<SUBMISSION>
<ACCESSION-NUMBER>0001004980-02-000072
<TYPE>8-K
<PUBLIC-DOCUMENT-COUNT>2
<PERIOD>20020830
<ITEMS>5
<ITEMS>7
<FILING-DATE>20020903
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>PG&E CORP
<CIK>0001004980
<ASSIGNED-SIC>4931
<IRS-NUMBER>943234914
<STATE-OF-INCORPORATION>CA
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>8-K
<ACT>34
<FILE-NUMBER>001-12609
<FILM-NUMBER>02754733
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>ONE MARKET SPEAR TOWER
<STREET2>SUITE 2400
<CITY>SAN FRANCISCO
<STATE>CA
<ZIP>94105
<PHONE>4152677000
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>ONE MARKET SPEAR TOWER
<STREET2>SUITE 2400
<CITY>SAN FRANCISCO
<STATE>CA
<ZIP>94105
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>PG&E PARENT CO INC
<DATE-CHANGED>19951214
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>final8k830.htm
<DESCRIPTION>FORM 8-K
<TEXT>
<html>
<head>
<title></title>
</head>
<body>
<div>
<p align="center">SECURITIES AND EXCHANGE COMMISSION</p>

<p align="center"></p>

<p align="center">Washington, D.C.&nbsp; 20549</p>

<p align="center"></p>

<p align="center"></p>

<p align="center"></p>

<p align="center"></p>

<p align="center">FORM 8&#8209;K</p>

<p align="center"></p>

<p align="center">CURRENT REPORT</p>

<p align="center">PURSUANT TO SECTION 13 OR 15(d) OF THE</p>

<p align="center">SECURITIES EXCHANGE ACT OF 1934</p>

<p align="center"></p>

<p align="center"></p>

<p align="center"></p>

<p align="center"></p>

<p align="center">Date of Report: August 30, 2002</p>

<p align="center"></p>

<p align="center"></p>

<p align="center"></p>

<p align="center"></p>

<p align="center"></p>

<p align="center">PG&amp;E Corporation</p>

<p align="center">
-----------------------------------------------------</p>

<p align="center">(Exact Name of Registrant as Specified in its
Charter)</p>

<p align="center"></p>

<p align="center"></p>

<p align="center"></p>

<p align="center">
California&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
1-12609&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
94-3234914</p>

<p align="center">
---------------------------------------------------------------------</p>

<p align="center">(State or other Jurisdiction&nbsp;&nbsp;
(Commission&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (IRS Employer</p>

<p align="center">of
Incorporation)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
File Number)&nbsp;&nbsp;&nbsp;&nbsp; Identification No.)</p>

<p align="center"></p>

<p align="center"></p>

<p align="center"></p>

<p align="center"></p>

<p align="center">PG&amp;E Corporation</p>

<p align="center">One Market, Spear Tower, Suite 2400</p>

<p align="center">San Francisco, California 94105</p>

<p align="center">
--------------------------------------------------</p>

<p align="center">(Address of principal executive offices) (Zip
Code)</p>

<p align="center"></p>

<p align="center"></p>

<p align="center">(415) 267-7000</p>

<p align="center">
---------------------------------------------------</p>

<p align="center">(Registrant's telephone number, including area
code)</p>

<p align="center"></p>

<p></p>

<br clear="all" />


<p>&nbsp;<br />
Item 5. Other Events</p>

<p>This current report on Form 8-K contains forward-looking
statements regarding PG&amp;E Corporation&rsquo;s projected cash
balance at September 30, 2002, which statements are based on
current expectations and assumptions which management believes are
reasonable and on information currently available to
management.&nbsp; These statements are necessarily subject to
various risks and uncertainties and actual results could differ
materially from those contemplated by the forward-looking
statements.&nbsp; Some of the factors that could cause actual
results to differ include: increases in legal fees associated with
the bankruptcy of PG&amp;E Corporation&rsquo;s subsidiary, Pacific
Gas and Electric Company (Utility); increases in operating costs at
PG&amp;E Corporation; increases in interest rates; the amount of
fees that may be associated with potential new financings; and
increases in taxes associated with operations.</p>

<h5>
A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Voluntary prepayment of loan to General Electric Capital
Corporation</h5>

<p><a name="_DV_M45"></a><a name="_DV_M46"></a></p>

<p>As previously disclosed, General Electric Capital Corporation
(GECC), Lehman Commercial Paper Inc. (LCPI), and certain other
lenders under PG&amp;E Corporation&rsquo;s $1.02 billion Amended
and Restated Credit Agreement dated June 25, 2002 (the
&ldquo;Credit Agreement&rdquo;) had waived, until August 30, 2002,
the requirement that PG&amp;E Corporation's subsidiary, PG&amp;E
National Energy Group, Inc. (PG&amp;E NEG), continue to maintain
investment grade ratings with either Standard &amp; Poor's
(S&amp;P) or Moody's Investor Services, Inc. (Moody's).&nbsp; (The
Credit Agreement provided for a $600 million Tranche A <b></b>Loan
held by GECC (the &ldquo;Tranche&nbsp;A Loan&rdquo;) and a $420
million Tranche B Loan held by LCPI and certain other lenders
(collectively, the &ldquo;Lenders&rdquo;).)</p>

<p>On August 30, 2002, PG&amp;E Corporation made a voluntary
prepayment of the $600 million aggregate principal amount of the
Tranche A Loan, plus interest totaling approximately $6.7 million,
to GECC, including a release by GECC of $90 million&nbsp; in an
interest reserve account maintained pursuant to the Credit
Agreement.&nbsp;&nbsp; GECC has retained its interest in an option
to purchase 3 percent of the shares of PG&amp;E NEG, determined on
a fully diluted basis, at an exercise price of $1.00. The option
may be exercised at any time until 45 days after August 30, 2002.
<a name="_DV_M68"></a>&nbsp; GECC also has the right to require
PG&amp;E National Energy Group, LLC (NEG LLC), the owner of all the
shares of PG&amp;E NEG, or PG&amp;E Corporation to repurchase the
option at a purchase price equal to the fair market value of the
underlying shares (the &ldquo;Put Price&rdquo;), which right is
exercisable until 45 days after August 30, 2002.&nbsp; GECC also
has<a name="_DV_C72">a first priority lien on (1)</a> PG&amp;E
Corporation&rsquo;s equity interest in NEG LLC<a name=
"_DV_M70"></a><a name="_DV_M71"></a> and (2) NEG LLC&rsquo;s equity
interest in PG&amp;E NEG.&nbsp;&nbsp;</p>

<p></p>

<p>After payment to GECC, PG&amp;E Corporation currently has
approximately $132 million cash on hand of which approximately $105
million is subject to certain restrictions on its use.&nbsp;
PG&amp;E Corporation anticipates its cash balance at September 30,
2002 will be approximately $200 million including certain interest
reserves required under the terms of the Credit Agreement, as
discussed below.&nbsp; PG&amp;E Corporation&rsquo;s cash balance
remains sufficient to fund its ongoing operations.</p>

<p></p>

<h5>B.&nbsp; New waiver extension from remaining Lenders</h5>

<p>Also, on August 30, 2002, PG&amp;E Corporation and the remaining
Lenders entered into a Second Amended and Restated Waiver and
Amendment Agreement (Waiver and Amendment) that extends the waiver
of the Credit Agreement requirement that PG&amp;E NEG continue to
maintain investment grade ratings with either S&amp;P or Moody's
until October 4, 2002.&nbsp; The agreement also makes certain
amendments to the Credit Agreement.&nbsp; A copy of the Waiver and
Amendment is filed as Exhibit 99 hereto.</p>

<p>The Waiver and Amendment is subject to early termination if
PG&amp;E Corporation fails to perform or comply with certain
covenants and terms of the Waiver and Amendment.&nbsp; During the
term of the waiver, PG&amp;E Corporation may not make any
investment, capital expenditure, or other payment to any of its
subsidiaries, in an amount that in the aggregate exceeds $10
million except as may be required under applicable law or by
conditions established by the California Public Utilities
Commission (CPUC) in decisions approving the formation of PG&amp;E
Corporation to hold the stock of the Utility.&nbsp;&nbsp;</p>

<p>&nbsp; The Waiver and Amendment requires PG&amp;E Corporation to
maintain $63 million in an interest reserve account until September
17, 2002, when the amount will be increased to $75 million. In
addition, PG&amp;E Corporation may not incur any new funded debt
without the consent of the Lenders.&nbsp;&nbsp;</p>

<p>In contrast to the prior waiver, which prohibited PG&amp;E
Corporation from allowing PG&amp;E NEG to sell any of its material
assets (except for certain sales in the ordinary course of
business), the Waiver and Amendment permits PG&amp;E NEG and any of
its subsidiaries to sell any of their assets, subject to certain
restrictions.&nbsp; Further, unlike the prior waiver, the Waiver
and Amendment does not require PG&amp;E NEG to maintain certain
levels of credit availability under the PG&amp;E NEG Credit
Agreement and provides additional flexibility on the incurrence of
PG&amp;E NEG indebtedness.</p>

<h5>During the term of the current waiver by the Lenders, PG&amp;E
Corporation intends to negotiate with the Lenders for the
elimination of the credit rating maintenance covenant from the
Credit Agreement or for such other amendments as may be needed;
however, PG&amp;E Corporation cannot predict whether, or to what
extent, it would be successful in such efforts.&nbsp;</h5>

<p>Item
7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Financial Statements, Pro Forma Financial Information, and
Exhibits</p>

<p>Exhibit
No.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Description of Exhibit</p>

<p>
99&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Second Amended and Restated Waiver and Amendment Agreement, dated
August 30, 2002, by and among PG&amp;E Corporation, PG&amp;E
National Energy Group, LLC, Lehman Commercial Paper Inc. as
administrative agent, and certain of the lenders party to the
Amended and Restated Credit Agreement dated as of June 25, 2002</p>

<br clear="all" />


<table border="0" cellspacing="0" cellpadding="0" width="638">
<tr>
<td valign="top">
<p align="center">SIGNATURE</p>
</td>
</tr>
</table>

<p>Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.</p>

<table border="0" cellspacing="0" cellpadding="0">
<tr>
<td valign="top">
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
</td>
<td valign="top">
<p>PG&amp;E CORPORATION<br />
 </p>
</td>
</tr>

<tr>
<td valign="top">
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
</td>
<td valign="top">
<p>By&nbsp; /s/ CHRISTOPHER P. JOHNS</p>
</td>
</tr>

<tr>
<td valign="top">
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
</td>
<td valign="top">
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></p>
</td>
</tr>

<tr>
<td valign="top">
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
</td>
<td valign="top">
<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CHRISTOPHER P.
JOHNS<br />
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Senior Vice President
and Controller<br />
<br />
 </p>
</td>
</tr>
</table>

<p>Dated:&nbsp; August 30, 2002</p>

<br clear="all" />


<p align="center"><a name="_DV_M141"></a>EXHIBIT INDEX</p>

<p>Exhibit
No.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Description of Exhibit</p>

<p>
99&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Second Amended and Restated Waiver and Amendment Agreement, dated
August 30, 2002, by and among PG&amp;E Corporation, PG&amp;E
National Energy Group, LLC, Lehman Commercial Paper Inc. as
administrative agent, and certain lenders party to the Amended and
Restated Credit Agreement dated as of June 25, 2002</p>
</div>
</body>
</html>


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>3
<FILENAME>ex99183002.htm
<DESCRIPTION>SECOND AMENDED AND RESTATED WAIVER AND AMENDMENT AGREEMENT
<TEXT>
<html>
<head>
<title></title>
</head>
<body>
<div>
<p align="right">Exhibit 99</p>

<p align="right">execution copy</p>

<p><b>PG&amp;E Corporation<br />
One Market Street, Spear Tower, Suite 2400<br />
</b><b>San Francisco, Ca&nbsp; 94105</b></p>

<p><u>SECOND AMENDED AND RESTATED WAIVER AND AMENDMENT
AGREEMENT</u></p>

<p>August 30, 2002</p>

<p>Lehman Commercial Paper Inc.,<br />
as Administrative Agent<br />
745 Seventh Avenue, 25<sup>th</sup> Floor,<br />
New York, NY&nbsp; 10019</p>

<p>The Lenders listed on Annex&nbsp;A hereto</p>

<p>Re:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Amended and Restated
Credit Agreement dated as of June 25, 2002, by and among PG&amp;E
Corporation, as borrower, the lenders party thereto, Lehman
Commercial Paper Inc., as administrative agent, and Lehman Brothers
Inc., as lead arranger and book manager (as amended, the
&ldquo;<u>Credit Agreement</u>&rdquo;) and the Tranche&nbsp;A
Interest Reserve Account Control Agreement and the
<u>Tranche&nbsp;B Interest Reserve Account Control
Agreement&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></p>

<p>Ladies and Gentlemen:</p>

<p>This Second Amended and Restated Waiver and Amendment Agreement
(&ldquo;<u>Waiver and Amendment Agreement</u>&rdquo;) amends and
restates the Amended and Restated Waiver and Amendment Agreement,
dated August 22, 2002, among the parties thereto.</p>

<p>Reference is made to the Credit Agreement. Capitalized terms
used herein but not otherwise defined herein shall have the
meanings assigned to such terms in the Credit Agreement.&nbsp;
Pursuant to Section&nbsp;6.14 of the Credit Agreement, NEG, Inc. is
required to maintain a rating of at least BBB- by Standard &amp;
Poor&rsquo;s (&ldquo;<u>S&amp;P</u>&rdquo;) or Baa3 by
Moody&rsquo;s on its long-term unsecured debt obligations (the
&ldquo;<u>Debt Obligations</u>&rdquo;).&nbsp; On July&nbsp;31,
2002, S&amp;P announced that the Debt Obligations had been
downgraded below the level required by Section&nbsp;6.14 and on
August&nbsp;5, 2002, Moody&rsquo;s announced that the Debt
Obligations had been downgraded below the level required by
Section&nbsp;6.14 (the &ldquo;<u>Downgrades</u>&rdquo;).</p>

<p>Pursuant to the terms of certain waiver letter agreements, dated
August&nbsp;1, 2002 and August&nbsp;16, 2002 and August 22, 2002,
among the Borrower, the Administrative Agent and the Lenders
signatories thereto, the Lenders agreed to waive any Default or
Event of Default under Section&nbsp;6.14 arising from the
Downgrades which waiver shall apply until, and only until, the
Waiver Expiration Date (as defined in the August&nbsp;22, 2002
Amended and Restated Waiver and Amendment Agreement).&nbsp; On the
date hereof, the Borrower is repaying the Tranche A Loan in full.
The Borrower hereby requests that the Tranche B Lenders agree to
extend the waiver of any such Default or Event of Default under
Section&nbsp;6.14 from August 30, 2002 until and only until the
earlier of the following dates (the &ldquo;<u>Waiver Expiration
Date</u>&rdquo;):&nbsp; (a)&nbsp;October 4, 2002 or (b)&nbsp;the
date of the failure by the Borrower to perform or observe any term,
covenant or agreement set forth in this Waiver and Amendment
Agreement.</p>

<p>The parties to this Waiver and Amendment Agreement hereby agree
that none of the waivers, restrictions and other provisions of this
Waiver and Amendment Agreement shall be binding upon them with
respect to any discussions concerning any future proposed waivers
related to the Credit Agreement or to any future proposed amendment
to the Credit Agreement or any of the related documents unless any
such discussion is specifically agreed to in writing.</p>

<p>In consideration of the foregoing:</p>

<h1>The Borrower agrees and covenants as follows:</h1>

<h2>notwithstanding anything provided to the contrary in the Credit
Agreement, from August 16, 2002 and until the Waiver Expiration
Date, the Borrower shall not make any Investment or Capital
Expenditure or make any other payment to any of its subsidiaries,
except that so long as no Default or Event of Default shall have
occurred and be continuing, the Borrower may make such Investment
or Capital Expenditure, or payment to its subsidiaries, in an
amount not to exceed $10,000,000 in the aggregate (exclusive of
payments made in respect of tax sharing arrangements and taking
into account any amount as may be used by the Borrower in any such
transaction to the extent permitted by clause&nbsp;(A) of the
proviso of Section&nbsp;3.2(b) of the Credit Agreement),
<u>provided</u> that (i)&nbsp;the amount of any cash Dividend
actually received by the Borrower after the date hereof may be
added to such amount for purposes of determining whether the
Borrower is in compliance with this clause&nbsp;(b) and
(ii)&nbsp;nothing herein shall restrict the ability of the Borrower
to make such Investment or Capital Expenditure in PGE Utility or
payment to PGE Utility, in each case, as reasonably determined by
the Borrower that such transaction is required by applicable Law or
the Holding Company Conditions, and the Borrower hereby advises the
Lenders that it believes such amount should be sufficient to
discharge any of its obligations during the period between August
16, 2002 and the Waiver Expiration Date;</h2>

<h2>the Borrower shall, not later than September 4, 2002, deliver
an Officer&rsquo;s Certificate from the Chief Executive Officer,
Chief Financial Officer, or Treasurer of the Borrower, dated the
date hereof, certifying and stating, after due inquiry, the amount
of cash and Cash Equivalents, then held by the Borrower (the
&ldquo;<u>Available Cash Amount</u>&rdquo;) on the date
hereof;</h2>

<h2>the Borrower shall promptly, after receipt of reasonably
detailed invoices, pay or reimburse the Administrative Agent and
each Tranche B Lender for all of its reasonable out-of-pocket costs
and expenses in connection with the preparation, negotiation and
execution of this Waiver and Amendment Agreement and all prior
Waivers, including, without limitation, the reasonable fees and
disbursements of counsel to the Administrative Agent, and counsel
to the Tranche&nbsp;B Lenders;</h2>

<h2>the Borrower shall, as promptly as practicable after the date
hereof, file a form 8-K disclosing the material terms and
conditions of this Waiver and Amendment Agreement and the Payoff
Letter (as defined below) and attaching thereto a copy of this
Waiver and Amendment Agreement;</h2>

<h2>the Borrower shall have deposited such amount as may be
necessary into the Tranche&nbsp;B Interest Reserve Account such
that the aggregate amount of cash and Cash Equivalents held in the
Tranche&nbsp;B Interest Reserve Account shall be in an amount equal
to $63,000,000 up to September 17, 2002 and $75,000,000 from and
after September 17, 2002;</h2>

<h2>notwithstanding anything to the contrary in Sections 7.4 and
7A.4 of the Credit Agreement or in this Amended and Restated
Waiver, Borrower shall not incur new funded debt;</h2>

<h2>from and after the date hereof, (i) Section 7 and 7A and
Section 8 and 8A of the Credit Agreement shall apply to the Tranche
B Loans and the occurrence of any event listed in Section 8.1 or in
8A.1 shall constitute a Tranche B Event of Default, (ii) for all
purposes under those Sections 7 and 7A and 8 and 8A, the Tranche A
Loan and all other Obligations owing to the Tranche A Lenders shall
be deemed paid in full and (iii) all rights under those Sections
shall be exercised at the direction of the Majority Tranche B
Lenders rather than the Majority Tranche A Lenders;</h2>

<h2>on the date hereof, Borrower shall cause the Tranche A Lender
to execute and deliver to the Borrower and the Tranche B Lenders a
pay-off letter substantially in the form of Exhibit A hereto;</h2>

<h2>for avoidance of doubt, notwithstanding Section 9.10 of the
Credit Agreement, the consent of the Tranche A Lenders shall not be
required to amend any Financing Document (other than the Option
Agreement) or waive any right thereunder; and</h2>

<h2>notwithstanding anything to the contrary in the Credit
Agreement, any payment, in whole or in part, of any principal of
the Tranche B Loan made on or before October 21, 2002 shall be
accompanied by a payment of a prepayment fee equal to 5% of the
principal amount repaid or prepaid, in lieu of any prepayment fee
otherwise applicable under the Credit Agreement.</h2>

<h1>Borrower shall pay to the Administrative Agent for the ratable
benefit of the Tranche&nbsp;B Lenders a fee in the total amount of
$4,200,000 earned as of today but payable on September 17,
2002.</h1>

<h1>The parties wish to amend certain provisions of the Credit
Agreement in order to maximize the value or liquidity of LLC and
NEG, Inc. and, therefore agree as follows:</h1>

<h2>The second proviso of Section 3.2(e) is revised to read as
follows:</h2>

<p>&ldquo;<u>provided</u>, <u>further</u>, that if a Default or
Event of Default shall have occurred and be continuing such Net
Sale Proceeds of Asset Sales by NEG, Inc. or any Subsidiary of NEG,
Inc. are not required to be applied in accordance with Section
3.2(h) if they are (i) applied to repay Indebtedness of NEG, Inc.
or any NEG Subsidiary or (ii) reinvested in the business of NEG,
Inc. or any NEG Subsidiary to the extent specified in Part II of
the Business Plan&rdquo;</p>

<h2>A new Section 7.1(xv) shall be added as follows:</h2>

<p>&ldquo;(xv) Liens on assets of NEG, Inc. or any of its
Subsidiaries to secure Indebtedness permitted under Section
7.4(xi).&rdquo;</p>

<h2>A new Section 7.2(x) shall be added as follows:</h2>

<p>&ldquo;(x) NEG, Inc. and any of its Subsidiaries may sell any of
their assets <u>provided</u> (i) such sale is to a non-affiliate
and is on arms-length terms and (ii) the transaction cannot
reasonably be expected to have a Material Adverse Effect or result
in a Material Adverse Change to Borrower or LLC (the parties
acknowledge that a sale at below book value will not, in and of
itself, necessarily have a Material Adverse Effect or cause a
Material Adverse Change).&rdquo;</p>

<h2>A new clause (iv) shall be added to the end of the first
sentence of Section 7.3 as follows:</h2>

<p>&ldquo;and (iv) any Subsidiary of NEG, Inc. may pay a stock
dividend to its immediate parent provided such dividend cannot
reasonably be expected to have a Material Adverse Effect or result
in an Material Adverse Change to Borrower or LLC.&rdquo;</p>

<h2>A new clause (xi) is added to the end of Section 7.4 as
follows:</h2>

<p>&ldquo;(xi) Indebtedness of NEG, Inc. or of any of its
Subsidiaries in an aggregate amount not to exceed
$250,000,000.&rdquo;</p>

<h2>Section 7A shall automatically be deemed amended to be
consistent with the amendments made to Section 7 hereunder.</h2>

<h2>Section 8.1(m) shall be deleted.</h2>

<h2>Section 8A shall automatically be deemed amended to be
consistent with the amendments made to Section 8 hereunder.</h2>

<h2>Section&nbsp;7.14(b) is hereby amended to read as
follows:&nbsp; &ldquo;The Borrower will not permit the aggregate
amount of cash and Cash Equivalents held in the Tranche B Interest
Reserve Account on any Interest Payment Date to be less than
$63,000,000 up to September 17, 2002 and $75,000,000
thereafter;</h2>

<h2>Section&nbsp;7A.14 is hereby amended to read as follows:&nbsp;
&ldquo;The Borrower will not permit the aggregate amount of cash
and Cash Equivalents held in the Tranche B Interest Reserve Account
on any Interest Payment Date to be less than $63,000,000 up to
September 17, 2002 and $75,000,000 thereafter;</h2>

<h2>Section&nbsp;8A.1(c)(iv) is hereby amended to read as follows:
&ldquo;(iv) fail to make the required deposits in the Tranche B
Interest Reserve Account after the Closing in accordance with
Section 7.14(b) or 7A.14 or the amount on deposit in the
Tranche&nbsp;B Interest Reserve Account is at any time less than
the amount required under Section&nbsp; 7.14(b) or
7A.14&rdquo;;</h2>

<h2>Section&nbsp;9.11(b)(v) is hereby amended by inserting the
words &ldquo;in an amount less than $50,000,000&rdquo; after the
words &ldquo;any such participation&rdquo; in such
Section&nbsp;9.11(b)(v);</h2>

<h2>Section&nbsp;10.3 is amended by adding the words &ldquo;or any
Lender&rdquo; after the words &ldquo;Administrative Agent&rdquo;
each time such words appear in such Section&nbsp;10.3; and</h2>

<h2>Clause (b) of the definition of &ldquo;Applicable Margin&rdquo;
is amended to read as follows:</h2>

<p>&ldquo;(b)&nbsp;with respect to the Tranche B Loan, (i) as to
the Base Rate Loan, 9.00% per annum (ii) as to the Eurodollar Loan,
10.00% per annum.&rdquo;</p>

<h1>The parties agree that:</h1>

<h2>Until the Waiver Expiration Date, the words &ldquo;, and will
cause all members of the NEG Group to,&rdquo; are deemed deleted
from the first sentence of Section 6.3.</h2>

<h2>Until the Waiver Expiration Date, the words &ldquo;either
individually or&rdquo; are deemed deleted from Section 6.11.</h2>

<h2>Until the Waiver Expiration Date, Section 7.16 and Section
7A.16 shall be deemed not to apply.</h2>

<h2>Until the Waiver Expiration Date, Section 8.1(j) and Section
8A.1(j) shall be deemed not to apply.</h2>

<h1>The Borrower represents and warrants to the Administrative
Agent and the Tranche B Lenders that:</h1>

<h2>This Waiver and Amendment Agreement <b></b>and the amendments
effected hereby have been duly authorized, executed and delivered
by the Borrower and the LLC and are the legal, valid and binding
obligations of the Borrower and the LLC enforceable against them in
accordance with the terms hereof and thereof; and</h2>

<h2>Borrower has obtained all consents and approvals necessary for
the execution, delivery and performance of this Waiver and
Amendment Agreement.</h2>

<p>The Collateral Agent agrees that on September 9, 2002 and again
on September 23, 2002 it shall deliver to the Tranche&nbsp;B
Lenders written notice of the amounts held in the Tranche B
Interest Reserve Account.</p>

<p>For purposes of this Waiver and Amendment Agreement,
&ldquo;<u>subsidiary</u>&rdquo; shall mean, with respect to any
Person, any corporation, partnership or other entity of which any
of the securities or other ownership interests are directly or
indirectly owned or controlled by such Person or one or more
subsidiaries of such Person or by such Person and one or more
subsidiaries of such Person.</p>

<p>Each of the parties hereto by its execution and delivery of this
Waiver and Amendment Agreement consents to the amendments as set
forth herein in accordance with Section&nbsp;9.10 of the Credit
Agreement.</p>

<p>The Borrower and LLC acknowledge and agree that none of the
signatories to this Waiver and Amendment Agreement is waving any
other Default or Event of Default or any other provision in the
Credit Agreement and except as expressly provided herein, nothing
in this Waiver and Amendment Agreement shall constitute a course of
dealing between the parties, or constitute a modification or
amendment of any other provision of the Credit Agreement and the
provisions of the Credit Agreement and the other Financing
Documents are and shall remain in full force and effect.</p>

<p>The Borrower and LLC hereby unconditionally and irrevocably
acquit and fully forever release and discharge the undersigned
Lenders, their participants, and the Lenders&rsquo; and their
participants&rsquo; respective subsidiaries, affiliates, members,
partners, officers, employees, representatives, agents, managers,
counsel, directors, successors and assigns, both present and
former, from any and all actions, cause of action, claims, demands,
remedies, suits, damages and liabilities of whatever kind or
nature, in law or in equity, now known or unknown, suspected or
unsuspected to the extent that any of the foregoing arises from any
action or failure to act on or prior to the date hereof and relates
to or arises out of this Waiver and Amendment Agreement, the Credit
Agreement or any other Financing Documents or the transactions
contemplated hereby or thereby (&ldquo;<u>Released
Claims</u>&rdquo;).&nbsp; The Borrower covenants and agrees that
neither it nor any of the Covered Parties shall commence, and in
any way, prosecute or cause to be commenced or prosecuted against
any of the Persons mentioned above any action or other proceeding
based upon any of the Released Claims.</p>

<p>The Borrower also acknowledges, ratifies and affirms the
validity and enforceability of the Credit Agreement and all liens
and security interests granted thereunder or under any of the
Security Documents to the Lenders as collateral security for its
obligations and indebtedness owing under the Loan Documents (the
&ldquo;<u>Obligations</u>&rdquo;) and acknowledges that all such
liens and security interests and all collateral pledged as security
for the Obligations continue to be and remain collateral for the
Obligations from and after the date hereof.</p>

<p>In furtherance to the rights of the Lenders under
Section&nbsp;6.2 of the Credit Agreement, the Borrower shall, and
shall cause NEG, Inc. and other members of the NEG Group to be
available, at the request of any of the Lenders, to discuss with
the Lenders, at any time and from time to time, the affairs,
finances and accounts of the Borrower, NEG, Inc. and other members
of the NEG Group (including without limitation, any guarantee or
financial support with respect to the operation or business of NEG,
Inc. or any other member of the NEG Group and any action or
proposed action for the Borrower, NEG, Inc. or any member of the
NEG Group with respect thereto in connection with the
Downgrades).</p>

<p>This Waiver and Amendment Agreement hereby amends Section&nbsp;7
of the Tranche&nbsp;B Interest Reserve Account Control Agreement by
adding the following sentence at the end thereof:&nbsp; &ldquo;The
Collateral Agent agrees that it shall not amend or consent to any
amendment to any terms or provisions of the Tranche&nbsp;B Interest
Reserve Account Control Agreement without the consent of the
required Tranche&nbsp;B Lenders.&rdquo;</p>

<p>This Waiver and Amendment Agreement shall be governed by, and
construed in accordance with, the law of the State of New York
without regard to the conflict of law rules thereof (other than
Section&nbsp;5-1401 of the New York General Obligations Law).&nbsp;
This Waiver and Amendment Agreement may be executed in any number
of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered by
facsimile or otherwise shall be an original, but all of which shall
together constitute on and the same instrument.</p>

<br clear="all" />


<p>This Waiver and Amendment Agreement shall become effective as of
the date hereof when the Borrower, LLC, the Collateral Agent, and
the required Tranche&nbsp;B Lenders shall have executed and
delivered this Waiver and Amendment Agreement, and received a fully
executed counterpart copy, by facsimile or otherwise, of this
Waiver and Amendment Agreement, and Officer&rsquo;s Certificate of
the Borrower described above.</p>

<table border="0" cellspacing="0" cellpadding="0">
<tr>
<td valign="top">
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
</td>
<td valign="top">
<p>Very truly yours,<br />
<br />
 PG&amp;E CORPORATION<br />
<br />
<br />
 By : ______________________________<br />
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Name:&nbsp; Peter A.
Darbee<br />
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Title:&nbsp; Senior Vice
President &amp; Chief Financial
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Officer<br />
<br />
<br />
<br />
<br />
 PG&amp;E NATIONAL ENERGY GROUP, LLC<br />
<br />
<br />
 By : ______________________________<br />
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Name:&nbsp;<br />
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Title:&nbsp;</p>
</td>
</tr>
</table>

<br clear="all" />


<table border="0" cellspacing="0" cellpadding="0">
<tr>
<td valign="top">
<p>Agreed and Accepted:<br />
<br />
 <i>Administrative Agent:<br />
<br />
</i> LEHMAN COMMERCIAL PAPER INC.<br />
<br />
<br />
 By : ______________________________<br />
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Name:<br />
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Title:</p>
</td>
</tr>
</table>

<p></p>

<br clear="all" />


<p><b><i></i></b></p>

<table border="0" cellspacing="0" cellpadding="0">
<tr>
<td valign="top">
<p><b><i>Lenders:<br />
<br />
</i></b> LEHMAN COMMERCIAL PAPER INC.<br />
<br />
<br />
 By : ______________________________<br />
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Name:<br />
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Title:<br />
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Date:</p>
</td>
</tr>
</table>

<br clear="all" />


<table border="0" cellspacing="0" cellpadding="0">
<tr>
<td valign="top">
<p>WILMINGTON TRUST COMPANY<br />
<br />
<br />
 By : ______________________________<br />
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Name:<br />
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Title:<br />
 </p>
</td>
</tr>
</table>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Date:</p>

<br clear="all" />


<table border="0" cellspacing="0" cellpadding="0">
<tr>
<td valign="top">
<p>DK ACQUISITION PARTNERS, L.P.<br />
 By:&nbsp;&nbsp; M.H. Davidson &amp; Co., its general partner<br />
<br />
<br />
 By : ______________________________<br />
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Name:<br />
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Title:<br />
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Date:<br />
 </p>
</td>
</tr>
</table>

<p></p>

<br clear="all" />


<table border="0" cellspacing="0" cellpadding="0">
<tr>
<td valign="top">
<p>WATERSHED CAPITAL INSTITUTIONAL PARTNERS, L.P.<br />
 WATERSHED CAPITAL PARTNERS (OFFSHORE), LTD.<br />
 WATERSHED CAPITAL PARTNERS, L.P.<br />
<br />
 by WATERSHED ASSET MANAGEMENT, L.L.C. as its Investment
Manager<br />
<br />
<br />
 By : ______________________________<br />
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Name:<br />
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Title:</p>
</td>
</tr>
</table>

<p></p>

<br clear="all" />


<p><b><i></i></b></p>

<table border="0" cellspacing="0" cellpadding="0">
<tr>
<td valign="top">
<p><b><i>Collateral Agent:<br />
<br />
</i></b> DEUTSCHE BANK TRUST COMPANY AMERICAS, in its capacity as
Collateral Agent under the Tranche&nbsp;B Interest Reserve Account
Control Agreement<br />
<br />
<br />
 By : ______________________________<br />
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Name:<br />
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Title:<br />
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Date:</p>
</td>
</tr>
</table>

<p></p>
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