<SUBMISSION>
<ACCESSION-NUMBER>0000950149-04-001157
<TYPE>S-4/A
<PUBLIC-DOCUMENT-COUNT>6
<FILING-DATE>20040618
<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>S-4/A
<ACT>33
<FILE-NUMBER>333-114923
<FILM-NUMBER>04871323
</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>S-4/A
<SEQUENCE>1
<FILENAME>f97982a1sv4za.htm
<DESCRIPTION>AMENDMENT NO. 1 TO FORM S-4
<TEXT>
<HTML>
<HEAD>
<TITLE>sv4za</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="center">
<B><FONT size="2">As filed with the Securities and Exchange
Commission on June&nbsp;18, 2004</FONT></B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="right">
<B><FONT size="2">Registration No.&nbsp;333-114923</FONT></B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="center">
<HR size="1" width="100%" align="center" noshade>
</DIV>

<DIV align="center">
<HR size="1" width="100%" align="center" noshade>
</DIV>

<P align="center">
<B><FONT size="4">SECURITIES AND EXCHANGE COMMISSION</FONT></B>

<DIV align="center">
<B>WASHINGTON D.C. 20549</B>
</DIV>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center">
<B>AMENDMENT NO. 1</B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="center">
<B>TO</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="center">
<B><FONT size="5">Form&nbsp;S-4</FONT></B>
</DIV>

<DIV align="center">
<B>REGISTRATION STATEMENT</B>
</DIV>

<DIV align="center">
<B>UNDER</B>
</DIV>

<DIV align="center">
<B>THE SECURITIES ACT OF 1933</B>
</DIV>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="center">
<B><FONT size="6">PG&#38;E Corporation</FONT></B>

<DIV align="center">
<I><FONT size="2">(Exact Name of Registrant as Specified in Its
Charter)</FONT></I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="33%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="32%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="29%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B><FONT size="2">California</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">4911</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">94-3234914</FONT></B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I><FONT size="2">(State or Other Jurisdiction of<BR>
    Incorporation or Organization)</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <I><FONT size="2">(Primary Standard Industrial<BR>
    Classification Code Number)</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <I><FONT size="2">(I.R.S. Employer<BR>
    Identification Number)</FONT></I></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<B><FONT size="2">One Market Street, Spear Tower,
Suite&nbsp;2400</FONT></B>

<DIV align="center">
<B><FONT size="2">San Francisco, CA 94105</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(415)&nbsp;267-7000</FONT></B>
</DIV>

<DIV align="center">
<I><FONT size="2">(Address, Including Zip Code, and Telephone
Number,</FONT></I>
</DIV>

<DIV align="center">
<I><FONT size="2">Including Area Code, of Registrant&#146;s
Principal Executive Offices)</FONT></I>
</DIV>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="center">
<B><FONT size="2">Bruce R. Worthington</FONT></B>

<DIV align="center">
<B><FONT size="2">One Market Street, Spear Tower,
Suite&nbsp;2400</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">San Francisco, CA 94105</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(415)&nbsp;267-7000</FONT></B>
</DIV>

<DIV align="center">
<I><FONT size="2">(Name, Address, Including Zip Code, and
Telephone Number,</FONT></I>
</DIV>

<DIV align="center">
<I><FONT size="2">Including Area Code, of Agent for
Service)</FONT></I>
</DIV>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="center">
<B><I><FONT size="2">COPY TO:</FONT></I></B>

<DIV align="center">
<B><FONT size="2">Leslie P. Jay, Esq.</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">Orrick, Herrington &#38; Sutcliffe
LLP</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">400 Sansome Street</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">San Francisco, California 94111</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(415) 392-1122</FONT></B>
</DIV>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Approximate date of commencement of proposed
sale to the public:</FONT></B><FONT size="2"> As soon as
practicable after the effective date of this registration
statement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If the securities being registered on this form
are being offered in connection with the formation of a holding
company and there is compliance with General Instruction G,
check the following
box:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If this form is filed to register additional
securities for an offering pursuant to Rule&nbsp;462(b) under
the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>&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;</U>
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If this form is a post-effective amendment filed
pursuant to Rule&nbsp;462(d) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same
offering.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">The registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its
effective date until the registrant shall file a further
amendment which specifically states that this registration
statement shall thereafter become effective in accordance with
Section&nbsp;8(a) of the Securities Act of 1933 or until this
registration statement shall become effective on such date as
the Commission, acting pursuant to said Section&nbsp;8(a), may
determine.</FONT></B>

<P align="center">
<HR size="1" width="100%" align="center" noshade>

<DIV align="center">
<HR size="1" width="100%" align="center" noshade>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<TABLE width="100%" border="1" cellpadding="5"><TR><TD>
<B><FONT size="2" color="#E8112D">The information contained in
this prospectus is not complete and may be changed. We may not
exchange the outstanding securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and we are not soliciting offers to buy these
securities in any jurisdiction where the offer or sale is not
permitted.</FONT></B>
</TD></TR></TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center">
<B><FONT size="2" color="#E8112D">Preliminary Prospectus,
Subject to Completion, Dated June&nbsp;18, 2004</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center">
<IMG src="f97982a1f9798214.gif" alt="PG&#38;E LOGO">

<P align="center">
<B><FONT size="4">Offer to Exchange</FONT></B>

<DIV align="center">
<B><FONT size="4">$600,000,000 6&nbsp;7/8% Senior Secured Notes
due 2008 for</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="4">$600,000,000 6&nbsp;7/8% Senior Secured Notes
due 2008</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="4">which have been registered under the
Securities Act of 1933</FONT></B>
</DIV>

<P align="center">
<B><FONT size="4">The exchange offer will expire at 5:00
p.m.,</FONT></B>

<DIV align="center">
<B><FONT size="4">New York City time,
on &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;,
2004, unless extended.</FONT></B>
</DIV>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="left">
<B><FONT size="2">Material Terms of the Exchange
Offer:</FONT></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">We are offering to exchange notes registered
    under the Securities Act of 1933, as amended, for a like
    principal amount of notes that we issued in a private placement
    that closed on July&nbsp;2, 2003.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The terms of the exchange notes are substantially
    identical to the terms of the original notes, except that the
    exchange notes will not contain transfer restrictions, will not
    have the registration rights that apply to the original notes
    and will not entitle their holders to additional interest for
    our failure to comply with these registration rights. The terms
    and conditions of the exchange offer are more fully described in
    this prospectus.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The exchange offer is subject to the conditions
    that it shall be permissible under applicable law and Securities
    and Exchange Commission policy and that there is no action or
    proceeding, pending or threatened, that would impair our ability
    to proceed with the exchange offer.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">You may withdraw tenders of original notes at any
    time before the expiration of the exchange offer. We will
    exchange all original notes that are validly tendered and not
    withdrawn before the expiration of the exchange offer.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">We will not receive any cash proceeds from the
    exchange offer.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">There is no existing market for the exchange
    notes and we do not intend to apply for their listing on any
    securities exchange or any automated quotation system.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">We believe that the exchange of original notes
    for exchange notes will not be a taxable event for United States
    federal income tax purposes.
    </FONT></TD>
</TR>

</TABLE>

<P align="center">
<B>You should consider carefully the &#147;Risk Factors&#148;
beginning on page&nbsp;9 of this prospectus.</B>

<P align="center">
<HR size="1" width="97%" align="center" noshade>

<P align="left">
<B><FONT size="2">None of the Securities and Exchange
Commission, any state securities commission or any other
regulatory body has approved or disapproved of these securities
or passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.</FONT></B>

<P align="center">
<HR size="1" width="97%" align="center" noshade>

<P align="center">
<FONT size="2">Prospectus
dated &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>

<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#001">SUMMARY</A></TD></TR>
<TR><TD colspan="9"><A HREF="#002">RISK FACTORS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#003">RATIO OF EARNINGS TO FIXED CHARGES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#004">THE EXCHANGE OFFER</A></TD></TR>
<TR><TD colspan="9"><A HREF="#005">DESCRIPTION OF THE NOTES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#006">CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#007">PLAN OF DISTRIBUTION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#008">LEGAL MATTERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#009">EXPERTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#010">AVAILABLE INFORMATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#011">WHERE YOU CAN FIND MORE INFORMATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="f97982a1exv12w1.htm">EXHIBIT 12.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="f97982a1exv23w1.htm">EXHIBIT 23.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="f97982a1exv99w1.htm">EXHIBIT 99.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="f97982a1exv99w2.htm">EXHIBIT 99.2</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">TABLE OF CONTENTS</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="90%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Page</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Special Note Regarding Forward-Looking Statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">ii</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Summary
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Risk Factors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ratio of Earnings to Fixed Charges
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">The Exchange Offer
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Description of the Notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Certain United States Federal Income Tax
    Consequences
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">73</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Plan of Distribution
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Legal Matters
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Experts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Available Information
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Where You Can Find More Information
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This prospectus incorporates business and
financial information about us that is not included in or
delivered with the prospectus. You should rely only on the
information contained or incorporated by reference in this
prospectus. We have not authorized any other person to provide
you with different or additional information. If anyone provides
you with different or additional information, you should not
rely on it. You should assume that the information contained or
incorporated by reference in this prospectus is accurate as of
the date on the front cover of this prospectus or the date of
the document incorporated by reference. Our business, financial
condition, results of operations and prospects may have changed
since then. We are not making an offer to sell or exchange the
securities offered by this prospectus in any jurisdiction where
the offer, sale or exchange is not permitted.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The information incorporated by reference into
this prospectus is available without charge to holders of the
original notes upon written or oral request to The Office of the
Corporate Secretary, PG&#38;E Corporation, One Market Street,
Spear Tower, Suite&nbsp;2400, San Francisco, California 94105,
telephone number (415)&nbsp;267-7070. In order to obtain timely
delivery, such holders must request the information no later
than five business days before the expiration date of the
exchange offer.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">When used in this prospectus and unless otherwise
specified, the term:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">&#147;NEGT&#148; refers to our unconsolidated
    subsidiary National Energy &#38; Gas Transmission, Inc.,
    formerly known as PG&#38;E National Energy Group, Inc.;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">&#147;Utility&#148; refers to our subsidiary
    Pacific Gas and Electric Company; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">&#147;we,&#148; &#147;our&#148; and
    &#147;us&#148; refer to PG&#38;E Corporation and its
    consolidated subsidiaries.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">i
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" -->
<DIV align="left"><A NAME="000"></A></DIV>

<P align="center">
<B><FONT size="2">SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This prospectus and the documents incorporated
herein by reference contain various forward-looking statements.
These forward-looking statements can be identified by the use of
words such as &#147;assume,&#148; &#147;expect,&#148;
&#147;intend,&#148; &#147;plan,&#148; &#147;project,&#148;
&#147;believe,&#148; &#147;estimate,&#148; &#147;predict,&#148;
&#147;anticipate,&#148; &#147;may,&#148; &#147;might,&#148;
&#147;will,&#148; &#147;should,&#148; &#147;would,&#148;
&#147;could,&#148; &#147;goal,&#148; &#147;potential&#148; and
similar expressions. We have based these forward-looking
statements on our current expectations and projections about
future events, our assumptions regarding these events and our
knowledge of facts at the time the statements were made. These
forward-looking statements are subject to various risks and
uncertainties that may be outside our control, and our actual
results could differ materially from our projected results.
These risks and uncertainties include, among other things:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Whether the Implementation of the
Utility&#146;s Plan of Reorganization Is Disrupted</FONT></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The timing and resolution of the petitions for
    review that were filed in the California Court of Appeal for the
    first Appellate District, or the California Court of Appeal,
    seeking review of the December&nbsp;18, 2003 decision of the
    California Public Utilities Commission, or the CPUC, approving
    the settlement agreement the CPUC entered into with the Utility
    and us on December&nbsp;19, 2003, or the settlement agreement,
    and the CPUC&#146;s March&nbsp;16, 2004 denial of applications
    for rehearing of the December&nbsp;18, 2003 decision; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the timing and resolution of the pending appeals
    of the confirmation by the U.S. Bankruptcy Court for the
    Northern District of California, or the bankruptcy court, of the
    Utility&#146;s plan of reorganization that incorporates the
    settlement agreement, or the Utility&#146;s plan of
    reorganization.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<P align="left">
<B><FONT size="2">Operating Environment</FONT></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Unanticipated changes in our or the
    Utility&#146;s operating expenses or capital expenditures;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the level and volatility of wholesale electricity
    and natural gas prices and supplies, the Utility&#146;s ability
    to manage and respond to the levels and volatility successfully
    and the extent to which the Utility is able to timely recover
    increased costs related to this volatility;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the extent to which the Utility&#146;s residual
    net open position (<I>i.e.</I>, that portion of the
    Utility&#146;s electricity customers&#146; demand not satisfied
    by electricity that the Utility generates or has under contract,
    or by electricity provided under the California Department of
    Water Resources, or DWR, power purchase contracts allocated to
    the Utility&#146;s customers) increases or decreases due to
    changes in customer and economic growth rates, the periodic
    expiration or termination of the Utility&#146;s or the
    DWR&#146;s power purchase contracts, the reallocation of the
    DWR&#146;s power purchase contracts among the California
    investor-owned electric utilities, whether various
    counterparties are able to meet their obligations under their
    power purchase contracts with the Utility or with the DWR, the
    retirement or other closure of the Utility&#146;s electricity
    generation facilities, the performance of the Utility&#146;s
    electricity generation facilities, the extent to which the
    Utility purchases or builds electricity generation facilities,
    and other factors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">weather, storms, earthquakes, fires, floods,
    other natural disasters, explosions, accidents, mechanical
    breakdowns and other events or hazards that affect demand,
    result in power outages, reduce generating output, or cause
    damage to the Utility&#146;s assets or operations or those of
    third parties on which the Utility relies;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">unanticipated population growth or decline,
    changes in market demand, demographic patterns or general
    economic and financial market conditions, including
    unanticipated changes in interest or inflation rates, and the
    extent to which the Utility is able to timely recover its costs
    in the face of such events;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the operation of the Utility&#146;s Diablo Canyon
    power plant, which exposes it to potentially significant
    environmental and capital expenditure outlays, and, to the
    extent the Utility is unable to increase the Utility&#146;s
    spent fuel storage capacity by 2007 or find an alternative
    depository, the risk that the Utility may be required to close
    its Diablo Canyon power plant and purchase electricity from more
    expensive sources;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">actions of credit rating agencies;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">ii
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">significant changes in our or the Utility&#146;s
    relationship with our or its employees, the availability of
    qualified personnel and the potential adverse effects if labor
    disputes were to occur; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">acts of terrorism.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<P align="left">
<B><FONT size="2">Legislative and Regulatory Environment and
Pending Litigation</FONT></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">The impact of current and future ratemaking
    actions of the CPUC;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">whether the conditions to securitizing the
    $2.2&nbsp;billion after-tax regulatory asset established under
    the settlement agreement are met and, if so, the timing and
    amount of the securitization and the impact of the
    securitization on our and the Utility&#146;s earnings;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">prevailing governmental policies and legislative
    or regulatory actions generally, including those of the
    California legislature, the U.S. Congress, the CPUC, the Federal
    Energy Regulatory Commission, or the FERC, and the Nuclear
    Regulatory Commission, or the NRC, with regard to the
    Utility&#146;s allowed rates of return, industry and rate
    structure, recovery of investments and costs, acquisitions and
    disposals of assets and facilities, treatment of affiliate
    contracts and relationships, and operation and construction of
    facilities;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the extent to which the CPUC or the FERC delays
    or denies recovery of the Utility&#146;s costs, including
    electricity purchase costs, from customers due to a regulatory
    determination that the costs were not reasonable or prudent or
    for other reasons;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">how the CPUC administers the capital structure,
    stand-alone dividend and capital requirements conditions of the
    CPUC&#146;s decisions permitting the establishment of holding
    companies for the California investor-owned electric utilities;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">whether the Utility is in compliance with all
    applicable rules, tariffs and orders relating to electricity and
    natural gas utility operations, and the extent to which a
    finding of non-compliance could result in customer refunds,
    penalties or other non-recoverable expenses;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">whether the Utility is required to incur material
    costs or capital expenditures or curtail or cease operations at
    affected facilities to comply with existing and future
    environmental laws, regulations and policies; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the outcome of pending litigation.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<P align="left">
<B><FONT size="2">Competition</FONT></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Increased competition as a result of the takeover
    by condemnation of the Utility&#146;s distribution assets,
    duplication of the Utility&#146;s distribution assets or service
    by local public utilities, self-generation by the Utility&#146;s
    customers and other forms of competition that may result in
    stranded investment capital, decreased customer growth, loss of
    customer load and additional barriers to cost recovery; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the extent to which the Utility&#146;s
    distribution customers switch between purchasing electricity
    from the Utility and purchasing electricity from alternate
    energy service providers, thus becoming direct access customers,
    and the extent to which cities, counties and others in the
    Utility&#146;s service territory begin directly serving the
    Utility&#146;s customers or combine to form community choice
    aggregators.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For additional factors that could affect the
validity of our forward-looking statements, you should read the
section of this prospectus titled &#147;Risk Factors.&#148;
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You should read this prospectus and the documents
that we incorporate by reference into this prospectus, the
documents that we have filed as exhibits to the registration
statement of which this prospectus is a part and the documents
that we refer to under the section of this prospectus titled
&#147;Where You Can Find More Information&#148; completely and
with the understanding that our actual future results could be
materially different from what we currently expect. We qualify
all our forward-looking statements by these cautionary
statements. These forward-looking statements speak only as of
the date of this prospectus or the date of the document
incorporated by reference, as applicable. Except as required by
applicable laws or regulations, we do not undertake any
obligation to update or revise any forward-looking statement,
whether as a result of new information, future events or
otherwise.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">iii
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "SUMMARY" -->
<DIV align="left"><A NAME="001"></A></DIV>

<P align="center">
<B><FONT size="2">SUMMARY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">This summary may not contain all of the
information that may be important to you in deciding whether to
exchange your original notes for exchange notes. This summary
should be read in conjunction with, and is qualified in its
entirety by, the more detailed information and financial
statements (including the accompanying notes) included and
incorporated by reference in this prospectus.</FONT></I>

<P align="center">
<B><FONT size="2">Our Company</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are an energy-based holding company
headquartered in San Francisco, California that conducts its
business principally through the Utility, a public utility
operating in northern and central California. The Utility
engages primarily in the businesses of electricity and natural
gas distribution, electricity generation, electricity
transmission, and natural gas transportation and storage.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our executive offices are located at One Market
Street, Spear Tower, Suite 2400, San Francisco, California
94105, and our telephone number is (415)&nbsp;267-7000.
</FONT>

<P align="left">
<B><FONT size="2">The California Energy Crisis and the
Utility&#146;s Chapter&nbsp;11 Proceeding</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 1998, the state of California implemented
electricity industry restructuring and established a framework
allowing generators and other power providers to charge
market-based prices for electricity sold on the wholesale
market. The implementing legislation also established a retail
electricity rate freeze and a plan for recovering the
Utility&#146;s generation-related costs that were expected to be
uneconomic under the new market framework. State regulatory
action further required the Utility to divest a majority of its
fossil fuel-fired generation facilities and made it economically
unattractive to retain its remaining generation facilities. The
resulting sales of generation facilities in turn made the
Utility more dependent on the newly deregulated wholesale
electricity market.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Beginning in May 2000, wholesale prices for
electricity began to increase. Since the Utility&#146;s retail
electricity rates remained frozen, the Utility financed the
higher costs of wholesale electricity by issuing debt and
drawing on its credit facilities. The Utility&#146;s inability
to recover its electricity purchase costs from customers
ultimately resulted in billions of dollars in defaulted debt and
unpaid bills and caused the Utility to file a voluntary petition
for relief under Chapter&nbsp;11 of the United States Bankruptcy
Code, or Chapter&nbsp;11, on April&nbsp;6, 2001. During its
Chapter&nbsp;11 proceeding, the Utility retained control of its
assets and operated its business as a debtor-in-possession while
subject to the jurisdiction of the bankruptcy court.
</FONT>

<P align="left">
<B><FONT size="2">The CPUC Settlement Agreement</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On December&nbsp;18, 2003, the CPUC approved the
settlement agreement that provided the basis for the
Utility&#146;s plan of reorganization. Two CPUC commissioners,
or the dissenting commissioners, voted not to approve the
settlement agreement. The settlement agreement was executed by
the CPUC, the Utility and us on December&nbsp;19, 2003.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The settlement agreement contains a statement of
intent that it is in the public interest to restore the Utility
to financial health and to maintain and improve its financial
health in the future to ensure that it is able to provide safe
and reliable electricity and natural gas service to its
customers at just and reasonable rates. The settlement agreement
generally ensures that the Utility will have the opportunity to
collect in rates reasonable costs of providing utility service.
The settlement agreement provides that the Utility&#146;s
authorized return on equity will be no less than 11.22% per year
and, except for 2004 and 2005, the Utility&#146;s authorized
equity to capitalization ratio will be no less than 52% until
Moody&#146;s Investors Service, or Moody&#146;s, has issued the
Utility an issuer rating of not less than A3 or Standard &#38;
Poor&#146;s Ratings Services, or S&#38;P, has issued the Utility
a long-term issuer credit rating of not less than A-. The
settlement agreement also establishes a $2.2&nbsp;billion
after-tax regulatory asset (subject to certain reductions) and
allows for the recognition of an approximately $700&nbsp;million
after-tax regulatory asset related to generation assets. The
settlement agreement and related decisions by the CPUC provide
that the Utility&#146;s revenue requirement will
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">1
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">be collected regardless of sales levels and that
the Utility&#146;s rates will be timely adjusted to accommodate
changes in costs that it incurs.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Confirmation and Implementation of the Plan of
Reorganization</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On December&nbsp;22, 2003, the bankruptcy court
confirmed the plan of reorganization, fully incorporating the
settlement agreement. On April&nbsp;12, 2004, the Utility&#146;s
plan of reorganization became effective.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On the effective date, the Utility paid
approximately $8.394&nbsp;billion in cash to holders of allowed
claims and deposited approximately $1.843&nbsp;billion into
escrow accounts for the payment of disputed claims. The Utility
also paid approximately $83&nbsp;million in preferred stock
dividends and made sinking fund payments of approximately
$10&nbsp;million that were in arrears. The proceeds of the
Utility&#146;s public offering of $6.7&nbsp;billion of first
mortgage bonds provided the majority of the funds for these
payments, with $350&nbsp;million from an accounts receivable
financing facility, $799&nbsp;million from a term loan and
reimbursement agreements, and approximately $2.481&nbsp;billion
from cash on hand supplying the balance. In addition, the
Utility reinstated approximately $814&nbsp;million in debt
consisting of pollution control bond-related obligations and
approximately $421&nbsp;million of its preferred stock.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Although the Utility&#146;s operations will no
longer be subject to the oversight of the bankruptcy court, the
bankruptcy court will retain jurisdiction to hear and determine
disputes arising in connection with the interpretation,
implementation or enforcement of (i)&nbsp;the settlement
agreement, (ii)&nbsp;the Utility&#146;s plan of reorganization
and (iii)&nbsp;the confirmation order. The bankruptcy court
retains jurisdiction to resolve remaining disputed claims.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with its emergence from
Chapter&nbsp;11, the Utility has received an issuer credit
rating of Baa3 from Moody&#146;s and a long-term issuer credit
rating of BBB- from S&#38;P.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Pending Proceedings</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Appeals of the bankruptcy court&#146;s order
confirming the Utility&#146;s plan of reorganization are still
pending in the U.S. District Court for the Northern District of
California, or the District Court. These appeals were filed by
the dissenting commissioners and a municipality. The District
Court will set a schedule for briefing and argument of the
appeals at a later date. In addition, on April&nbsp;15, 2004,
the City and County of San Francisco, or CCSF, and Aglet
Consumer Alliance, or Aglet, each filed a petition with the
California Court of Appeal seeking review of the CPUC&#146;s
December&nbsp;18, 2003 decision approving the settlement
agreement and the CPUC&#146;s March&nbsp;16, 2004 decision
denying applications for rehearing of the December&nbsp;18, 2003
decision. CCSF and Aglet allege that the settlement agreement
violates California law, among other claims. CCSF requests the
appellate court to hear and review the CPUC&#146;s decisions
approving the settlement agreement and Aglet requests that the
CPUC&#146;s decisions be overturned. We and the Utility believe
the petitions are without merit and should be denied. The
Utility filed its answer in opposition to the petitions for
review on May&nbsp;19, 2004.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under applicable federal precedent, once the plan
of reorganization has been &#147;substantially
consummated,&#148; any pending appeals of the confirmation order
should be dismissed. If, notwithstanding this federal precedent,
the bankruptcy court&#146;s confirmation order or the settlement
agreement is subsequently overturned or modified, our and the
Utility&#146;s financial condition and results of operations
could be materially adversely affected and our and the
Utility&#146;s ability to make payments on our respective debt
could be materially adversely affected.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">2
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">Summary of the Terms of the Exchange
Offer</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On July&nbsp;2, 2003, we completed the private
placement of $600&nbsp;million in aggregate principal amount of
our 6&nbsp;7/8% senior secured notes due 2008, which we refer to
in this prospectus as the &#147;original notes.&#148; These
original notes were not registered under the Securities Act of
1933, as amended, or the Securities Act. Therefore, the original
notes are subject to significant restrictions on resale.
Accordingly, when we sold these original notes, we entered into
a registration rights agreement with the initial purchasers that
requires us to deliver to you this prospectus and to permit you
to exchange your original notes for notes, which we refer to in
this prospectus as the &#147;exchange notes,&#148; that are
registered under the Securities Act. The original notes and the
exchange notes are collectively referred to in this prospectus
as the &#147;notes.&#148; The terms of the exchange notes will
be substantially identical to the terms of the original notes,
except that the exchange notes will not contain transfer
restrictions and will not have the registration rights that
apply to the original notes or entitle their holders to
additional interest for our failure to comply with these
registration rights. The exchange notes will be issued under the
same indenture under which the original notes were issued and,
as a holder of the exchange notes, you will be entitled to the
same rights under the indenture that you had as a holder of
original notes. The original notes and the exchange notes will
be treated as a single series of notes under the indenture.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Set forth below is a summary description of the
terms of the exchange offer.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Exchange Offer</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">We are offering to exchange up to
    $600&nbsp;million in aggregate principal amount of exchange
    notes for a like aggregate principal amount of original notes.
    Original notes may be tendered only in denominations of $1,000
    and multiples thereof.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Expiration Date</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">The exchange offer will expire at 5:00&nbsp;p.m.,
    New York City time,
    on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2004, unless we extend it. We do not currently intend to extend
    the exchange offer.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Treatment of Accrued Interest</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Any interest that has accrued on the original
    notes before their acceptance or exchange in this exchange offer
    will be included in the interest paid on the exchange notes on
    the first interest payment date after the conclusion of the
    exchange offer.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Conditions to the Exchange Offer</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">The exchange offer is subject to the conditions
    that:
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&#149;&nbsp;it shall be permissible under
    applicable law and Securities and Exchange Commission, or SEC,
    policy; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&#149;&nbsp;there is no action or proceeding,
    pending or threatened, that would impair our ability to proceed
    with the exchange offer.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Procedure for Exchanging Original
    Notes</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">If the original notes you wish to exchange are in
    book-entry form and registered in the name of a broker, dealer,
    commercial bank, trust company or other nominee, you must
    contact the registered holder and instruct it to promptly tender
    your original notes for exchange on your behalf. You must comply
    with procedures of The Depository Trust Company, or DTC, for
    tender and delivery of book-entry securities in order to validly
    tender your original notes for exchange.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">If the original notes you wish to exchange are
    registered in your name, you must complete, sign and date the
    letter of transmittal, and mail or otherwise deliver it,
    together with any other required documentation, to J.P. Morgan
    Trust Company, National Association, as exchange agent, at the
    address specified under the heading &#147;The Exchange
    Offer&#151; Exchange Agent.&#148;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<P align="center"><FONT size="2">3
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Questions regarding the exchange of original
    notes or the exchange offer generally should be directed to the
    exchange agent at one of its addresses specified under the
    heading &#147;The Exchange Offer&#151; Exchange Agent.&#148;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Guaranteed Delivery Procedures</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">If you wish to exchange your original notes and
    you cannot get the required documents to the exchange agent
    by &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2004 or you cannot tender and deliver your original notes in
    accordance with DTC&#146;s procedures
    by &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2004, you may tender your original notes according to the
    guaranteed delivery procedures described under the heading
    &#147;The Exchange Offer&#151; Guaranteed Delivery
    Procedures.&#148;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Withdrawal Rights</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">You may withdraw the tender of your original
    notes at any time before 5:00&nbsp;p.m., New York City time,
    on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2004.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Acceptance of Original Notes and Delivery of
    Exchange Notes</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">We will accept for exchange any and all original
    notes that are properly tendered in the exchange offer before
    5:00&nbsp;p.m., New York City time,
    on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2004, as long as all of the terms and conditions of the exchange
    offer are met. We will deliver the exchange notes promptly
    following the expiration date.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Resale of Exchange Notes</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Based on interpretations by the staff of the SEC,
    as detailed in a series of no-action letters issued by the SEC
    to third parties, we believe that you may offer for resale,
    resell or otherwise transfer the exchange notes without
    complying with the registration and prospectus delivery
    requirements of the Securities Act if you are:
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&#149;&nbsp;acquiring the exchange notes and
    acquired the original notes being exchanged in the ordinary
    course of your business;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&#149;&nbsp;not a broker-dealer tendering
    original notes acquired directly from us;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&#149;&nbsp;not participating, do not intend to
    participate and have no arrangements or understandings with any
    person to participate in a distribution (within the meaning of
    the Securities Act) of the exchange notes; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&#149;&nbsp;not our &#147;affiliate,&#148; within
    the meaning of Rule&nbsp;405 under the Securities Act.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Each broker or dealer that receives exchange
    notes in exchange for original notes that were acquired for its
    own account as a result of market-making or other trading
    activities must acknowledge that it will deliver a prospectus
    meeting the requirements of the Securities Act in connection
    with any resale of those exchange notes. Furthermore, any
    broker-dealer that acquired any of its original notes directly
    from us must be named as a selling noteholder in connection with
    the registration and prospectus delivery requirements of the
    Securities Act relating to any resale transaction.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">4
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Consequences of Failure to Exchange</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">If you do not exchange your original notes for
    exchange notes, you will not be able to offer, sell or otherwise
    transfer the original notes except:
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&#149;&nbsp;in compliance with the registration
    and prospectus delivery requirements of the Securities Act and
    any other applicable securities laws;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&#149;&nbsp;under an exemption from the
    registration requirements of securities laws; or
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&#149;&nbsp;in a transaction not subject to the
    securities laws.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Original notes that remain outstanding after
    completion of the exchange offer will continue to bear a legend
    reflecting these restrictions on transfer. In addition, upon
    completion of the exchange offer, you will not be entitled to
    any rights to have the resale of original notes registered under
    the Securities Act (subject to limited exceptions applicable
    only to certain qualified institutional buyers). Unless
    otherwise required to do so by the terms of the registration
    rights agreement, we do not intend to register under the
    Securities Act the resale of any original notes that remain
    outstanding after completion of the exchange offer.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Certain Tax Considerations</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">We believe that the exchange of original notes
    for exchange notes will not be a taxable event for United States
    federal income tax purposes.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Exchange Agent</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">J.P. Morgan Trust Company, National Association
    is serving as exchange agent for the exchange offer.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<P align="center"><FONT size="2">5
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">Summary Description of the Exchange
Notes</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">The summary below describes the principal
terms of the exchange notes. Some of the terms and conditions
described below are subject to important limitations and
exceptions. The &#147;Description of the Notes&#148; section of
this prospectus contains a more detailed description of the
terms and conditions of the exchange notes.</FONT></I>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The terms of the exchange notes we are issuing in
the exchange offer will be substantially identical to the terms
of the original notes, except that the exchange notes will:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">not contain transfer restrictions;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">not have the registration rights that apply to
    the original notes; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">not entitle their holders to additional interest
    for our failure to comply with these registration rights.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A brief description of the material terms of the
exchange notes is set forth below:
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Securities Offered</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">$600,000,000 aggregate principal amount of
    6&nbsp;7/8% Senior Secured Notes due July&nbsp;15, 2008.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Maturity</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">July&nbsp;15, 2008.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Interest Payment Dates</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">January&nbsp;15 and July&nbsp;15 of each year,
    beginning July&nbsp;15, 2004. The first payment date on the
    original notes was January&nbsp;15, 2004. Any interest that has
    accrued, but has not been paid or provided for, on the original
    notes before their acceptance and exchange in this exchange
    offer will become accrued interest on the corresponding exchange
    note and will be payable on the first interest payment date
    after the conclusion of the exchange to holders of record on the
    immediately preceding January&nbsp;1 or July&nbsp;1, as
    applicable.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Interest Rate</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">6&nbsp;7/8% per year.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Mandatory Offer to Repurchase</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">If PG&#38;E Corporation experiences a change of
    control or a reorganization event (in each case, as defined in
    &#147;Description of the Notes&#148;), it must offer to
    repurchase the exchange notes at 101% of their principal amount,
    plus accrued and unpaid interest, if any, to the date of
    repurchase. See &#147;Description of the Notes&#151; Repurchase
    at the Option of Holders&#151; Change of Control or
    Reorganization Event.&#148;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Security</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">The exchange notes will be secured by a first
    priority pledge of approximately 94% of the Utility&#146;s
    common stock. The rights of the holders with respect to 65% of
    such shares will be limited. See &#147;Description of the
    Notes&#151; The Pledge Agreements.&#148;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Ranking</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">The exchange notes will be secured obligations of
    PG&#38;E Corporation and, to the extent of the collateral
    securing the notes, will be senior to all PG&#38;E
    Corporation&#146;s current and future unsecured indebtedness.
    The exchange notes will be secured only by the Utility&#146;s
    common stock and will not be secured by any other assets of
    PG&#38;E Corporation. PG&#38;E Corporation is a holding company
    that conducts its business principally through the Utility.
    Thus, as a practical matter, the exchange notes will be
    effectively junior to all obligations, including trade payables
    and other unsecured debts, of the Utility. As of April&nbsp;12,
    2004, after giving effect to the consummation of the
    transactions in connec-
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<P align="center"><FONT size="2">6
</FONT>

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<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">tion with the effective date of the
    Utility&#146;s plan of reorganization, the exchange notes:
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&#149;&nbsp;ranked senior to $280&nbsp;million of
    our convertible subordinated debt; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&#149;&nbsp;were effectively junior to all
    obligations owed by the Utility, which included approximately
    $9.7&nbsp;billion of financial debt (including rate reduction
    bonds and borrowings under an accounts receivable financing
    facility).
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">The exchange notes will not be guaranteed by the
    Utility. In addition, under the indenture, there are no
    restrictions on the ability of the Utility to incur additional
    debt. The exchange notes also will be effectively subordinated
    to all additional indebtedness incurred by the Utility.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Sinking Fund</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">None.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Optional Redemption</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">We may redeem the notes in whole or in part at
    any time on or after July&nbsp;15, 2006 at the redemption prices
    described under &#147;Description of the Notes&#151; Optional
    Redemption.&#148; In addition, we may redeem some or all of the
    notes at any time prior to July&nbsp;15, 2006 at a make-whole
    premium plus accrued and unpaid interest, if any, to the
    redemption date. Prior to July&nbsp;15, 2006, we may also redeem
    up to 35% of the aggregate principal amount of the notes at a
    redemption price of 106.875% with the net cash proceeds of
    certain public equity offerings.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Covenants of the Indenture</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">We will issue the exchange notes under an
    indenture between us and J.P.&nbsp;Morgan Trust Company,
    National Association, as successor trustee. The indenture
    contains covenants that restrict our ability to:
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&#149;&nbsp;borrow money;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&#149;&nbsp;pay dividends on or purchase our
    stock or our restricted subsidiaries&#146; stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&#149;&nbsp;make investments;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&#149;&nbsp;use assets as security in other
    transactions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&#149;&nbsp;sell certain assets or merge with or
    into other companies; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&#149;&nbsp;enter into transactions with
    affiliates.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">On the date the exchange notes are issued, our
    principal subsidiary, the Utility, will be an unrestricted
    subsidiary. In addition, under the circumstances described under
    &#147;Description of the Notes&#151; Certain Covenants&#151;
    Designation of Restricted and Unrestricted Subsidiaries,&#148;
    we are permitted to designate certain of our current and future
    subsidiaries as unrestricted subsidiaries. Our unrestricted
    subsidiaries will not be subject to the restrictive covenants
    described above. On the date the exchange notes are issued,
    there will be no restrictions on the ability of our unrestricted
    subsidiaries to incur debt, all of which would be effectively
    senior to the exchange notes.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">7
</FONT>

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<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">In the event that the notes are assigned a rating
    of Baa3 or better by Moody&#146;s and BBB- or better by S&#38;P
    and no default has occurred and is continuing, certain covenants
    in the indenture will be terminated. In the event that the notes
    are no longer assigned a rating of Baa3 or better by
    Moody&#146;s or BBB- or better by S&#38;P after these certain
    covenants have been terminated, such covenants will not be
    restored. For more details, see &#147;Description of the
    Notes&#151; Covenant Termination.&#148;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Absence of a Public Market for the
    Notes</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">The exchange notes will be a new issue of
    securities. We cannot assure you that an active or liquid market
    will develop for the exchange notes. See &#147;Plan of
    Distribution.&#148;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Listing</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">We do not intend to list the exchange notes on
    any securities exchange or automated quotation system.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">8
</FONT>

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<!-- link1 "RISK FACTORS" -->
<DIV align="left"><A NAME="002"></A></DIV>

<P align="center">
<B><FONT size="2">RISK FACTORS</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">You should carefully consider the risks
described below, as well as other information contained or
incorporated by reference in this prospectus. The risks and
uncertainties described below are generally applicable to both
the original notes and the exchange notes. The risks and
uncertainties described below are not the only ones we may face.
The following risks, together with additional risks and
uncertainties not currently known to us or that we may currently
deem immaterial, could impair our financial condition and
results of operations and ultimately affect our ability to make
payments on the notes.</FONT></I>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Risks Related to the Notes</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">As a holding company, we are substantially
dependent on the Utility, our regulated subsidiary, to fund our
cash needs. Our ability to generate cash depends on many factors
beyond our control. Regulatory constraints could limit the
Utility&#146;s ability to distribute cash to us.</FONT></I></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are a holding company with no direct
operations and no material assets other than our own cash and
the equity of the Utility and we are substantially dependent
upon the earnings and cash flows of the Utility to meet our
obligations. Our principal sources of cash will be dividends
from, and stock repurchases by, the Utility, reimbursements from
the Utility for administrative and other services we provide to
it and proceeds from the purchase of our common stock by
participants in our stock option and retirement plans. While in
Chapter&nbsp;11, the Utility was prohibited from paying any
common stock dividends, and therefore the Utility did not make
any distributions on its common stock in 2001, 2002, 2003 or the
first quarter of 2004.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Utility expects to achieve the target capital
structure provided in the settlement agreement by the second
half of 2005. While we expect that once the Utility reaches its
target capital structure, it will commence distributions on its
common stock to us, we can provide no assurance as to if or when
this will occur or the amount of any distribution that may be
made.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Also, in connection with our becoming a holding
company of the Utility, the CPUC imposed certain conditions
relating to the financial integrity of the Utility, including
that:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Utility maintain a balanced capital structure
    consistent with CPUC determinations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the dividend policy of the Utility be established
    by the Utility&#146;s board of directors as though the Utility
    were a comparable stand-alone utility company;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Utility not guarantee our or our other
    subsidiaries&#146; notes, debentures, debt obligations or other
    securities without prior written consent from the CPUC; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the capital requirements of the Utility, as
    determined to be necessary and prudent to meet its obligation to
    serve or to operate the Utility in a prudent and efficient
    manner, be given first priority by both our and the
    Utility&#146;s boards of directors.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">These conditions could further limit the
flexibility of the Utility to declare or pay a dividend or
require us to contribute equity capital to the Utility.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If, as a result of any of the above factors, the
Utility is limited in its ability to make distributions to us or
we are required to contribute capital to the Utility, our
ability to satisfy our obligations to the noteholders could be
adversely affected.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">The notes will be effectively subordinated
to all indebtedness of the Utility.</FONT></I></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The notes are not guaranteed by the Utility.
Holders of notes will not have any claim as a creditor against
the Utility, and the indebtedness and all other liabilities,
including trade payables, whether secured or unsecured, of the
Utility will be effectively senior to the claims of the
noteholders. In addition, there are no restrictions under the
indenture on the ability of the Utility to incur additional
debt, so that the notes also will be effectively subordinated to
all additional indebtedness incurred by the Utility. In the
event of a future bankruptcy, liquidation, reorganization or
other winding up of the Utility, holders of its indebtedness and
its trade creditors will generally be entitled to payment of
their claims from the assets of the Utility before any
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">9
</FONT>

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<DIV align="left">
<FONT size="2">assets are made available for distribution to us.
The occurrence of such events could adversely affect our ability
to satisfy our obligations to the noteholders.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">To service our indebtedness, we will
require a significant amount of cash. Our substantial
indebtedness and the substantial indebtedness of the Utility
could adversely affect our financial health and prevent us from
fulfilling our obligations under the notes.</FONT></I></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We and the Utility have a significant amount of
debt. As of April&nbsp;12, 2004, we had approximately
$880&nbsp;million of debt outstanding, including the notes, on a
stand-alone basis. As of April&nbsp;12, 2004, after giving
effect to the consummation of the transactions in connection
with the effective date of the Utility&#146;s plan of
reorganization, the Utility, together with its consolidated
subsidiaries, had approximately $9.7 billion of financial debt,
including rate reduction bonds and $350&nbsp;million in
borrowings under an accounts receivable financing facility. The
Utility, together with its consolidated subsidiaries, has
established working capital facilities upon which they may draw
up to approximately $1.5&nbsp;billion, of which only the
$350&nbsp;million included above was drawn down in cash and
$206&nbsp;million in letters of credit was utilized on the
effective date. In addition, the Utility has credit facilities
that provide for the issuance of up to $620&nbsp;million in
letters of credit, all of which was utilized on the effective
date. Also, substantially all of the Utility&#146;s
pre-effective date cash balance were used on the effective date
to pay or provide for the payment of claims in connection with
its plan of reorganization.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This substantial indebtedness could have
important consequences to holders of the notes. For example, it
could:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">make it difficult for us to satisfy our
    obligations with respect to the notes;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">increase our or the Utility&#146;s vulnerability
    to general adverse economic and industry conditions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">increase our or the Utility&#146;s vulnerability
    to interest rate increases for the portion of any of our or the
    Utility&#146;s variable rate debt;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">require us or the Utility to dedicate a
    substantial portion of our cash flow from operations to payments
    on our or the Utility&#146;s indebtedness, thereby reducing the
    availability of cash flow to fund working capital, capital
    expenditures, acquisitions, development efforts and other
    general corporate purposes and, with respect to the Utility,
    cash distributions to us;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">limit our or the Utility&#146;s flexibility in
    planning for, or reacting to, changes in our or the
    Utility&#146;s businesses; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">limit, along with the financial and other
    restrictive covenants in the documents governing our and the
    Utility&#146;s indebtedness, among other things, our and the
    Utility&#146;s ability to borrow additional funds.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We or the Utility may need to refinance all or a
portion of our or the Utility&#146;s indebtedness, including the
notes and the Utility&#146;s first mortgage bonds, credit
facilities, term loan and reimbursement agreements, on or before
maturity. If a refinancing need arises and either we or the
Utility are unable to refinance or extend outstanding borrowings
on commercially reasonable terms or at all, we or the Utility
may have to:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">reduce or delay capital expenditures planned for
    replacements, improvements and expansions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">sell assets;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">restructure debt; and/or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">obtain additional debt or equity financing.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<FONT size="2">We cannot assure you that we or the Utility could
effect or implement any of these alternatives on satisfactory
terms, if at all, particularly, in the case of the Utility,
because effecting any alternative may require CPUC approval. If
the Utility&#146;s cash flows from operations are insufficient
to service the Utility&#146;s substantial indebtedness and fund
distributions to us in amounts sufficient to service our
substantial indebtedness, our ability to satisfy our obligations
to the noteholders would be adversely affected.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">10
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">The collateral securing the notes may be
diluted under certain circumstances. In addition, the notes will
be effectively subordinated to certain of our obligations to the
extent these obligations are secured by collateral that does not
secure the notes.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the indenture, the collateral that secures
the notes is also allowed to secure a substantial amount of
certain types of other indebtedness specified in the indenture
on an equal and ratable basis. In addition, after the notes are
rated Baa3 or better by Moody&#146;s and BBB- or better by
S&#38;P, additional indebtedness in an amount of up to 15% of
our consolidated tangible assets could be secured by the
collateral securing the exchange notes. Noteholders&#146; rights
to the collateral could be substantially diluted by any increase
in the indebtedness secured by this collateral.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to the collateral securing the notes,
the indenture permits certain of our obligations to be secured
by any of our property or assets that does not secure the notes.
See &#147;Description of the Notes&#151; Certain Covenants&#151;
Liens.&#148; As a result, to the extent any collateral secures
obligations but does not also secure the notes, the notes will
be effectively subordinated to these obligations with respect to
such collateral. In the event of our bankruptcy, liquidation or
reorganization, those assets that do not secure the notes will
not be available to pay our obligations on the notes unless and
until the obligations that are secured by such collateral are
paid in full. Lenders whose obligations are secured by
collateral that does not secure the notes may recover a greater
percentage of the amounts owed to them than the noteholders.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">The pledge of the Utility&#146;s common
stock to secure the notes could be declared void and, if this
happens, the value and liquidity of the notes could be adversely
affected and the risk that the noteholders might not fully
recover the amounts owed under the notes would be
increased.</FONT></I></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The notes are secured by a pledge of
approximately 94% of the Utility&#146;s outstanding common
stock. With respect to 35% of the shares pledged, the collateral
agent under the indenture governing the notes has the customary
rights of a pledgee of common stock, including the right to
foreclose on the shares. However, with respect to the remaining
65% of the shares pledged, the collateral agent under the
indenture governing the notes does not have the right to
foreclose on the shares, vote the shares, direct or restrict in
any way the voting of the shares by us, compel any disposition
of such shares or prevent any disposition of the shares in a
commercially reasonable transaction. Although we have not sought
approval of the CPUC for the pledge of the Utility&#146;s common
stock, we have received an opinion of counsel that no such
approval or other action of the CPUC was required in making the
pledge. This opinion of counsel, however, is not binding on the
CPUC and is not a guarantee of what a particular court would
hold. Rather, the opinion of counsel only represents
counsel&#146;s reasoned judgment as to what decision a court
should reach if the issues were properly presented to and
considered by the court following applicable legal principles.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Counsel&#146;s opinion points out that in at
least one recent decision the CPUC did exercise jurisdiction
over a pledge of 100% of the common stock of a public utility by
its non-utility parent. The facts of that case were unusual and,
unlike the current transaction, involved the pledge of 100% of
that public utility&#146;s common stock with full rights of
foreclosure with respect to all of those shares and a request
for CPUC approval by both the utility and its non-utility parent.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Moreover, we believe the CPUC&#146;s assertion of
jurisdiction in that recent decision is at odds with its own
prior decisions and the express terms of the relevant statute.
Nevertheless, it is possible that the CPUC also could seek to
assert its jurisdiction over the pledge of the Utility&#146;s
common stock. If it were to do so, and if its action were
ultimately upheld by the courts, the pledge could be declared
void and set aside. This could adversely affect the value and
the liquidity of the notes and increase the risk that holders of
the notes might not fully recover the amounts owed under the
notes. In addition, if the pledge is declared void, this would
result in an event of default under the indenture.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Even with a valid pledge of the Utility&#146;s
common stock, foreclosure by the collateral agent under the
indenture governing the notes may be subject to applicable
regulatory requirements, including approval by the CPUC if it
were determined that the foreclosure or the sale of the 35% of
the pledged Utility common stock would constitute a transfer of
control of the Utility. California law gives the CPUC broad
discretion to define &#147;control&#148; for these purposes and,
although we believe that the transaction is structured to
minimize the risk
</FONT>

<P align="center"><FONT size="2">11
</FONT>

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<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left">
<FONT size="2">that a subsequent foreclosure and sale would
constitute such a transfer of control, such a determination
would depend upon the facts and circumstances existing at the
time. Accordingly, the collateral agent&#146;s ability to
foreclose on and dispose of the Utility common stock may be
restricted or delayed by applicable regulatory requirements. Any
such restriction or delay could adversely affect the value and
the liquidity of the notes and increase the risk that the
noteholders might not fully recover the amounts owed under the
notes.
</FONT>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, any foreclosure that results in a
holder of the notes becoming the beneficial owner of 10% or more
of the outstanding voting securities of the Utility could
require the holder and its upstream parents to register as a
holding company under the Public Utility Holding Company Act of
1935, as amended, or PUHCA, unless an exemption is available.
Registration would subject the holder, as well as us, the
Utility and our other subsidiaries, to a comprehensive
regulatory scheme pursuant to which the SEC regulates the
structure, financings, lines of business and internal
transactions of public utility holding companies.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">The terms of our indebtedness could
restrict our flexibility and limit our ability to satisfy
obligations under the notes.</FONT></I></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are subject to financial covenants and other
restrictions contained in the indenture evidencing our senior
subordinated convertible notes and the indenture governing the
notes. These covenants, as well as covenants that may be
contained in agreements governing our future indebtedness, could
limit our operational flexibility and restrict our ability to
borrow additional funds to finance operations and to make
principal and interest payments on the notes. Additionally,
failure to comply with these financial covenants and other
restrictions could result in an event of default under the terms
of this indebtedness or future indebtedness which, if not cured
or waived, could result in this indebtedness or such future
indebtedness becoming due and payable. The effect of these
covenants, or our failure to comply with them, could have a
material adverse effect on our business, financial condition and
results of operations and our ability to satisfy obligations
under the notes.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Our ability to repurchase notes with cash
upon certain change of control or reorganization transactions
may be limited.</FONT></I></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In specific circumstances involving certain
change of control or reorganization transactions, holders of
notes will have the right to require us to repurchase some or
all of their notes. There can be no assurance that we will have
sufficient financial resources at such time or would be able to
arrange financing to pay the repurchase price of the notes in
cash. Our ability to repurchase the notes in such event also may
be limited by law, by regulation or administrative rule, by our
indentures, by the terms of other agreements relating to any
senior indebtedness and by such indebtedness and agreements as
may be entered into, replaced, supplemented or amended from time
to time. We may be required to refinance our indebtedness in
order to make such payments. We may not have the financial
ability to repurchase the notes in cash if payment for our other
indebtedness is accelerated.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Despite current indebtedness levels, we and
the Utility may still be able to incur substantially more debt.
This could further exacerbate certain risks described in these
risk factors.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may be able to incur substantial additional
debt in the future, including debt secured by the collateral
that secures the notes and debt secured by collateral that does
not secure the notes. In addition, the Utility is permitted to
borrow without any restrictions under the indenture. Adding new
debt to current debt levels could make it difficult for us to
satisfy our obligations with respect to the notes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">If the notes receive an investment grade
rating, we will no longer be subject to most of the covenants in
the indenture.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If at any time the notes receive an investment
grade rating from Moody&#146;s and S&#38;P, subject to certain
additional conditions, we and our restricted subsidiaries will
no longer be subject to most of the covenants set forth in the
indenture. In the event of termination, the covenants will not
be restored, even if the exchange notes are later rated below
investment grade by either or both of these rating agencies. See
&#147;Description of the Notes&#151; Covenant Termination.&#148;
</FONT>

<P align="center"><FONT size="2">12
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">The market price for the exchange notes may
be volatile.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Historically, the market for non-investment grade
debt has been subject to disruptions that have caused
substantial volatility in the prices of securities similar to
the exchange notes offered hereby. The market for the exchange
notes, if any, may be subject to similar disruptions. Any such
disruptions may adversely affect the value of the exchange notes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">The exchange notes have no prior public
market and we cannot assure you that any public market will
develop or be sustained after the offering.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Although the exchange notes generally may be
resold or otherwise transferred by holders who are not our
affiliates without compliance with the registration requirements
under the Securities Act, they will constitute a new issue of
securities without an established trading market. Although the
initial purchasers of the original notes may make a market in
the exchange notes, they are under no obligation to do so and
therefore there can be no assurance that such a market will
develop or, if it does develop, that it will continue. If an
active public market does not develop, the market price and
liquidity of the exchange notes may be adversely affected.
Furthermore, we do not intend to apply for listing of the
exchange notes on any securities exchange or automated quotation
system.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Even if a market for the exchange notes does
develop, you may not be able to resell the exchange notes for an
extended period of time, if at all. In addition, future trading
prices for the exchange notes will depend on many factors,
including, among other things, prevailing interest rates, our
financial condition and the market for similar securities. As a
result, you may not be able to liquidate your investment quickly
or to liquidate it at an attractive price.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">You may have difficulty selling the
original notes which you do not exchange.</FONT></I></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If you do not exchange your original notes for
the exchange notes offered in this exchange offer, you will
continue to be subject to the restrictions on the transfer of
your original notes. Those transfer restrictions are described
in the indenture and in the legend contained on the original
notes, and arose because we issued the original notes under
exemptions from, and in transactions not subject to, the
registration requirements of the Securities Act. In general, you
may offer or sell your original notes only if they are
registered under the Securities Act and applicable state
securities laws, or if they are offered and sold under an
exemption from those requirements. If you do not exchange your
original notes in the exchange offer, you will no longer be
entitled to have those notes registered under the Securities
Act, except under limited circumstances described in the
registration rights agreement.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, if a large number of original notes
are exchanged for exchange notes issued in the exchange offer,
the principal amount of original notes that will be outstanding
will decrease. This will reduce the liquidity of the market for
the original notes, making it more difficult for you to sell
your original notes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Broker-dealers or noteholders may become
subject to the registration and prospectus delivery requirements
of the Securities Act.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any broker-dealer that:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">is participating, intends to participate or has
    any arrangement or understanding with any person to participate
    in a distribution (within the meaning of the Securities Act) of
    the exchange notes; or
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">tenders original notes in the exchange offer that
    were acquired directly from us;
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<FONT size="2">may be deemed to have received restricted
securities and may be required to comply with the registration
and prospectus delivery requirements of the Securities Act in
connection with any resale transaction by that broker-dealer.
Any profit on the resale of the exchange notes and any
commission or concessions received by a broker-dealer may be
deemed to be underwriting compensation under the Securities Act.
In addition, any broker-dealer that will receive exchange notes
for its own account in exchange for original notes that were
acquired as a result of market-making activities or other
trading activities may be deemed an &#147;underwriter&#148;
within the meaning of the Securities Act. Any such broker-dealer
will be required to acknowledge that it will deliver this
prospectus in connection with any resale of these exchange notes.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">13
</FONT>

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<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to broker-dealers, any noteholder
that is participating, intends to participate or has any
arrangement or understanding with any person to participate in a
distribution of the exchange notes or who does not acquire the
exchange notes in the ordinary course of its business or who
holds any original notes to be exchanged in the exchange offer
that were acquired other than in the ordinary course of
business, may be deemed to have received restricted securities
and may be required to comply with the registration and
prospectus delivery requirements of the Securities Act in
connection with any resale transaction by that noteholder.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Risks Related to PG&#38;E
Corporation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">We could be required to contribute capital
to the Utility or be denied distributions from the Utility to
the extent required by the CPUC&#146;s determination of the
Utility&#146;s financial condition.</FONT></I></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In approving our formation as the holding company
of the Utility, the CPUC imposed certain conditions, including
an obligation by our Board of Directors to give &#147;first
priority&#148; to the capital requirements of the Utility, as
determined to be necessary and prudent to meet the
Utility&#146;s obligation to serve and to operate in a prudent
and efficient manner. The CPUC later issued decisions in which
it adopted an expansive interpretation of our obligations under
this condition, including the requirement that each of the
holding companies &#147;infuse the utility with all types of
capital necessary for the utility to fulfill its obligation to
serve.&#148; We and the holding companies of the other major
California investor-owned electric utilities appealed these
decisions. On May&nbsp;21, 2004, the California Court of Appeal
issued an opinion finding that the CPUC has limited jurisdiction
over the holding companies to enforce the conditions imposed by
the CPUC on their formations, but that the CPUC&#146;s decision
interpreting the capital requirements condition was not ripe for
review. We have until June&nbsp;30, 2004 to appeal the decision.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the terms of the settlement
agreement, the CPUC agreed that, once the CPUC approval of the
settlement agreement is no longer subject to appeal, it will
release all claims against us and the Utility related to past
holding company actions during the California energy crisis.
Nevertheless, as now interpreted by the CPUC, whenever the
Utility&#146;s financial health is impaired in the future, we
could be required to infuse the Utility with all types of
capital necessary to fulfill its obligation to serve or to
operate in a prudent and efficient manner. These obligations, if
ultimately upheld by the courts, could materially restrict our
ability to meet our other obligations, including payments on the
notes.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, there is pending California
legislation which, if adopted, would expressly empower the CPUC
to require us to infuse capital into the Utility of &#147;any
type and quantity&#148; deemed necessary by the CPUC. This and
other currently pending legislation, if adopted, would increase
the CPUC&#146;s control over us as a holding company of the
Utility.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Adverse resolution of pending litigation
could have a material adverse effect on our financial condition
and results of operation.</FONT></I></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are involved in lawsuits filed by the
California Attorney General, CCSF and a private plaintiff
against us alleging unfair or fraudulent business acts or
practices based on alleged violations of conditions established
in the CPUC&#146;s holding company decisions caused by our
failure to provide adequate financial support to the Utility
during the California energy crisis. These lawsuits seek
significant damages, penalties or equitable relief. On
October&nbsp;8, 2003, the District Court held that the claims
for damages were property of the Utility&#146;s bankruptcy
estate, thus removing the damages claims from the lawsuits. The
Attorney General and CCSF have appealed that decision to the
U.S. Court of Appeals for the Ninth Circuit, or the Ninth
Circuit, where it is currently pending. We filed motions to
dismiss the appeals on the ground that the Ninth Circuit lacked
jurisdiction to hear them under certain provisions of the U.S.
Bankruptcy Code. The Ninth Circuit denied our motions in March
2004 and consolidated the two appeals.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that the plaintiffs&#146; allegations
are without merit. However, there can be no assurance that we
will prevail in these lawsuits.
</FONT>

<P align="center"><FONT size="2">14
</FONT>

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<P align="left">
<B><FONT size="2">Risks Related to the Utility</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">If either or both of the CPUC&#146;s
approval of the settlement agreement and the bankruptcy
court&#146;s confirmation of the Utility&#146;s plan of
reorganization are overturned or modified on appeal, our and the
Utility&#146;s financial condition and results of operations
could be materially adversely affected.</FONT></I></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On December&nbsp;18, 2003, the CPUC approved the
settlement agreement and, on December&nbsp;22, 2003, the
bankruptcy court confirmed the Utility&#146;s plan of
reorganization, which fully incorporates the settlement
agreement as a material and integral part of the plan. On
March&nbsp;16, 2004, the CPUC denied applications that had been
filed by several parties seeking rehearing of the CPUC&#146;s
decision approving the settlement agreement. On April&nbsp;15,
2004, two of these parties, CCSF and Aglet, filed petitions for
review of the CPUC&#146;s decisions with the California Court of
Appeal. Further, the dissenting commissioners and a municipality
have filed appeals of the bankruptcy court&#146;s confirmation
order in the District Court. On April&nbsp;9, 2004, the District
Court denied the motion filed by the dissenting commissioners to
stay the confirmation order.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On April&nbsp;12, 2004, the Utility&#146;s plan
of reorganization became effective. The District Court appeals
of the bankruptcy court&#146;s confirmation order and the state
court appeals of the CPUC decisions described above are still
pending. If the bankruptcy court&#146;s confirmation of the
Utility&#146;s plan of reorganization or the settlement
agreement is overturned or modified on appeal, our and the
Utility&#146;s financial condition and results of operations,
and the Utility&#146;s ability to pay dividends or otherwise
make distributions to us, could be materially adversely
affected. This in turn could materially adversely affect our
ability to make payments on the notes.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Our and the Utility&#146;s financial
viability depends upon the Utility&#146;s ability to recover its
costs in a timely manner from the Utility&#146;s customers
through regulated rates and otherwise execute its business
strategy.</FONT></I></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Utility is a regulated entity subject to CPUC
jurisdiction in almost all aspects of its business, including
the rates, terms and conditions of its services, procurement of
electricity and natural gas for its customers, issuance of
securities, dispositions of utility assets and facilities and
aspects of the siting and operation of its electricity and
natural gas distribution systems. Executing the Utility&#146;s
business strategy depends on periodic CPUC approvals of these
and related matters. The Utility&#146;s ongoing financial
viability depends on its ability to recover from its customers
in a timely manner the Utility&#146;s costs, including the costs
of electricity and natural gas purchased by it for its
customers, in the Utility&#146;s CPUC-approved rates and its
ability to pass through to its customers in rates the
Utility&#146;s FERC-authorized revenue requirements. The
Utility&#146;s financial viability also depends on its ability
to recover in rates an adequate return on its capital structure,
including long-term debt and equity. During the California
energy crisis, the high price the Utility had to pay for
electricity on the wholesale market, coupled with its inability
to fully recover its costs in retail rates, caused the
Utility&#146;s costs to significantly exceed its revenues and
ultimately caused the Utility to file a petition under
Chapter&nbsp;11. Even though the settlement agreement and
current regulatory mechanisms contemplate that the CPUC will
give the Utility the opportunity to recover its reasonable and
prudent future costs in its rates, there can be no assurance
that the CPUC will find that all of the Utility&#146;s costs are
reasonable and prudent or will not otherwise take or fail to
take actions to the Utility&#146;s detriment. In addition, there
can be no assurance that the bankruptcy court or other courts
will implement and enforce the terms of the settlement agreement
and the Utility&#146;s plan of reorganization in a manner that
would produce the economic results that we and the Utility
intend or anticipate. Further, there can be no assurance that
FERC-authorized tariffs will be adequate to cover the related
costs. If the Utility is unable to recover any material amount
of its costs through its rates in a timely manner, our and the
Utility&#146;s financial condition and results of operations
would be materially adversely affected.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">15
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">The Utility may be unable to purchase
electricity in the wholesale market or to increase its
generating capacity in a manner that the CPUC will find
reasonable or in amounts sufficient to satisfy the
Utility&#146;s residual net open position.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Utility&#146;s residual net open position is
expected to grow over time for a number of reasons, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">periodic expirations of the Utility&#146;s
    existing electricity purchase contracts;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">periodic expirations or other terminations of the
    DWR contracts allocated to the Utility&#146;s customers;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">increases in the Utility&#146;s customers&#146;
    electricity demands due to customer and economic growth or other
    factors; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">retirement or closure of the Utility&#146;s
    electricity generation facilities.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;


<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left">
<FONT size="2">In addition, unexpected outages at the
Utility&#146;s Diablo Canyon power plant or any of its other
significant generation facilities, or a failure to perform by
any of the counterparties to the Utility&#146;s electricity
purchase contracts or the DWR contracts allocated to the
Utility&#146;s customers, would immediately increase the
Utility&#146;s residual net open position.
</FONT>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In January 2004, the CPUC adopted an interim
decision that would require the California investor-owned
electric utilities to achieve, no later than January&nbsp;1,
2008, an electricity planning reserve margin of 15-17% in excess
of peak capacity electricity requirements and to have a diverse
portfolio of electricity sources. The California Governor has
requested that the CPUC accelerate the phase-in of the planning
reserve requirement to 2006. These requirements may increase the
Utility&#146;s residual net open position. Specific procedures
contained in the decision relating to development and execution
of the Utility&#146;s procurement plans also may cause its cost
of electricity to increase. The CPUC also continued its target
of a 5% limitation on the reliance by the California
investor-owned electric utilities on the spot market to meet
their energy needs.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As existing electricity purchase contracts
expire, sources of electricity otherwise become unavailable or
demand increases, the Utility will purchase electricity in the
wholesale market. These purchases will be made under contracts
priced at the time of execution or, if made in the spot market,
at the then-current market price of wholesale electricity. There
can be no assurance that sufficient replacement electricity will
be available at prices and on terms that the CPUC will find
reasonable, or at all. The Utility&#146;s financial condition
and results of operations would be materially adversely affected
if it is unable to purchase electricity in the wholesale market
at prices or on terms the CPUC finds reasonable or in quantities
sufficient to satisfy the Utility&#146;s residual net open
position.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Alternatively, the CPUC may require the Utility,
or the Utility may elect, to satisfy all or a part of its
residual net open position by developing or acquiring additional
generation facilities. This could result in significant
additional capital expenditures or other costs and may require
the Utility to issue additional debt, which it may not be able
to issue on reasonable terms, or at all. In addition, if the
Utility is not able to recover a material part of the cost of
developing or acquiring additional generation facilities in the
Utility&#146;s rates in a timely manner, our and the
Utility&#146;s financial condition and results of operations
would be materially adversely affected.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">The Utility&#146;s financial condition and
results of operations could be materially adversely affected if
it is unable to successfully manage the risks inherent in
operating the Utility&#146;s facilities.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Utility owns and operates extensive
electricity and natural gas facilities that are interconnected
to the U.S. western electricity grid and numerous interstate and
continental natural gas pipelines. The operation of the
Utility&#146;s facilities and the facilities of third parties on
which it relies involves numerous risks, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">operating limitations that may be imposed by
    environmental or other regulatory requirements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">imposition of operational performance standards
    by agencies with regulatory oversight of the Utility&#146;s
    facilities;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">environmental and personal injury liabilities;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">fuel interruptions;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">16
</FONT>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">blackouts;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">labor disputes;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">weather, storms, earthquakes, fires, floods or
    other natural disasters; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">explosions, accidents, mechanical breakdowns and
    other events or hazards that affect demand, result in power
    outages, reduce generating output or cause damage to the
    Utility&#146;s assets or operations or those of third parties on
    which it relies.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<FONT size="2">The occurrence of any of these events could
result in lower revenues or increased expenses, or both, that
may not be fully recovered through insurance, rates or other
means in a timely manner or at all.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Electricity and natural gas markets are
highly volatile and insufficient regulatory responsiveness to
that volatility could cause events similar to those that led to
the filing of the Utility&#146;s Chapter&nbsp;11 petition to
occur.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the recent past, the commodity markets for
electricity and natural gas have been highly volatile and
subject to substantial price fluctuations. A variety of factors
may contribute to commodity market volatility, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">weather;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">supply and demand;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the availability of competitively priced
    alternative energy sources;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the level of production of natural gas;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the price of other fuels that are used to produce
    electricity, including crude oil and coal;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the transparency, efficiency, integrity and
    liquidity of regional energy markets affecting California;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">electricity transmission or natural gas
    transportation capacity constraints;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">federal, state and local energy and environmental
    regulation and legislation; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">natural disasters, war, terrorism and other
    catastrophic events.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">These factors are largely outside the
Utility&#146;s control. If wholesale electricity or natural gas
prices increase significantly, public pressure or other
regulatory or governmental influences or other factors could
constrain the willingness or ability of the CPUC to authorize
timely recovery of the Utility&#146;s costs. Moreover, the
volatility of commodity markets could cause the Utility to apply
more frequently to the CPUC for authority to timely recover its
costs in rates. If the Utility is unable to recover any material
amount of its costs in its rates in a timely manner, our and the
Utility&#146;s financial condition and results of operations
would be materially adversely affected.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">The Utility&#146;s operations are subject
to extensive environmental laws, and changes in, or liabilities
under, these laws could adversely affect its financial condition
and results of operations.</FONT></I></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Utility&#146;s operations are subject to
extensive federal, state and local environmental laws. Complying
with these environmental laws has in the past required
significant expenditures for environmental compliance,
monitoring and pollution control equipment, as well as for
related fees and permits. Moreover, compliance in the future may
require significant expenditures relating to electric and
magnetic fields. The Utility also is subject to significant
liabilities related to the investigation and remediation of
environmental contamination at the Utility&#146;s current and
former facilities, as well as at third-party owned sites. Due to
the potential for imposition of stricter standards and greater
regulation in the future and the possibility that other
potentially responsible parties may not be financially able to
contribute to cleanup costs, conditions may change or additional
contamination may be discovered, the Utility&#146;s
environmental compliance and remediation costs could increase,
and the timing of its capital expenditures in the future may
accelerate. If the Utility is unable to recover the costs of
complying with environmental laws in its rates in a timely
manner, the Utility&#146;s financial condition and results of
operations could be materially adversely affected. In addition,
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">17
</FONT>

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<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left">
<FONT size="2">in the event the Utility must pay materially more
than the amount that it currently has reserved on its balance
sheet to satisfy its environmental remediation obligations and
the Utility is unable to recover these costs from insurance or
through rates in a timely manner, our and the Utility&#146;s
financial condition and results of operations would be
materially adversely affected.
</FONT>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">The Utility faces the risk of unrecoverable
costs if its customers obtain distribution and transportation
services from other providers as a result of municipalization or
other forms of competition.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Utility&#146;s customers could bypass its
distribution and transportation system by obtaining service from
other sources. Forms of bypass of the Utility&#146;s electricity
distribution system include the construction of duplicate
distribution facilities to serve specific existing or new
customers, the municipalization of the Utility&#146;s
distribution facilities by local governments or districts,
self-generation by the Utility&#146;s customers and other forms
of competition. Bypass of the Utility&#146;s system may result
in stranded investment capital, loss of customer growth or
additional barriers to cost recovery. The Utility&#146;s natural
gas transportation facilities also are at risk of being bypassed
by interstate pipeline companies that construct facilities in
the Utility&#146;s markets or by customers who build pipeline
connections that bypass the Utility&#146;s natural gas
transportation and distribution system. As customers and local
public officials explore their energy options in light of the
recent California energy crisis, these bypass risks may be
increasing and may increase further if the Utility&#146;s rates
exceed the cost of other available alternatives. In addition,
technological changes could result in the development of
economically attractive alternatives to purchasing electricity
through the Utility&#146;s distribution facilities. Neither we
nor the Utility can currently predict the impact of these
actions and developments on the Utility&#146;s business,
although one possible outcome is a decline in the demand for the
services that the Utility provides, which would result in a
corresponding decline in the Utility&#146;s revenues and our
consolidated revenues.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If the number of the Utility&#146;s customers
declines due to bypass, technological changes or other forms of
competition, and the Utility&#146;s rates are not adjusted in a
timely manner to allow it to fully recover its investment in
electricity and natural gas facilities and electricity
procurement costs, our and the Utility&#146;s financial
condition and results of operations could be materially
adversely affected.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">The Utility faces the risk of unrecoverable
costs resulting from changes in the number of customers in its
service territory for whom the Utility purchases
electricity.</FONT></I></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As part of California&#146;s electricity industry
restructuring, the Utility&#146;s customers were given the
choice of either continuing to receive electricity procurement,
transmission and distribution services, or bundled service, from
the Utility or purchasing electricity from alternate energy
service providers and to thus become direct access customers.
The CPUC suspended the right of end-user customers to become
direct access customers on September&nbsp;20, 2001, although
customers that were then direct access customers have been
allowed to remain on direct access. Separately, the CPUC has
instituted a rulemaking implementing California&#146;s Assembly
Bill&nbsp;117, which permits California cities and counties to
purchase and sell electricity for their residents once they have
registered as community choice aggregators. The Utility would
continue to provide distribution, metering and billing services
to the community choice aggregators&#146; customers. Once
registration has occurred, each community choice aggregator
would purchase electricity for all of its residents who do not
affirmatively elect to continue to receive electricity from the
Utility. However, the Utility would remain those customers&#146;
electricity provider of last resort. If the Utility loses a
material number of customers as a result of cities and counties
electing to become community choice aggregators or the CPUC once
again allowing customers to migrate to direct access, the
Utility&#146;s electricity purchase contracts could obligate it
to purchase more electricity than the Utility&#146;s remaining
customers require, the excess of which the Utility would have to
sell, possibly at a loss. Further, if the Utility must provide
electricity to customers discontinuing direct access or electing
to leave a community choice aggregator, the Utility may be
required to make unanticipated purchases of additional
electricity at higher prices. If the Utility has excess
electricity or it must make unplanned purchases of electricity
as a result of changes in the number of community choice
aggregators&#146; customers or direct access customers and the
CPUC fails to adjust the Utility&#146;s rates to reflect the
impact of these actions, our and the Utility&#146;s financial
condition and results of operations could be materially
adversely affected.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">18
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">The operation and decommissioning of the
Utility&#146;s nuclear power plants expose it to potentially
significant liabilities and capital expenditures.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The operation and decommissioning of the
Utility&#146;s nuclear power plants expose it to potentially
significant liabilities and capital expenditures, including
those arising from the storage, handling and disposal of
radioactive materials and uncertainties related to the
regulatory, technological and financial aspects of
decommissioning nuclear plants at the end of their licensed
lives. The Utility maintains decommissioning trusts and external
insurance coverage to reduce the Utility&#146;s financial
exposure to these risks. However, the costs or damages the
Utility may incur in connection with the operation and
decommissioning of nuclear power plants could exceed the amount
of the Utility&#146;s insurance coverage and other amounts set
aside for these potential liabilities. In addition, as an
operator of two operating nuclear reactor units, the Utility may
be required under federal law to pay up to $201.2&nbsp;million
of liabilities arising out of each nuclear incident occurring
not only at the Utility&#146;s Diablo Canyon power plant but at
any other nuclear power plant in the United States. If the
Utility cannot recover any material amount of these excess costs
or damages in the Utility&#146;s rates in a timely manner, our
and the Utility&#146;s financial condition and results of
operations would be materially adversely affected.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, the NRC has broad authority under
federal law to impose licensing and safety-related requirements
upon owners and operators of nuclear power plants. In the event
of non-compliance, the NRC has the authority to impose fines or
to force a shutdown of the nuclear plant, or both, depending
upon the NRC&#146;s assessment of the severity of the situation.
Safety requirements promulgated by the NRC have, in the past,
necessitated substantial capital expenditures at the
Utility&#146;s Diablo Canyon power plant and additional
significant capital expenditures could be required in the future.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">If the Utility fails to increase the spent
fuel storage capacity at the Utility&#146;s Diablo Canyon power
plant by the spring of 2007 and there are no other available
spent fuel storage or disposal alternatives, the Utility would
be forced to close this plant and would therefore be required to
purchase electricity from more expensive sources.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the terms of the NRC operating licenses for
the Utility&#146;s Diablo Canyon power plant, there must be
sufficient storage capacity for the radioactive spent fuel
produced by this plant. Under current operating procedures, the
Utility believes that its Diablo Canyon power plant&#146;s
existing spent fuel pools have sufficient capacity to enable it
to operate until the spring of 2007. Although the Utility is
taking actions to increase the Diablo Canyon power plant&#146;s
spent fuel storage capacity and exploring other alternatives,
there can be no assurance that the Utility can obtain the
necessary regulatory approvals to expand spent fuel capacity or
that other alternatives will be available or implemented in time
to avoid a disruption in production or shutdown of one or both
units at this plant. As the proposed permanent spent fuel
depository at Yucca Mountain, Nevada will not be available by
2007, there will not be any available third party spent fuel
storage facilities. If there is a disruption in production or
shutdown of one or both units at this plant, the Utility will
need to purchase electricity from more expensive sources.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Acts of terrorism could materially
adversely affect our and the Utility&#146;s financial condition
and results of operations.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Utility&#146;s facilities, including its
operating and retired nuclear facilities and the facilities of
third parties on which we rely, could be targets of terrorist
activities. A terrorist attack on these facilities could result
in a full or partial disruption of the Utility&#146;s ability to
generate, transmit, transport or distribute electricity or
natural gas or cause environmental repercussions. Any
operational disruption or environmental repercussions could
result in a significant decrease in the Utility&#146;s revenues
or significant reconstruction or remediation costs, which could
materially adversely affect our and the Utility&#146;s financial
condition and results of operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Adverse judgments or settlements in the
chromium litigation cases could materially adversely affect our
and the Utility&#146;s financial condition and results of
operations.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Utility is a named defendant in 14 civil
actions currently pending in California courts relating to
alleged chromium contamination. The chromium litigation
complaints allege personal injuries, wrongful death
</FONT>

<P align="center"><FONT size="2">19
</FONT>

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<DIV align="left">
<FONT size="2">and loss of consortium and seek unspecified
compensatory and punitive damages based on claims arising from
alleged exposure to chromium contamination in the vicinity of
three of the Utility&#146;s natural gas compressor stations. If
the Utility pays a material amount in excess of the amount that
it currently has reserved on its balance sheet to satisfy
chromium-related liabilities and costs, our and the
Utility&#146;s financial condition and results of operations
could be materially adversely affected.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Changes in, or liabilities under, the
Utility&#146;s permits, authorizations or licenses could
adversely affect our and the Utility&#146;s financial condition
and results of operations.</FONT></I></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Utility&#146;s operations are subject to a
number of governmental permits, authorizations and licenses.
These permits, authorizations and licenses may be revoked or
modified by the agencies that granted them if facts develop that
differ significantly from the facts assumed when they were
issued. In addition, discharge permits and other approvals and
licenses are often granted for a term that is less than the
expected life of the associated facility. Licenses and permits
may require periodic renewal, which may result in additional
requirements being imposed by the granting agency. For example,
the Utility currently has seven facilities undergoing FERC
license renewal. In connection with a license renewal, the FERC
may impose new license conditions that could, among other
things, require increased expenditures or result in reduced
electricity output and/or capacity at the facility. If the
Utility is unable to obtain, renew or comply with these
governmental permits, authorizations or licenses, or the Utility
is unable to recover any increased costs of complying with
additional license requirements or any other associated costs in
its rates in a timely manner, our and the Utility&#146;s
financial condition and results of operations could be
materially adversely affected.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Risks Related to NEGT</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">If NEGT and its creditors prevail on their
claim that we are required to compensate NEGT under an alleged
tax-sharing agreement, we could be subject to substantial
damages.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">NEGT and its creditors have filed a complaint
against us asserting, among other claims, that NEGT is entitled
to be compensated under an alleged tax-sharing agreement for any
tax savings achieved by us as a result of incorporating losses,
deductions and tax credits related to NEGT or its subsidiaries
in our 2002 consolidated federal income tax return. In May 2003,
the Internal Revenue Service, or IRS, returned $533&nbsp;million
in estimated federal income taxes that we overpaid in 2002. NEGT
and its creditors have asserted that they have a direct interest
in certain tax savings achieved by us and are entitled to be
paid at least $414&nbsp;million of these funds. In addition, the
complaint seeks punitive damages for an alleged breach of
fiduciary duty by us and two of our officers who previously
served on NEGT&#146;s board of directors, as well as punitive
damages against us under an alleged claim of deceit.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We anticipate continuing to incorporate losses,
deductions and certain tax credits related to NEGT or its
subsidiaries in our consolidated federal tax return in
accordance with and as required by the Internal Revenue Code of
1986, as amended, or the Code, until these subsidiaries are no
longer consolidated with us for federal income tax purposes.
NEGT and its creditors similarly assert that NEGT is entitled to
be compensated for any tax savings resulting from inclusion of
these losses and deductions in our federal tax return and also
seek injunctive relief prohibiting us from taking certain tax
positions in the future. While we believe we do not have any
obligation to pay NEGT or any NEGT subsidiary any amount related
to the realization of tax savings, we cannot assure you that
NEGT and its creditors will not be successful in pursuing these
claims. Until the dispute is resolved, we are treating
$361.5&nbsp;million as restricted cash.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">We may lose the ability to offset tax gains
by us or our other subsidiaries with tax losses sustained by
NEGT.</FONT></I></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On May&nbsp;3, 2004, the U.S.&nbsp;Bankruptcy
Court for the District of Maryland, Greenbelt Division,
confirmed NEGT&#146;s plan of reorganization. If NEGT&#146;s
confirmed plan of reorganization is implemented, our equity
ownership will be eliminated, NEGT will become deconsolidated
from us for tax purposes, and we will lose the ability to offset
tax gains by us or our other subsidiaries with tax losses
sustained by NEGT after
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">20
</FONT>

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<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left">
<FONT size="2">deconsolidation. The implementation of
NEGT&#146;s plan of reorganization is anticipated to occur
during the second or third quarter of 2004.
</FONT>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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<DIV align="left"><A NAME="003"></A></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center">
<B><FONT size="2">RATIO OF EARNINGS TO FIXED CHARGES</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The table below sets forth our ratio of earnings
to fixed charges for the periods indicated. The information in
this table should be read in conjunction with, and is qualified
in its entirety by reference to, our consolidated financial
statements included in our and the Utility&#146;s Current Report
on Form&nbsp;8-K filed on June&nbsp;18, 2004 (including
specifically Exhibit&nbsp;99.1, which supersedes the information
contained in Exhibit&nbsp;13 to our and the Utility&#146;s
Annual Report on Form&nbsp;10-K for the year ended
December&nbsp;31, 2003 and Exhibit&nbsp;99.1 to the
Form&nbsp;8-K filed on March&nbsp;2, 2004), our and the
Utility&#146;s Quarterly Report on Form&nbsp;10-Q for the
quarter ended March&nbsp;31, 2004, and the pro forma financial
information included in our and the Utility&#146;s Current
Report on Form&nbsp;8-K filed on April&nbsp;27, 2004 (as
supplemented by Item&nbsp;5 of our and the Utility&#146;s
Current Report on Form&nbsp;8-K filed on June&nbsp;18, 2004).
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="39%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Three Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Ended March&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro</FONT></B></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003<SUP>(1)</SUP></FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000<SUP>(2)</SUP></FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ratio of earnings (loss) to fixed charges
    <SUP>(3)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20.9x</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(4)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.9x</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.0x</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.2x</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.4x</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7.0)x</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.0x</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The pro forma ratio is computed as if the
    Utility&#146;s exit from Chapter&nbsp;11 and the transactions
    related thereto, including recognition of certain regulatory
    assets, the effects of the rate reduction resulting from the
    implementation of the rate design settlement approved by the
    CPUC on February&nbsp;26, 2004 (which incorporated the revenue
    requirements ultimately approved in the Utility&#146;s general
    rate case), the reduction of interest expense related to
    repayment of existing indebtedness and the issuance by the
    Utility of $6.7&nbsp;billion in mortgage bonds, draws on the
    Utility&#146;s accounts receivable financing facility, and
    borrowings under the Utility&#146;s fifteen-month term loan and
    reimbursement facility, elimination of reorganization
    professional fees and expenses and elimination of reorganization
    interest income, had occurred on January&nbsp;1, 2003. See our
    and the Utility&#146;s Current Report on Form&nbsp;8-K dated
    April&nbsp;27, 2004 for further discussion of the pro forma
    adjustments.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The ratio of earnings to fixed charges for 2000
    indicates a ratio of less than one-to-one. The dollar amount of
    the deficiency is approximately $5.6&nbsp;billion.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">For the purpose of computing ratios of earnings
    to fixed charges, &#147;earnings&#148; represent pre-tax income
    from continuing operations plus fixed charges, as computed, less
    the pre-tax earnings required to cover the preferred dividend
    requirements of subsidiaries. &#147;Fixed charges&#148; include
    interest, including amortization of debt issue costs, premiums
    and discounts, the debt portion of the allowance for funds used
    during construction, an estimate of the amount of interest
    within rents, and the preferred security requirements of
    consolidated subsidiaries.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The ratio of earnings to fixed charges for the
    three months ended March&nbsp;31, 2004 includes the earnings
    associated with recognition of approximately $4.9&nbsp;billion
    of regulatory assets.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<P align="center"><FONT size="2">21
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "THE EXCHANGE OFFER" -->
<DIV align="left"><A NAME="004"></A></DIV>

<P align="center">
<B><FONT size="2">THE EXCHANGE OFFER</FONT></B>

<P align="left">
<B><FONT size="2">Purpose of the Exchange Offer</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We issued and sold the original notes on
July&nbsp;2, 2003 in a private placement. In connection with
that issuance and sale, we entered into a registration rights
agreement with the initial purchasers of the original notes. In
the registration rights agreement, we agreed to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">file with the SEC a registration statement by
    April&nbsp;27, 2004 relating to an offer to exchange the
    original notes for the exchange notes;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">use our commercially reasonable best efforts to
    cause the registration statement to be declared effective under
    the Securities Act by July&nbsp;1, 2004; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">commence the exchange offer and keep the exchange
    offer open for at least 20 business days.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The exchange offer being made by this prospectus
is intended to satisfy our obligations under the registration
rights agreement. We filed the registration statement of which
this prospectus is a part on April&nbsp;27, 2004 and the
registration statement was declared effective on
June&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2004.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<FONT size="2">If:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we fail to consummate the exchange offer by
    August&nbsp;9, 2004 (or such later date as may be required by
    the federal securities laws); or
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the registration statement of which this
    prospectus is a part ceases to be effective or fails to be
    usable for its intended purpose without being succeeded within
    five business days by a post-effective amendment that cures such
    failure and that is itself immediately declared effective,
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<FONT size="2">then we would be required to pay additional
interest to holders of original notes. Any such additional
interest would cease to accrue upon consummation of the exchange
offer, in the case of the first bullet point above, or, in the
case of the second bullet point above, upon the filing of a
post-effective amendment to the registration statement of which
this prospectus is a part that is declared effective and is
usable to consummate the exchange offer.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon completion of the exchange offer, holders of
original notes will not be entitled to any rights to have the
resale of original notes registered under the Securities Act
except to the limited extent that certain qualified
institutional buyers, if any, are otherwise entitled under the
registration rights agreement to have their original notes
registered under a shelf registration statement. Except for this
limited circumstance, we do not intend to register under the
Securities Act the resale of any original notes that remain
outstanding after completion of the exchange offer. See
&#147;Description of the Notes&#151; Registration Rights.&#148;
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Effect of the Exchange Offer</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Based on interpretations by the SEC staff set
forth in Exxon Capital Holdings Corporation (available
May&nbsp;13, 1988), Morgan Stanley &#38; Co. Incorporated
(available June&nbsp;5, 1991), K-III Communications Corporation
(available May&nbsp;14, 1993), Shearman &#38; Sterling
(available July&nbsp;2, 1993), Brown&nbsp;&#38; Wood LLP
(available February&nbsp;7, 1997) and other no-action letters
issued to third parties, we believe that you may offer for
resale, resell and otherwise transfer the exchange notes issued
to you in the exchange offer without compliance with the
registration and prospectus delivery requirements of the
Securities Act if:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">you are acquiring the exchange notes and acquired
    the original notes being exchanged in the ordinary course of
    your business;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">you are not a broker-dealer tendering original
    notes acquired directly from us;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">you are not participating, do not intend to
    participate and have no arrangements or understandings with any
    person to participate in a distribution (within the meaning of
    the Securities Act) of the exchange notes; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">you are not our &#147;affiliate,&#148; within the
    meaning of Rule&nbsp;405 under the Securities Act.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<P align="center"><FONT size="2">22
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If you are not able to meet these requirements,
you are a &#147;restricted holder.&#148; As a restricted holder,
you will not be able to participate in the exchange offer, you
may not rely on the interpretations of the SEC staff set forth
in the no-action letters referred to above and you may only sell
your original notes in compliance with the registration and
prospectus delivery requirements of the Securities Act and any
other applicable securities laws, or under an exemption from the
registration requirements of the securities laws or in a
transaction not subject to the securities laws.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We do not intend to seek our own no-action
letter, and there can be no assurance that the staff of the SEC
would make a similar determination with respect to the exchange
notes as it has in such no-action letters to third parties.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, if the tendering holder is a
broker-dealer that will receive exchange notes in exchange for
original notes that were acquired for its own account as a
result of market-making activities or other trading activities,
it may be deemed to be an &#147;underwriter&#148; within the
meaning of the Securities Act. Any such holder will be required
to acknowledge in the letter of transmittal that it will deliver
a prospectus meeting the requirements of the Securities Act in
connection with any resale of these exchange notes. This
prospectus may be used by those broker-dealers to resell
exchange notes they receive pursuant to the exchange offer. We
have agreed that we will allow this prospectus to be used by any
broker-dealer in any resale of exchange notes
until &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;,
2004, <I>i.e.</I>, 180&nbsp;days after the date of this
prospectus (or such shorter period during which such
broker-dealers are required by law to deliver such prospectus).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Except as described above, this prospectus may
not be used for an offer to resell, a resale or any other
transfer of exchange notes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Furthermore, any broker-dealer that acquired any
of its original notes directly from us must be named as a
selling noteholder in connection with the registration and
prospectus delivery requirements of the Securities Act relating
to any resale transaction.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">To the extent original notes are tendered and
accepted in the exchange offer, the principal amount of original
notes that will be outstanding will decrease with a resulting
decrease in the liquidity in the market for the original notes.
Original notes that are still outstanding following the
completion of the exchange offer will continue to be subject to
transfer restrictions.
</FONT>

<P align="left">
<B><FONT size="2">Terms of the Exchange Offer; Expiration
Date</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the terms and subject to the conditions of
the exchange offer described in this prospectus and in the
accompanying letter of transmittal, we will accept for exchange
all original notes validly tendered and not withdrawn before the
expiration date. The term &#147;expiration date&#148; means
5:00&nbsp;p.m., New&nbsp;York City time,
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004, unless we, in our sole discretion, extend the exchange
offer, in which case the term &#147;expiration date&#148; shall
mean the latest date and time to which the exchange offer is
extended.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We will issue $1,000 principal amount of exchange
notes in exchange for each $1,000 principal amount of original
notes accepted in the exchange offer. You may tender some or all
of your original notes pursuant to the exchange offer. However,
original notes may be tendered only in denominations of $1,000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The exchange offer is not conditioned upon any
minimum aggregate principal amount of original notes being
tendered for exchange. As of the date of this prospectus, an
aggregate of $600&nbsp;million principal amount of original
notes was outstanding. This prospectus is being sent to all
registered holders of original notes and to others believed to
have beneficial interests in the original notes. There will be
no fixed record date for determining registered holders of
original notes entitled to participate in the exchange offer.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to conduct the exchange offer in
accordance with the applicable requirements of the Securities
Act and the Securities Exchange Act of 1934, as amended, or the
Exchange Act, and the rules and regulations of the SEC. Holders
of original notes do not have any appraisal or dissenters&#146;
rights under law or under the indenture in connection with the
exchange offer. Original notes that are not tendered for
exchange in the exchange offer will remain outstanding and
continue to accrue interest and will be entitled to the rights
and benefits their holders have under the indenture.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">23
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We will be deemed to have accepted for exchange
validly tendered original notes when we have given oral or
written notice of the acceptance to the exchange agent. The
exchange agent will act as agent for the tendering holders of
original notes for the purposes of receiving the exchange notes
from us and delivering the exchange notes to the tendering
holders.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If we do not accept for exchange any tendered
original notes because of an invalid tender, the occurrence of
certain other events described in this prospectus or otherwise,
such unaccepted original notes will be returned, without
expense, to the holder tendering them or the appropriate
book-entry will be made, in each case, as promptly as
practicable after the expiration date.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are not making, nor is our board of directors
making, any recommendation to you as to whether to tender or
refrain from tendering all or any portion of your original notes
in the exchange offer. No one has been authorized to make any
such recommendation. You must make your own decision whether to
tender your original notes in the exchange offer and, if you
decide to do so, you must also make your own decision as to the
aggregate amount of original notes to tender after reading this
prospectus and the letter of transmittal and consulting with
your advisers, if any, based on your own financial position and
requirements.
</FONT>

<P align="left">
<B><FONT size="2">Extensions of the Exchange Offer</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If we determine to extend the exchange offer, we
will notify the exchange agent of any extension by oral or
written notice.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We reserve the right, in our sole discretion to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">delay accepting for exchange any original notes;
    or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">extend or terminate the exchange offer and to
    refuse to accept original notes not previously accepted if the
    exchange offer is not permissible under applicable law or SEC
    policy.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Without limiting the manner in which we may
choose to make public announcements of any delay in acceptance,
extension, termination or amendment of the exchange offer, we
will have no obligation to publish, advertise or otherwise
communicate any public announcement, other than by making a
timely release to a financial news service.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During any extension of the exchange offer, all
original notes previously tendered will remain subject to the
exchange offer and we may accept them for exchange. We will
return any original notes that we do not accept for exchange for
any reason without expense to the tendering holder as promptly
as practicable after the expiration or earlier termination of
the exchange offer.
</FONT>

<P align="left">
<B><FONT size="2">Procedures for Tendering</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order to exchange your original notes, you
must complete one of the following procedures by the expiration
date:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">if your original notes are in book-entry form,
    the book-entry procedures for tendering your original notes must
    be completed as described under &#147;&#151;Book-Entry
    Transfer;&#148;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">if you hold physical notes that are registered in
    your name (<I>i.e.</I>, not in book-entry form), you must
    transmit a properly completed and duly executed letter of
    transmittal, certificates for the original notes you wish to
    exchange, and all other documents required by the letter of
    transmittal, to J.P. Morgan Trust Company, National Association,
    the exchange agent, at its address listed under
    &#147;&#151;Exchange Agent;&#148; or
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">if you cannot tender your original notes by
    either of the above methods by the expiration date, you must
    comply with the guaranteed delivery procedures described under
    &#147;&#151;Guaranteed Delivery Procedures.&#148;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<P align="center"><FONT size="2">24
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A tender of original notes by a holder that is
not withdrawn prior to the expiration date will constitute an
agreement between that holder and us in accordance with the
terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The method of delivery of original notes, letters
of transmittal and all other required documents is at the
holder&#146;s election and risk. Holders should allow sufficient
time to effect the DTC procedures necessary to validly tender
their original notes to the exchange agent before the expiration
date. Holders should not send letters of transmittal or other
required documents to us.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We will determine, in our sole discretion, all
questions as to the validity, form, eligibility (including time
of receipt), acceptance of tendered original notes and
withdrawal of tendered original notes, and our determination
will be final and binding. We reserve the absolute right to
reject any and all original notes not properly tendered or any
original notes the acceptance of which would, in the opinion of
us or our counsel, be unlawful. We also reserve the absolute
right to waive any defects or irregularities or conditions of
the exchange offer as to any particular original notes either
before or after the expiration date. Our interpretation of the
terms and conditions of the exchange offer as to any particular
original notes either before or after the expiration date,
including the instructions in the letter of transmittal, will be
final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of original notes for
exchange must be cured within such time as we shall determine.
Although we intend to notify holders of any defects or
irregularities with respect to tenders of original notes for
exchange, neither we nor the exchange agent nor any other person
shall be under any duty to give such notification, nor shall any
of them incur any liability for failure to give such
notification. Tenders of original notes will not be deemed to
have been made until all defects or irregularities have been
cured or waived. Any original notes received by the exchange
agent that are not properly tendered and as to which the defects
or irregularities have not been cured or waived will be returned
by the exchange agent to the tendering holders or, in the case
of original notes delivered by book-entry transfer within DTC,
will be credited to the account maintained within DTC by the
participant in DTC which delivered such original notes, unless
otherwise provided in the letter of transmittal, as soon as
practicable following the expiration date.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, we reserve the right in our sole
discretion to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">purchase or make offers for any original notes
    that remain outstanding after the expiration date;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">terminate the exchange offer as set forth under
    &#147;&#151;Conditions to the Exchange Offer;&#148; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">purchase original notes in the open market, in
    privately negotiated transactions or otherwise to the extent
    permitted by applicable law.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The terms of any such purchases or offers could
differ from the terms of the exchange offer.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">By signing, or otherwise becoming bound by, the
letter of transmittal, each tendering holder of original notes
(other than certain specified holders) will represent to us that:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">it is acquiring the exchange notes and it
    acquired the original notes being exchanged in the ordinary
    course of its business;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">it is not a broker-dealer tendering original
    notes acquired directly from us;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">it is not participating, does not intend to
    participate and has no arrangements or understandings with any
    person to participate in a distribution (within the meaning of
    the Securities Act) of the exchange notes; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">it is not our &#147;affiliate,&#148; within the
    meaning of Rule&nbsp;405 under the Securities Act, or, if it is
    our affiliate, it will comply with the registration and
    prospectus delivery requirements of the Securities Act to the
    extent applicable.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If the tendering holder is a broker-dealer that
will receive exchange notes in exchange for original notes that
were acquired for its own account as a result of market-making
activities or other trading activities, it may be deemed to be
an &#147;underwriter&#148; within the meaning of the Securities
Act. Any such broker-dealer
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">25
</FONT>

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<DIV align="left">
<FONT size="2">will be required to acknowledge in the letter of
transmittal that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale
of these exchange notes. The letter of transmittal states that
by so acknowledging and by delivering a prospectus, the
broker-dealer will not be deemed to admit that it is an
&#147;underwriter&#148; within the meaning of the Securities Act.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Book-Entry Transfer</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If your original notes are in book-entry form and
are registered in the name of a broker, dealer, commercial bank,
trust company or other nominee, you must contact the registered
holder of your original notes and instruct it to promptly tender
your original notes for exchange on your behalf.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The exchange agent will establish an account with
respect to the original notes at DTC promptly after the date of
this prospectus. Your book-entry notes must be transferred into
the exchange agent&#146;s account at DTC in compliance with
DTC&#146;s transfer procedures in order for your notes to be
validly tendered for exchange. Any financial institution that is
a participant in DTC&#146;s systems may cause DTC to transfer
original notes to the exchange agent&#146;s account. The DTC
participant, on your behalf, must transmit its acceptance of the
exchange offer to DTC. DTC will verify this acceptance, execute
a book-entry transfer of the tendered original notes into the
exchange agent&#146;s account and then send to the exchange
agent confirmation of this book-entry transfer. The confirmation
of this book-entry transfer will include an &#147;agent&#146;s
message&#148; confirming that DTC has received an express
acknowledgement from the DTC participant that the DTC
participant has received and agrees to be bound by the letter of
transmittal and that we may enforce the letter of transmittal
against this participant. Original notes will be deemed to be
validly tendered for exchange only if the exchange agent
receives the book-entry confirmation from DTC, including the
agent&#146;s message, prior to the expiration date.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All references in this prospectus to deposit or
delivery of original notes shall be deemed to also refer to
DTC&#146;s book-entry delivery method.
</FONT>

<P align="left">
<B><FONT size="2">Guaranteed Delivery Procedures</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Holders who wish to tender their original notes
and (1)&nbsp;whose original notes are not immediately available
or (2)&nbsp;who cannot deliver the letter of transmittal or any
other required documents to the exchange agent prior to the
expiration date or (3)&nbsp;who cannot complete the procedures
for book-entry transfer on a timely basis may effect a tender if:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the tender is made through an eligible
    institution;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">before the expiration date, the exchange agent
    receives from the eligible institution a properly completed and
    duly executed notice of guaranteed delivery, by facsimile
    transmission, mail or hand delivery, listing the principal
    amount of original notes tendered, stating that the tender is
    being made thereby and guaranteeing that, within three New York
    Stock Exchange, Inc. trading days after the expiration date, a
    duly executed letter of transmittal together with a confirmation
    of book-entry transfer of such original notes into the exchange
    agent&#146;s account at DTC, and any other documents required by
    the letter of transmittal and the instructions thereto, will be
    deposited by such eligible institution with the exchange agent;
    and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">within three New York Stock Exchange trading days
    after the expiration date, the exchange agent receives a
    confirmation of book-entry transfer of all tendered original
    notes into the exchange agent&#146;s account at DTC in the case
    of book-entry notes, or a properly completed and executed letter
    of transmittal and the physical notes, in the case of notes in
    certificated form, and all other documents required by the
    letter of transmittal.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon request to the exchange agent, a notice of
guaranteed delivery will be sent to holders who wish to tender
their original notes according to the guaranteed delivery
procedures described above.
</FONT>

<P align="center"><FONT size="2">26
</FONT>

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<P align="left">
<B><FONT size="2">Withdrawal of Tenders</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Except as otherwise provided in this prospectus,
tenders of original notes may be withdrawn at any time prior to
the expiration date.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For a withdrawal to be effective, the exchange
agent must receive a written or facsimile transmission notice of
withdrawal at one of its addresses set forth under
&#147;&#151;Exchange Agent.&#148; Any notice of withdrawal must:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">specify the name of the person who tendered the
    original notes to be withdrawn;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">identify the original notes to be withdrawn,
    including the principal amount of such original notes;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">state that the holder is withdrawing its election
    to exchange the original notes to be withdrawn;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">be signed by the holder in the same manner as the
    original signature on the letter of transmittal by which the
    original notes were tendered and include any required signature
    guarantees; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">specify the name and number of the account at DTC
    to be credited with the withdrawn original notes and otherwise
    comply with the procedures of DTC.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We will determine, in our sole discretion, all
questions as to the validity, form and eligibility (including
time of receipt) of any notice of withdrawal, and our
determination shall be final and binding on all parties. Any
original notes so withdrawn will be deemed not to have been
validly tendered for exchange for purposes of the exchange
offer, and no exchange notes will be issued with respect thereto
unless the original notes so withdrawn are validly re-tendered.
Properly withdrawn original notes may be re-tendered by
following one of the procedures described above under
&#147;&#151;Procedures for Tendering&#148; at any time prior to
the expiration date.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any original notes that are tendered for exchange
through the facilities of DTC but that are not exchanged for any
reason will be credited to an account maintained with DTC for
the original notes as soon as practicable after withdrawal,
rejection of tender or termination of the exchange offer.
</FONT>

<P align="left">
<B><FONT size="2">Conditions to the Exchange Offer</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Despite any other term of the exchange offer, we
will not be required to accept for exchange, or to issue
exchange notes in exchange for, any original notes, and we may
terminate the exchange offer as provided in this prospectus
prior to the expiration date, if:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the exchange offer is not permissible under
    applicable law or SEC policy; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">a pending or threatened action or proceeding
    would impair our ability to proceed with the exchange offer.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These conditions are for our sole benefit and may
be asserted by us regardless of the circumstances giving rise to
any of these conditions or may be waived by us, in whole or in
part, at any time and from time to time in our discretion. Our
failure at any time to exercise any of the foregoing rights
shall not be deemed a waiver of the right and each right shall
be deemed an ongoing right which may be asserted at any time and
from time to time.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If we determine that the conditions to the
exchange offer are not satisfied, we may:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">refuse to accept and return to the tendering
    holder any original notes or credit any tendered original notes
    to the account maintained within DTC by the participant in DTC
    which delivered the original notes, or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">extend the exchange offer and retain all original
    notes tendered before the expiration date, subject to the rights
    of holders to withdraw the tenders of original notes (see
    &#147;&#151;Withdrawal of Tenders&#148; above).
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, we will not accept for exchange any
original notes tendered, and we will not issue exchange notes in
exchange for any of the original notes, if at that time any stop
order is threatened or in effect with
</FONT>

<P align="center"><FONT size="2">27
</FONT>

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<DIV align="left">
<FONT size="2">respect to the registration statement of which
this prospectus constitutes a part or the qualification of the
indenture under the Trust Indenture Act of 1939.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Exchange Agent</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">J.P. Morgan Trust Company, National Association
has been appointed as the exchange agent for the exchange offer.
All signed letters of transmittal and other documents required
for a valid tender of your original notes should be directed to
the exchange agent at one of the addresses set forth below.
Questions and requests for assistance, requests for additional
copies of this prospectus or of the letter of transmittal and
requests for notices of guaranteed delivery should be directed
to the exchange agent addressed as follows:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="51%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="46%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="center" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <I><FONT size="2">By Registered, Certified Mail or by<BR>
    Hand or Overnight Delivery:<BR>
    <BR>
    </FONT></I><FONT size="2">J.P. Morgan Trust Company, National<BR>
    Association, as Exchange Agent<BR>
    Institutional Trust Services<BR>
    Attention: Exchanges, Frank Ivins<BR>
    2001&nbsp;Bryan Street, 9th&nbsp;Floor<BR>
    Dallas, Texas 75201
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <I><FONT size="2">By Facsimile:<BR>
    <BR>
    </FONT></I><FONT size="2">Fax
    number:&nbsp;(214)&nbsp;468-6494<BR>
    Attention: Frank Ivins<BR>
    Confirm by telephone:&nbsp;(800)&nbsp;275-2048<BR>
    <BR>
     <I>Online:<BR>
    <BR>
    </I>www.jpmorgan.com/bondholder
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">For information call:&nbsp;(800)&nbsp;275-2048
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Delivery to other than the above address or
facsimile number will not constitute a valid delivery.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Fees and Expenses</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We will bear the expenses of soliciting tenders
for the exchange offer. These expenses include fees and expenses
of the exchange agent and the trustee, the registration fee, our
accounting and legal fees and up to $10,000 of the legal fees of
counsel to the initial purchasers, printing costs, and related
fees and expenses. We will principally solicit tenders for the
exchange offer by mail or overnight courier, although our
officers and regular employees may additionally solicit in
person or by telephone or facsimile.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have not retained any dealer-manager in
connection with the exchange offer and will not pay any brokers,
dealers or others soliciting acceptance of the exchange offer.
We, however, will pay the exchange agent reasonable and
customary fees for its services and its reasonable out-of-pocket
expenses. We may also pay brokerage houses and other custodians,
nominees and fiduciaries for their reasonable out-of-pocket
expenses for sending copies of this prospectus, letters of
transmittal and related documents to holders of the original
notes, and in tendering original notes for their customers.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Transfer Taxes</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Holders who tender their original notes for
exchange will not be obligated to pay any transfer taxes in
connection with the exchange offer.
</FONT>

<P align="left">
<B><FONT size="2">Accounting Treatment</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We will recognize no gain or loss, for accounting
purposes, as a result of the exchange offer. The unamortized
expenses relating to the issuance of the original notes will be
amortized over the term of the exchange notes. The costs of the
exchange offer will be expensed as period costs.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Consequences of Failure to Exchange</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Holders of original notes who do not exchange
their original notes for exchange notes pursuant to the exchange
offer will not be able to offer, sell or otherwise transfer the
original notes except in compliance with the registration
requirements of the Securities Act and other applicable
securities laws, under an exemption from the securities laws or
in a transaction not subject to the securities laws. Original
notes not exchanged pursuant to the exchange offer will
otherwise remain outstanding in accordance with their
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">28
</FONT>

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<DIV align="left">
<FONT size="2">respective terms and will continue to bear a
legend reflecting these restrictions on transfer. Holders of
original notes do not have any appraisal or dissenters&#146;
rights in connection with the exchange offer.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon completion of the exchange offer, holders of
original notes will not be entitled to any rights to have the
resale of original notes registered under the Securities Act
except to the limited extent that certain qualified
institutional buyers, if any, are otherwise entitled under the
registration rights agreement to have their original notes
registered under a shelf registration. Except for this limited
circumstance, we do not intend to register under the Securities
Act the resale of any original notes that remain outstanding
after completion of the exchange offer.
</FONT>

<P align="center"><FONT size="2">29
</FONT>

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<!-- link1 "DESCRIPTION OF THE NOTES" -->
<DIV align="left"><A NAME="005"></A></DIV>

<P align="center">
<B><FONT size="2">DESCRIPTION OF THE NOTES</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company will issue the exchange notes under
the indenture dated as of July&nbsp;2, 2003 between the Company
and J.P. Morgan Trust Company, National Association, as
successor trustee. The terms of the exchange notes include those
stated in the indenture and those made part of the indenture by
reference to the Trust Indenture Act of 1939.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following description is a summary of the
material provisions of the indenture, the pledge agreements and
the registration rights agreement. It does not restate those
agreements in their entirety. We urge you to read the indenture,
the pledge agreements and the registration rights agreement
because they, and not these descriptions, define your rights as
holders of the exchange notes. See &#147;Where You Can Find More
Information.&#148; You can find the definitions of certain terms
used in this description under the subheading &#147;Certain
Definitions.&#148; In this description, the term
&#147;Company&#148; refers only to PG&#38;E Corporation and not
to any of its subsidiaries.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The registered holder of an exchange note will be
treated as the owner of it for all purposes. Only registered
holders will have rights under the indenture. See
&#147;&#151;Book-Entry System; Global Notes.&#148;
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Brief Description of the Notes</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The exchange notes will be:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">general obligations of the Company;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">secured by the outstanding common stock of the
    Utility owned by the Company;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">to the extent of the collateral securing the
    notes, senior to all current and future unsecured Indebtedness
    of the Company.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of April&nbsp;12, 2004, the Company (excluding
its subsidiaries) had total Indebtedness of approximately
$880&nbsp;million of which:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">$600&nbsp;million was represented by the original
    notes; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">$280&nbsp;million was debt contractually
    subordinated to the original notes.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The exchange notes will not be guaranteed by the
Utility. In addition, under the indenture, there are no
restrictions on the ability of the Utility to incur additional
debt. As a practical matter, the notes will be effectively
subordinated to all Indebtedness of the Utility. In the event of
a further bankruptcy, liquidation, reorganization or other
winding up of the Utility, holders of its indebtedness and its
trade creditors will generally be entitled to payment of their
claims from the assets of the Utility before any assets are made
available for distribution to the Company.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of the issue date of the exchange notes, the
Company&#146;s principal subsidiary, the Utility, will be an
Unrestricted Subsidiary. As of April&nbsp;12, 2004, after giving
effect to the consummation of the transactions in connection
with the effective date of the Utility&#146;s plan of
reorganization, the Utility, together with its consolidated
subsidiaries, had approximately $9.7&nbsp;billion of financial
debt, including rate reduction bonds and $350&nbsp;million in
borrowings under an accounts receivable financing facility. The
Utility, together with its consolidated subsidiaries, has
established working capital facilities upon which they may draw
up to approximately $1.5&nbsp;billion, of which only the
$350&nbsp;million included above was drawn down in cash and
$206&nbsp;million in letters of credit was utilized on the
effective date. In addition, the Utility has a credit facility
that provides for the issuance of up to $620&nbsp;million in
letters of credit, all of which was utilized on the effective
date. The Utility generates substantially all of the
Company&#146;s consolidated revenues.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The indenture permits the Company and its
subsidiaries to incur additional Indebtedness, including secured
<I>pari passu </I>Indebtedness. The indenture does not impose
any limitation on the incurrence by the Company&#146;s
Unrestricted Subsidiaries of Indebtedness or by its other
subsidiaries of liabilities that are not considered
Indebtedness. See the eighth risk factor under &#147;Risk
Factors&#151;Risks Related to the Notes.&#148;
</FONT>

<P align="center"><FONT size="2">30
</FONT>

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<P align="left">
<B><FONT size="2">Principal, Maturity and Interest</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company will issue exchange notes with an
initial maximum aggregate principal amount of up to
$600&nbsp;million, if all the original notes are exchanged. In
any event, the aggregate amount of original notes and exchange
notes outstanding will not exceed $600&nbsp;million. The Company
will issue exchange notes in denominations of $1,000 and
multiples thereof. The exchange notes will mature on
July&nbsp;15, 2008. The indenture governing the notes permits
the Company to issue additional notes from time to time after
this offering. Any such offering of additional notes will be
subject to the Company&#146;s ability to incur indebtedness
under the covenant described under &#147;&#151;Certain
Covenants&#151; Incurrence of Indebtedness and Issuance of
Preferred Stock.&#148; The exchange notes, the original notes
and any additional notes subsequently issued under the indenture
will be treated as a single class for all purposes under the
indenture, including, without limitation, waivers, amendments,
redemptions and offers to purchase. Unless the context otherwise
requires, for purposes of this &#147;Description of the
Notes&#148; section, reference to the notes includes the
original notes, the exchange notes and any additional notes
actually issued.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest on the exchange notes will accrue at the
rate of 6&nbsp;7/8% per annum and will be payable semi-annually
in arrears on January&nbsp;15 and July&nbsp;15. Payments on the
original notes commenced January&nbsp;15, 2004. The Company will
make each interest payment to the holders of record on the
immediately preceding January&nbsp;1 and July&nbsp;1. Any
interest that has accrued, but has not been paid or provided
for, on the original notes before their acceptance and exchange
in this exchange offer will become accrued interest on the
corresponding exchange note and will be payable on the first
interest payment date after the conclusion of the exchange to
holders of record on the immediately preceding January&nbsp;1 or
July&nbsp;1, as applicable.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.
</FONT>

<P align="left">
<B><FONT size="2">Methods of Receiving Payments on the
Notes</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company will pay all principal, interest and
premium, if any, by wire transfer on the global notes and on any
certificated notes if the holders of such certificated notes
have given wire transfer instructions to the Company and are
registered holders of at least $250,000 in principal amount of
the notes. All other payments on the notes will be made at the
office or agency of the paying agent and registrar within the
City and State of New York unless the Company elects to make
interest payments by check mailed to the holders at their
addresses set forth in the register of holders.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Paying Agent and Registrar for the
Notes</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The trustee is currently acting as paying agent
and registrar. The Company may change the paying agent or
registrar without prior notice to the noteholders, and the
Company or any of its Subsidiaries may act as paying agent or
registrar.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Transfer and Exchange</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A holder may transfer or exchange notes in
accordance with the indenture. The registrar and the trustee may
require a holder to furnish appropriate endorsements and
transfer documents in connection with a transfer of notes.
Holders will be required to pay all taxes, assessments or
similar governmental charges due on transfer. The Company is not
required to transfer or exchange any note selected for
redemption. Also, the Company is not required to transfer or
exchange any note for a period of 15&nbsp;days before a
selection of notes to be redeemed.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Security</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Stock Pledges. </FONT></I><FONT size="2">All
obligations of the Company with respect to the notes are secured
by a perfected first priority security interest in the
approximately 94% of the outstanding common stock of the Utility
that the Company owns. So long as no Event of Default has
occurred and is continuing, all cash distributions, cash
proceeds and other cash amounts payable in respect of the stock
of the Utility securing the notes will be received by the
Company. The balance of the common stock of the Utility is owned
by a subsidiary of the Utility.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">31
</FONT>

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<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">With respect to 35% of the common stock pledged
for the benefit of the lenders, the holders have customary
rights of a pledgee of common stock, provided that certain
regulatory approvals may be required in connection with any
foreclosure on and any exercise of the right to vote such stock.
With respect to the remaining 65%, such common stock has been
pledged for the benefit of the holders, but the holders have no
ability to control such common stock under any circumstances and
do not have any of the typical rights and remedies of a secured
creditor. However, the holders do have the right to receive any
cash proceeds received upon a disposition of such common stock.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the terms of the Pledge Agreements, until
the holders of any additional Indebtedness have become parties
to the Pledge Agreements in accordance with the terms thereof
(&#147;New Senior Secured Debt&#148;), the holders of more than
50% of the outstanding principal amount of the notes may direct
the Collateral Agent with respect to certain decisions relating
to the exercise of remedies under the Pledge Agreements,
including whether to foreclose on the portion of the Collateral
representing 35% of the common stock of the Utility owned by the
Company following a default on the notes. After the holders of
any New Senior Secured Debt have become parties to the Pledge
Agreements, the holders of (1)&nbsp;more than 50% of the
outstanding principal amount of the notes, voting separately as
a class; (2)&nbsp;more than 50% of the outstanding principal
amount of any issuance of New Senior Secured Debt that the
Company has designated as having the right to vote separately as
a class, voting separately as a class; and (3)&nbsp;more than
50% of the outstanding principal amount of all New Senior
Secured Debt that has not been so designated, voting separately
as a class, shall direct the Collateral Agent with respect to
decisions relating to the exercise of remedies. Moreover, upon
the full and final payment and performance of all Obligations of
the Company secured by the Pledge Agreements, the Pledge
Agreements shall terminate and the pledged Collateral shall be
released. The Liens on the Collateral with respect to the notes
may be released in certain other circumstances in accordance
with the terms of the Pledge Agreements. See
&#147;&#151;Release.&#148;
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Sufficiency of Collateral.
</FONT></I><FONT size="2">In the event of foreclosure on the
Collateral, the proceeds from the sale of the Collateral may not
be sufficient to satisfy in full the Company&#146;s obligations
under the notes and any other senior secured indebtedness. The
amount to be received upon such a sale would be dependent on
numerous factors, including but not limited to the fair market
value of the Collateral and the timing and the manner of the
sale. By its nature, portions of the Collateral may be illiquid
and may have no readily ascertainable market value. Accordingly,
there can be no assurance that the Collateral can be sold in a
short period of time in an orderly manner. To the extent that
third parties enjoy Liens permitted by the Indenture, such third
parties may have rights and remedies with respect to the assets
or property subject to such Liens that, if exercised, could
adversely affect the value of the Collateral. In addition, in
the event of a bankruptcy, the ability of the holders to realize
upon any of the Collateral may be subject to certain bankruptcy
law limitations.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has the ability to issue additional
notes as part of the same series of these notes or in one or
more different series and certain other Indebtedness, all of
which may be secured by the Collateral with the notes. In
addition, the Company can use the Collateral to secure on an
equal and ratable basis with the notes any Indebtedness incurred
pursuant to clause&nbsp;(1) and clause&nbsp;(13) of the second
paragraph of the covenant described under &#147;&#151;Certain
Covenants&#151; Incurrence of Indebtedness and Issuance of
Preferred Stock&#148; and to secure other Indebtedness on a
junior basis. Following the Investment Grade Date, the Company
may secure additional Indebtedness, whether or not pursuant to
clause&nbsp;(1) and clause&nbsp;(13) of the second paragraph of
the covenant described under &#147;&#151;Certain Covenants&#151;
Incurrence of Indebtedness and Issuance of Preferred Stock&#148;
with the Collateral in an amount of up to 15% of the
Company&#146;s Consolidated Tangible Assets. See the fourth risk
factor under &#147;Risk Factors&#151; Risks Related to the
Notes.&#148; The notes will be effectively subordinated to all
indebtedness of the Utility.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">See also the fifth risk factor under &#147;Risk
Factors&#151; Risks Related to the Notes.&#148;
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Certain Bankruptcy Limitations</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The right of the Collateral Agent to repossess
and dispose of the Collateral upon the occurrence of an Event of
Default would be significantly impaired by applicable bankruptcy
law in the event that a bankruptcy case were to be commenced by
or against the Company prior to the Collateral Agent having
repossessed and
</FONT>

<P align="center"><FONT size="2">32
</FONT>

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<DIV align="left">
<FONT size="2">disposed of the Collateral. Upon the commencement
of a case for relief under Title 11 of the United States Code,
as amended (the &#147;Bankruptcy Code&#148;), a secured creditor
such as the Collateral Agent is prohibited from repossessing its
security from a debtor in a bankruptcy case, or from disposing
of security repossessed from the debtor, without bankruptcy
court approval.
</FONT>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In view of the broad equitable powers of a
bankruptcy court, it is impossible to predict how long payments
under the notes could be delayed following commencement of a
bankruptcy case, whether or when the Collateral Agent could
repossess or dispose of the Collateral, the value of the
Collateral at the time of the bankruptcy petition or whether or
to what extent noteholders would be compensated for any delay in
payment or loss of value of the Collateral. Furthermore, in the
event the value of the Collateral is not sufficient to repay all
amounts due on the notes, the noteholders would hold secured
claims to the extent of the value of the Collateral to which the
noteholders are entitled, and unsecured claims with respect to
such shortfall. The Bankruptcy Code only permits the payment
and/or accrual of post-petition interest, costs and
attorneys&#146; fees to a secured creditor during a
debtor&#146;s bankruptcy case to the extent the value of the
collateral is determined by the bankruptcy court to exceed the
aggregate outstanding principal amount of the obligations
secured by the collateral.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Optional Redemption</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At any time prior to July&nbsp;15, 2006, the
Company may on any one or more occasions redeem up to 35% of the
aggregate principal amount of notes issued under the indenture
at a redemption price of 106.875% of the principal amount, plus
accrued and unpaid interest to the redemption date, with the net
cash proceeds of one or more Equity Offerings by the Company;
provided that:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">at least 65% of the aggregate principal amount of
    notes issued under the indenture remains outstanding immediately
    after the occurrence of each such redemption (excluding notes
    held by the Company and its Subsidiaries); and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any such redemption occurs within 120&nbsp;days
    of the date of the closing of such Equity Offering.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At any time and from time to time prior to
July&nbsp;15, 2006, the Company may, at its option, redeem all
or a portion of the notes at the Make-Whole Price plus accrued
and unpaid interest to the redemption date.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Except pursuant to the preceding paragraphs, the
notes will not be redeemable at the Company&#146;s option prior
to July&nbsp;15, 2006.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On and after July&nbsp;15, 2006, the Company may
redeem all or a part of the notes upon not less than 30 nor more
than 60&nbsp;days&#146; notice, at the redemption prices
(expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest on the notes redeemed, to the
applicable redemption date, if redeemed during the twelve-month
period beginning on July 15 of the years indicated below:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="83%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">103.438</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">101.719</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unless the Company defaults in the payment of the
redemption price, interest will cease to accrue on the notes or
portions thereof called for redemption on the applicable
redemption date.
</FONT>

<P align="left">
<B><I><FONT size="2">Selection and Notice</FONT></I></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If less than all of the notes are to be redeemed
at any time, the indenture provides that the trustee will select
notes for redemption as follows:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">if the notes are listed on any national
    securities exchange, in compliance with the requirements of the
    principal national securities exchange on which the notes are
    listed; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">if the notes are not listed on any national
    securities exchange, on a pro rata basis, by lot or by such
    method as the trustee deems fair and appropriate.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<FONT size="2">The selection of notes for redemption will be
performed by DTC so long as the notes are global notes
registered in the name of DTC or its nominee. See
&#147;&#151;Book Entry System; Global Notes.&#148;
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">33
</FONT>

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<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Notes in denominations larger than $1,000 may be
redeemed in part but only in multiples of $1,000. Notices of
redemption will be mailed by first class mail at least 30 but
not more than 60&nbsp;days before the redemption date to each
noteholder to be redeemed at its registered address, except that
redemption notices may be mailed more than 60&nbsp;days prior to
a redemption date if the notice is issued in connection with a
defeasance of the notes or a satisfaction and discharge of the
indenture. Notices of redemption may not be conditional. If any
note is to be redeemed in part only, the notice of redemption
that relates to that note will state the portion of the
principal amount of that note that is to be redeemed. A new note
in principal amount equal to the unredeemed portion of the
original note will be issued in the name of the noteholder upon
cancellation of the original note. Notes called for redemption
become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on notes or portions
of them called for redemption.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Mandatory Redemption; Open Market
Purchases</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is not required to make mandatory
redemption or sinking fund payments with respect to the notes.
However, under certain circumstances the Company is required to
offer to purchase the notes as set forth under
&#147;&#151;Repurchase at the Option of Holders.&#148; The
Company or any of its Subsidiaries may at any time and from time
to time purchase notes in the open market or otherwise.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Covenant Termination</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the first date upon which the notes are
rated Baa3 or better by Moody&#146;s and BBB- or better by
S&#38;P (or, if either such entity ceases to rate the notes for
reasons outside of the control of the Company, the equivalent
investment grade credit rating from any other &#147;nationally
recognized statistical rating organization&#148; within the
meaning of Rule&nbsp;15c3-1(c)(2)(vi)(F) under the Exchange Act
selected by Company as a replacement agency) and no Material
Default has occurred and is continuing under the indenture (the
&#147;Investment Grade Date&#148;), the Company and its
Restricted Subsidiaries will cease to be subject to the
provisions of the indenture described below, which will be
deemed to be terminated as of and from such date, under:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">&#147;&#151;Repurchase at the Option of the
    Holders&#151; Asset Sales,&#148;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">&#147;&#151;Certain Covenants&#151; Restricted
    Payments,&#148;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">&#147;&#151;Certain Covenants&#151; Incurrence of
    Indebtedness and Issuance of Preferred Stock,&#148;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">&#147;&#151;Certain Covenants&#151; Dividend and
    Other Payment Restrictions Affecting Subsidiaries,&#148;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">&#147;&#151;Certain Covenants&#151; Transactions
    with Affiliates,&#148;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">&#147;&#151;Certain Covenants&#151; Business
    Activities&#148; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">&#147;&#151;Certain Covenants&#151; Payments for
    Consent;&#148;
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<FONT size="2">provided that the provisions of the indenture
described below will not be so terminated:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">&#147;&#151;Repurchase at the Option of
    Holders&#151; Change of Control or Reorganization Event,&#148;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">&#147;&#151;Certain Covenants&#151; Liens,&#148;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">&#147;&#151;Certain Covenants&#151; Merger,
    Consolidation or Sale of Assets&#148; (except as set forth in
    that covenant), and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">&#147;&#151;Certain Covenants&#151; Reports.&#148;
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">In the event that the notes are no longer rated
Baa3 or better by Moody&#146;s or BBB- or better by S&#38;P
after the Investment Grade Date, such terminated covenants will
not be restored. As a result, the notes will be entitled to
substantially less covenant protection from and after the
Investment Grade Date.
</FONT>

<P align="center"><FONT size="2">34
</FONT>

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<P align="left">
<B><FONT size="2">Repurchase at the Option of Holders</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><I><FONT size="2">Change of Control or Reorganization
Event</FONT></I></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If a Change of Control or Reorganization Event
occurs, each noteholder will have the right to require the
Company to repurchase all or any part (equal to $1,000 or an
integral multiple of $1,000) of that holder&#146;s notes
pursuant to an offer by the Company (a &#147;Change of Control
Offer&#148;) on the terms described below. In a Change of
Control Offer, the Company will offer a payment in cash (the
&#147;Change of Control Payment&#148;) equal to 101% of the
aggregate principal amount of notes repurchased plus accrued and
unpaid interest for the notes repurchased, to the date of
purchase. Within 30 days following any Change of Control or no
sooner than 60&nbsp;days prior to and no later than 30&nbsp;days
following a Reorganization Event, as the case may be, the
Company will mail a notice to each registered noteholder
describing the transaction or transactions that constitute the
Change of Control or Reorganization Event, as the case may be,
and offering to repurchase notes on the date specified in the
notice, which date will be no earlier than 30&nbsp;days and no
later than 60&nbsp;days from the date such notice is mailed (the
&#147;Change of Control Payment Date&#148;), pursuant to the
procedures described below and in such notice.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company will comply with the requirements of
Rule&nbsp;14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of
the notes as a result of a Change of Control or Reorganization
Event. To the extent that the provisions of any securities laws
or regulations conflict with this covenant, the Company will
comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations under this
covenant.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On the Change of Control Payment Date the Company
will, to the extent lawful:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">accept for payment all notes or portions of notes
    properly tendered pursuant to the Change of Control Offer;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">deposit with the paying agent an amount equal to
    the Change of Control Payment in respect of all notes or
    portions of notes properly tendered; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">deliver or cause to be delivered to the trustee
    the notes properly accepted together with an officers&#146;
    certificate stating the aggregate principal amount of notes or
    portions of notes being purchased by the Company.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The paying agent will promptly mail to each
noteholder properly tendered the Change of Control Payment for
such notes, and the trustee will promptly authenticate and mail
(or cause to be transferred by book entry) to each holder a new
note equal in principal amount to any unpurchased portion of the
notes surrendered, if any; provided that each new note will be
in a principal amount of $1,000 or an integral multiple of
$1,000.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s future agreements governing
its Indebtedness, including one or more Credit Facilities, may
prohibit the Company from purchasing any notes in the event of a
Change of Control or Reorganization Event, and may also provide
that a Change of Control or Reorganization Event would
constitute a default or require repayment of the Indebtedness
under these agreements. In the event a Change of Control or
Reorganization Event occurs at a time when the Company is
prohibited from purchasing notes, the Company could seek the
consent of its lenders to the purchase of notes or could attempt
to refinance the borrowings that contain the prohibition. If the
Company does not obtain such a consent or repay those
borrowings, the Company will remain prohibited from purchasing
notes. In such case, the Company&#146;s failure to comply with
the foregoing provisions would constitute an Event of Default
under the indenture which would, in turn, constitute a default
under the Company&#146;s other agreements governing its
Indebtedness. See the seventh risk factor under &#147;Risk
Factors&#151; Risks Related to the Notes.&#148;
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The provisions described above that require the
Company to make a Change of Control Offer following a Change of
Control or Reorganization Event, as applicable, will be
applicable whether or not any other provisions of the indenture
are applicable. Except as described above with respect to a
Change of Control or
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">35
</FONT>

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<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left">
<FONT size="2">Reorganization Event, the indenture does not
contain provisions that permit the noteholders to require that
the Company repurchase or redeem the notes in the event of a
takeover, recapitalization or similar transaction.
</FONT>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company will not be required to make a Change
of Control Offer upon a Change of Control or Reorganization
Event, as applicable, if a third party makes the Change of
Control Offer in the manner, at the times and otherwise in
compliance with the requirements set forth in the indenture
applicable to a Change of Control Offer made by the Company and
purchases all notes properly tendered and not withdrawn under
the Change of Control Offer.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The definition of Change of Control includes a
phrase relating to the direct or indirect sale, lease, transfer,
conveyance or other disposition of &#147;all or substantially
all&#148; of the properties or assets of the Company and its
Restricted Subsidiaries taken as a whole. Although there is a
limited body of case law interpreting the phrase
&#147;substantially all,&#148; there is no precise established
definition of the phrase under applicable law. Accordingly, the
ability of a noteholder to require the Company to repurchase its
notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company
and its Restricted Subsidiaries taken as a whole to another
Person or group may be uncertain.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Change of Control and Reorganization Event
provisions of the indenture may be waived or modified with the
consent of the holders of a majority in principal amount of the
notes then outstanding.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><I><FONT size="2">Asset Sales</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Company (or the Restricted Subsidiary, as the
    case may be) receives consideration at the time of the Asset
    Sale at least equal to the fair market value of the assets or
    Equity Interests issued or sold or otherwise disposed of;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the fair market value is determined by the
    Company&#146;s chief financial officer and set forth in an
    officer&#146;s certificate delivered to the trustee; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">at least 75% of the consideration received in the
    Asset Sale by the Company or such Restricted Subsidiary is in
    the form of cash or Cash Equivalents. For purposes of this
    provision, each of the following will be deemed to be cash:
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(a)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any liabilities, as shown on the Company&#146;s
    or such Restricted Subsidiary&#146;s most recent balance sheet,
    of the Company or any Restricted Subsidiary (other than
    contingent liabilities and liabilities that are by their terms
    subordinated to the notes) that are transferred to the
    transferee by operation of law or assumed by the transferee of
    any such assets pursuant to an agreement that releases the
    Company or such Restricted Subsidiary from, or fully indemnifies
    it against, further liability;
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(b)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any securities, notes or other obligations
    received by the Company or any such Restricted Subsidiary from
    such transferee that are, within 60&nbsp;days, converted by the
    Company or such Restricted Subsidiary into cash, to the extent
    of the cash received in that conversion; and
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(c)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Additional Assets received in an exchange of
    assets transaction.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Within 360&nbsp;days after the receipt of any Net
Proceeds from an Asset Sale, the Company or the applicable
Restricted Subsidiary may apply those Net Proceeds at its option:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">to repay Senior Debt or any Indebtedness of a
    Restricted Subsidiary and, if the Senior Debt or such
    Indebtedness repaid is revolving credit Indebtedness, to
    correspondingly reduce commitments with respect thereto;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">to acquire all or substantially all of the assets
    of, or a majority of the Voting Stock of, another Permitted
    Business;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">36
</FONT>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">to make a capital expenditure in a Permitted
    Business; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">to acquire other long-term assets that are used
    or useful in a Permitted Business.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pending the final application of any Net
Proceeds, the Company may temporarily reduce revolving credit
borrowings or otherwise invest the Net Proceeds in any manner
that is not prohibited by the indenture.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the preceding paragraph will
constitute &#147;Excess Proceeds.&#148; When the aggregate
amount of Excess Proceeds exceeds $30.0&nbsp;million, the
Company will make an offer (an &#147;Asset Sale Offer&#148;) to
all noteholders and to the extent required, to all holders of
other secured Indebtedness that is <I>pari passu </I>with the
notes containing provisions similar to those set forth in the
indenture with respect to offers to purchase or redeem with the
proceeds of sales of assets, to purchase the maximum principal
amount of notes (in integral multiples of $1,000) and such other
secured <I>pari passu </I>Indebtedness that may be purchased out
of the Excess Proceeds. The offer price in any Asset Sale Offer
will be equal to 100% of principal amount of notes and other
secured <I>pari passu </I>Indebtedness to be purchased or the
lesser amount required under agreements governing such other
secured <I>pari passu </I>Indebtedness, plus accrued and unpaid
interest, if any, to the date of purchase, and will be payable
in cash. If any Excess Proceeds remain after consummation of an
Asset Sale Offer, the Company may use such Excess Proceeds for
any purpose not otherwise prohibited by the indenture, including
any similar offer to purchase unsecured Indebtedness. If the
aggregate principal amount of notes and other secured <I>pari
passu </I>Indebtedness tendered into such Asset Sale Offer
exceeds the amount of Excess Proceeds, the trustee will select
the notes and such other secured <I>pari passu </I>Indebtedness
to be purchased on a pro rata basis. Upon completion of each
Asset Sale Offer, the amount of Excess Proceeds will be reset at
zero.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Asset Sale Offer will remain open for a
period of at least 20 Business Days following its commencement
and not more than 30 Business Days, except to the extent that a
longer period is required by applicable law (the &#147;Asset
Sale Offer Period&#148;). No later than five Business Days after
the termination of the Asset Sale Offer Period (the &#147;Asset
Sale Payment Date&#148;), the Company will apply all Excess
Proceeds to the purchase of notes and the other secured <I>pari
passu </I>Indebtedness to be purchased (on a pro rata basis, if
applicable) or, if notes and such other secured <I>pari passu
</I>Indebtedness in an aggregate principal amount less than the
Excess Proceeds has been tendered, all notes and secured <I>pari
passu </I>Indebtedness tendered in response to the Asset Sale
Offer.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company will comply with the requirements of
Rule&nbsp;14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent those laws and
regulations are applicable in connection with each repurchase of
notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with
this covenant, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have
breached its obligations under this covenant.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The paying agent will promptly (but in any case
not later than five Business Days after the Asset Sale Payment
Date) mail to each noteholder properly tendered the payment for
such notes, and the trustee will promptly authenticate and mail
(or cause to be transferred by book entry) to each holder a new
note equal in principal amount to any unpurchased portion of the
notes surrendered, if any; provided that each new note will be
in a principal amount of $1,000 or an integral multiple of
$1,000.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s future agreements governing
its Indebtedness, including one or more Credit Facilities, may
prohibit the Company from purchasing any notes, and may also
provide that certain asset sales would constitute a default or
require repayment of the Indebtedness under these agreements. In
the event an Asset Sale occurs at a time when the Company is
prohibited from purchasing notes, the Company could seek the
consent of its lenders to the purchase of notes or could attempt
to refinance the borrowings that contain the prohibition. If the
Company does not obtain such a consent or repay those
borrowings, the Company will remain prohibited from purchasing
notes. In such case, the Company&#146;s failure to comply with
the foregoing provisions would constitute an Event of Default
under the indenture which would, in turn, constitute a default
under the Company&#146;s other agreements governing its
Indebtedness.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Asset Sale provisions of the indenture may be
waived or modified with the consent of the holders of a majority
in principal amount of the notes then outstanding.
</FONT>

<P align="center"><FONT size="2">37
</FONT>

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<P align="left">
<B><FONT size="2">Certain Covenants</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of the Issue Date and as of the date of this
prospectus, the principal subsidiary of the Company, the
Utility, was an &#147;Unrestricted Subsidiary.&#148; In
addition, under the circumstances described under
&#147;&#151;Designation of Restricted and Unrestricted
Subsidiaries,&#148; the Company will be permitted to designate
certain of its future Subsidiaries as &#147;Unrestricted
Subsidiaries.&#148; Unrestricted Subsidiaries will not be
subject to many of the restrictive covenants in the indenture.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><I><FONT size="2">Restricted Payments</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">declare or pay any dividend or make any other
    payment or distribution on account of the Company&#146;s or any
    of its Restricted Subsidiaries&#146; Equity Interests
    (including, without limitation, any payment in connection with
    any merger or consolidation involving the Company or any of its
    Restricted Subsidiaries) or to the direct or indirect holders of
    the Company&#146;s or any of its Restricted Subsidiaries&#146;
    Equity Interests in their capacity as such (other than dividends
    or distributions payable in Equity Interests (other than
    Disqualified Stock) of the Company or to the Company or a
    Restricted Subsidiary of the Company);
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">purchase, redeem or otherwise acquire or retire
    for value (including, without limitation, in connection with any
    merger or consolidation involving the Company) any Equity
    Interests of the Company or any direct or indirect parent of the
    Company;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">make any payment on or with respect to, or
    purchase, redeem, defease or otherwise acquire or retire for
    value any Indebtedness that is subordinated to the notes, except
    a payment of interest or principal at the Stated Maturity
    thereof; or
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(4)&nbsp;make any Restricted Investment
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">(all such payments and other actions set forth in
clauses (1)&nbsp;through (4)&nbsp;above being collectively
referred to as &#147;Restricted Payments&#148;), unless, at the
time of and after giving effect to such Restricted Payment:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">no Default has occurred and is continuing or
    would occur as a consequence of such Restricted Payment;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Company would, at the time of such Restricted
    Payment and after giving pro forma effect thereto as if such
    Restricted Payment had been made at the beginning of the
    applicable four- quarter period, have been permitted to incur at
    least $1.00 of additional Indebtedness pursuant to the Fixed
    Charge Coverage Ratio test set forth in the first paragraph of
    the covenant described under &#147;&#151;Incurrence of
    Indebtedness and Issuance of Preferred Stock;&#148; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">such Restricted Payment, together with the
    aggregate amount of all other Restricted Payments made by the
    Company and its Restricted Subsidiaries after the Issue Date
    (excluding Restricted Payments permitted by clauses&nbsp;(2),
    (3), (4), (7), (9), (10) and&nbsp;(12) of the next succeeding
    paragraph), is less than the sum, without duplication, of:
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(a)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">50% of the Consolidated Net Income of the Company
    for the period (taken as one accounting period) from the
    beginning of the first fiscal quarter commencing after the Issue
    Date to the end of the Company&#146;s most recently ended fiscal
    quarter for which internal financial statements are available at
    the time of such Restricted Payment (or, if such Consolidated
    Net Income for such period is a deficit, less 100% of such
    deficit), <I>plus</I>
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(b)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">100% of the aggregate Net Cash Proceeds and the
    fair market value of marketable securities received by the
    Company (and the fair market value of any Permitted Business or
    assets used or useful in a Permitted Business to the extent
    acquired in consideration of Equity Interests (other than
    Disqualified Stock) of the Company) since the Issue Date as a
    contribution to its common equity capital or from the issue or
    sale of Equity Interests of the Company (other than Disqualified
    Stock) or from the issue or sale of convertible or
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">38
</FONT>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">exchangeable Disqualified Stock or convertible or
    exchangeable debt securities of the Company that have been
    converted into or exchanged for such Equity Interests (other
    than Equity Interests (or Disqualified Stock or debt securities)
    sold to a Subsidiary of the Company), <I>plus</I>
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(c)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">to the extent that any Restricted Investment that
    was made after the Issue Date is sold or otherwise liquidated,
    the cash plus fair market value of any marketable securities
    received upon sale or liquidation of such Restricted Investment
    (less the cost of disposition, if any), <I>plus</I>
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(d)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">to the extent that any Unrestricted Subsidiary of
    the Company is redesignated as a Restricted Subsidiary after the
    Issue Date, the aggregate fair market value of all Investments
    of the Company or the Restricted Subsidiary in such Subsidiary
    as of the date of such redesignation.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<FONT size="2">This covenant will not prohibit:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="3%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the payment of any dividend within 60&nbsp;days
    after the date of declaration of the dividend, if at the date of
    declaration the dividend payment would have complied with the
    provisions of the indenture;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the redemption, repurchase, retirement,
    defeasance or other acquisition of any subordinated Indebtedness
    of the Company or of any Equity Interests of the Company or any
    of its Restricted Subsidiaries in exchange for, or out of the
    Net Cash Proceeds of the substantially concurrent sale (other
    than to a Subsidiary of the Company) of, Equity Interests of the
    Company (other than Disqualified Stock) or with cash in an
    amount up to the fair market value of any Permitted Business or
    assets used or useful in a Permitted Business to the extent
    acquired in a substantially concurrent acquisition in
    consideration of Equity Interests (other than Disqualified
    Stock) of the Company; provided that the amount of any such
    proceeds that are utilized for any such redemption, repurchase,
    retirement, defeasance or other acquisition will be excluded
    from clause (3)(b) of the preceding paragraph;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the defeasance, redemption, repurchase or other
    acquisition of subordinated Indebtedness or Disqualified Stock
    of the Company with the Net Cash Proceeds from an incurrence of
    Permitted Refinancing Indebtedness;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the payment of any dividend or other payment or
    distribution by a Restricted Subsidiary of the Company to the
    holders of its Equity Interests on a pro rata basis;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">so long as no Material Default has occurred and
    is continuing or would be caused thereby, the repurchase,
    redemption or other acquisition or retirement for value in the
    ordinary course of business of any Equity Interests of the
    Company or any Restricted Subsidiary of the Company held by any
    existing or former employee or director of the Company (or any
    of its Restricted Subsidiaries) pursuant to any equity
    subscription agreement, stock option agreement or similar
    agreement; provided that the aggregate price paid for all such
    repurchased, redeemed, acquired or retired Equity Interests may
    not exceed $7.5&nbsp;million in any twelve-month period;
    provided further that any amounts paid by the Company for any
    such repurchase, redemption or other acquisition or retirement
    will not be counted for purposes of the foregoing limitation to
    the extent the Utility has reimbursed the Company for such
    payments;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">so long as no Material Default has occurred and
    is continuing or would be caused thereby, the declaration and
    payment of dividends to holders of any class or series of
    Disqualified Stock of the Company or preferred stock of
    Restricted Subsidiaries issued in accordance with the terms of
    the indenture to the extent such dividends are included in the
    definition of &#147;Fixed Charges;&#148;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">if the Utility is a Restricted Subsidiary and so
    long as no Material Default has occurred and is continuing or
    would be caused thereby, the payment of regular quarterly cash
    dividends on the
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<P align="center"><FONT size="2">39
</FONT>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="3%"></TD>
    <TD width="90%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">Company&#146;s common stock; provided that such
    dividends are paid pursuant to the dividend policy established
    by the Board of Directors of the Company and that the Company
    shall have received the cash used for such dividends from
    distributions by the Utility of cash legally available therefor;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(8)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">if the Utility is an Unrestricted Subsidiary and
    so long as no Material Default has occurred and is continuing or
    would be caused thereby, the payment of regular quarterly cash
    dividends on the Company&#146;s common stock; provided that such
    dividends are paid pursuant to the dividend policy established
    by the Board of Directors of the Company and that the Company
    shall have received the cash used for such dividends from
    distributions by the Utility of cash legally available therefor
    (excluding, however, any distributions of the cash proceeds of
    material asset sales outside the ordinary course of business);
    provided further that any such distributions by the Utility to
    the Company or a Restricted Subsidiary that the Company pays as
    a dividend pursuant to this clause&nbsp;(8) will not be included
    in the Consolidated Net Income of the Company under
    clause&nbsp;(3)(a) of the preceding paragraph;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(9)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Investments in the Utility by the Company or a
    Restricted Subsidiary out of the Net Cash Proceeds of the
    substantially concurrent sale (other than to a Subsidiary of the
    Company) of Equity Interests of the Company (other than
    Disqualified Stock) or with cash in an amount up to the fair
    market value of any Permitted Business or assets used or useful
    in a Permitted Business to the extent acquired in a
    substantially concurrent acquisition in consideration of Equity
    Interests (other than Disqualified Stock) of the Company;
    provided that the amount of any such proceeds that are utilized
    for any such Investments will be excluded from
    clause&nbsp;(3)(b) of the preceding paragraph;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="4%"></TD>
    <TD width="90%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(10)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">so long as no Material Default has occurred and
    is continuing or would be caused thereby, any dividends on
    preferred stock of the Company; provided that such dividends can
    be paid under clause&nbsp;(3) of the preceding paragraph; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(11)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">so long as no Default has occurred and is
    continuing or would be caused thereby, other Restricted Payments
    in an aggregate amount since the Issue Date not to exceed
    $75.0&nbsp;million.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The amount of all Restricted Payments (other than
cash) will be the fair market value on the date of the
Restricted Payment of the asset(s) or securities proposed to be
transferred or issued by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted
Payment. The fair market value of any assets or securities that
are required to be valued by this covenant will be determined in
good faith by the chief financial officer of the Company, whose
officer&#146;s certificate with respect thereto will be
delivered to the trustee and if such fair market value exceeds
$75.0 million, by the Board of Directors of the Company, whose
resolution with respect thereto will be delivered to the
trustee. Not later than the date of making any Restricted
Payment, the Company will deliver to the trustee an
officer&#146;s certificate stating that such Restricted Payment
is permitted and setting forth the basis upon which the
calculations required by this &#147;Restricted Payments&#148;
covenant were computed, together with a copy of any fairness
opinion or appraisal required by the indenture. Any sale of
Capital Stock by a Restricted Subsidiary will be deemed to be an
issuance of Capital Stock by the Company.
</FONT>

<P align="left">
<B><I><FONT size="2">Incurrence of Indebtedness and Issuance of
Preferred Stock</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create,
incur, issue, assume, guarantee or otherwise become directly or
indirectly liable, contingently or otherwise, with respect to
(collectively, &#147;incur&#148;) any Indebtedness (including
Acquired Debt), and the Company will not issue any Disqualified
Stock and will not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock; provided, however, that the
Company may incur Indebtedness (including Acquired Debt) or
issue Disqualified Stock and any Restricted Subsidiary may incur
Indebtedness (including Acquired Debt) or issue preferred stock,
if the Fixed Charge Coverage Ratio for the Company&#146;s most
recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the
date on which such additional Indebtedness is incurred or such
Disqualified Stock or preferred stock is issued
</FONT>

<P align="center"><FONT size="2">40
</FONT>

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<DIV align="left">
<FONT size="2">would have been at least 2.0 to 1, determined on
a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been
incurred or any such Disqualified Stock or preferred stock had
been issued, as the case may be, at the beginning of such
four-quarter period.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The first paragraph of this covenant will not
prohibit the incurrence of any of the following items of
Indebtedness (collectively, &#147;Permitted Debt&#148;):
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the incurrence by the Company and any Restricted
    Subsidiary of Indebtedness under one or more Credit Facilities
    in an aggregate amount at any one time outstanding under this
    clause&nbsp;(1) (with letters of credit being deemed to have a
    principal amount equal to the maximum potential liability of the
    Company and its Subsidiaries thereunder) not to exceed
    $500.0&nbsp;million;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the incurrence by the Company and its Restricted
    Subsidiaries of Existing Indebtedness;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the incurrence by the Company of Indebtedness
    represented by the original notes and the exchange notes;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the incurrence by the Company and any of its
    Restricted Subsidiaries of Indebtedness represented by Capital
    Lease Obligations, mortgage financings or purchase money
    obligations, in each case, incurred for the purpose of financing
    all or any part of the purchase price or cost of construction or
    improvement of property, plant or equipment used in the business
    of the Company or such Restricted Subsidiary and the incurrence
    of any Permitted Refinancing Indebtedness incurred to refund,
    refinance or replace any Indebtedness incurred pursuant to this
    clause&nbsp;(4) in an aggregate amount (after giving effect to
    the retirement of the Indebtedness so refunded, refinanced or
    replaced) not to exceed $35.0&nbsp;million at any one time
    outstanding;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the incurrence by the Company or any of its
    Restricted Subsidiaries of Permitted Refinancing Indebtedness in
    exchange for, or the net proceeds of which are used to refund,
    refinance or replace Indebtedness (other than intercompany
    Indebtedness) that was permitted by the indenture to be incurred
    under the first paragraph of this covenant or clauses (2),
    (3)&nbsp;or (5)&nbsp;of this second paragraph;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the incurrence by the Company or any of its
    Restricted Subsidiaries of intercompany Indebtedness between or
    among the Company and any of its Restricted Subsidiaries;
    provided that:
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(a)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">if the Company is the obligor on such
    Indebtedness, such Indebtedness must be expressly subordinated
    to the prior payment in full in cash of all Obligations with
    respect to the notes; and
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(b)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">(i)&nbsp;any subsequent issuance or transfer of
    Equity Interests that results in any such Indebtedness being
    held by a Person other than the Company or a Restricted
    Subsidiary of the Company and (ii)&nbsp;any sale or other
    transfer of any such Indebtedness to a Person that is not either
    the Company or a Restricted Subsidiary of the Company will be
    deemed, in each case, to constitute an incurrence of such
    Indebtedness by the Company or a Restricted Subsidiary, as the
    case may be, that was not permitted by this clause&nbsp;(6);
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the incurrence by the Company or any of its
    Restricted Subsidiaries of Hedging Obligations in the normal
    course of business and not for speculative purposes, designed to
    protect the Company or its Restricted Subsidiary against
    fluctuations in interest rates or currency exchange rates with
    respect to Indebtedness incurred by the Company or any of its
    Restricted Subsidiaries or against fluctuations in the price of
    commodities used by that entity at the time;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (8)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Guarantee by the Company or any of its
    Restricted Subsidiaries of any Indebtedness that was permitted
    to be incurred by another provision of this covenant; provided
    that in the event the Indebtedness that is being Guaranteed is
    subordinated in right of payment to the notes,
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">41
</FONT>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">then the Guarantee of that Indebtedness by the
    Company shall be subordinated in right of payment to the notes;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (9)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the accrual of interest, the accretion or
    amortization of original issue discount, the payment of interest
    on any Indebtedness in the form of additional Indebtedness with
    the same terms, and the payment of dividends on Disqualified
    Stock or, in the case of any Restricted Subsidiary, preferred
    stock, in the form of additional shares of the same class of
    Disqualified Stock or preferred stock will not be deemed to be
    an incurrence of Indebtedness or an issuance of Disqualified
    Stock or preferred stock for purposes of this covenant;
    provided, in each such case, that the amount thereof is included
    in Fixed Charges of the Company as accrued;
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="4%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(10)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Indebtedness incurred in respect of workers&#146;
    compensation claims, self-insurance obligations, performance,
    surety and similar bonds and completion guarantees provided by
    the Company or a Restricted Subsidiary in the ordinary course of
    business;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(11)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Indebtedness arising from the honoring by a bank
    or other financial institution of a check, draft or similar
    instrument drawn against insufficient funds in the ordinary
    course of business;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(12)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the incurrence by the Company of Indebtedness
    that is subordinated in right of payment to the notes, and the
    incurrence of any Permitted Refinancing Indebtedness incurred to
    refund, refinance or replace any Indebtedness incurred pursuant
    to this clause&nbsp;(12), in an aggregate amount (after giving
    effect to the retirement of any Indebtedness so refunded,
    refinanced or replaced) not to exceed $200.0&nbsp;million at any
    one time outstanding; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(13)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the incurrence by the Company or any of its
    Restricted Subsidiaries of additional Indebtedness and the
    incurrence of any Permitted Refinancing Indebtedness incurred to
    refund, refinance or replace any Indebtedness incurred pursuant
    to this clause&nbsp;(13), in an aggregate amount (after giving
    effect to the retirement of any Indebtedness so refunded,
    refinanced or replaced) not to exceed $500.0&nbsp;million at any
    one time outstanding.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For purposes of determining compliance with this
covenant, in the event that an item of Indebtedness (including
Acquired Debt) at any time meets the criteria of more than one
of the categories of Permitted Debt described in clauses (1)
through (13)&nbsp;above, or is entitled to be incurred pursuant
to the first paragraph of this covenant, the Company will be
permitted to classify (and later reclassify) in whole or in part
in its sole discretion such item of Indebtedness in any manner
that complies with this covenant.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For purposes of determining compliance with any
U.S. dollar-denominated restriction on the incurrence of
Indebtedness, the U.S. dollar-equivalent principal amount of
Indebtedness denominated in a foreign currency will be
calculated based on the relevant currency exchange rate in
effect on the date such Indebtedness was incurred, in the case
of term Indebtedness, or first committed, in the case of
revolving credit Indebtedness; provided that if such
Indebtedness is incurred to refinance other Indebtedness
denominated in the same foreign currency, and such refinancing
would cause the applicable U.S. dollar-denominated restriction
to be exceeded if calculated at the relevant currency exchange
rate in effect on the date of such refinancing, the U.S.
dollar-denominated restriction will be deemed not to have been
exceeded so long as the principal amount of the refinancing
Indebtedness does not exceed the principal amount of the
Indebtedness being refinanced. Notwithstanding any other
provision of this covenant, the maximum amount of Indebtedness
that the Company may incur pursuant to this covenant will not be
deemed to be exceeded solely as a result of fluctuations in the
exchange rate of currencies.
</FONT>

<P align="left">
<B><I><FONT size="2">Liens</FONT></I></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company will not, and will not permit any of
its Restricted Subsidiaries to, create, incur, assume or
otherwise cause or suffer to exist or become effective any Lien
of any kind (other than Permitted Liens) securing Indebtedness,
Attributable Debt or trade payables upon the Collateral, unless:
(a)&nbsp;such Liens secure Permitted Debt and the lenders become
a party to the Pledge Agreements, or otherwise agree to be bound
by the terms thereof, in connection with the creation of such
Liens and, in each case, all payments due under the indenture
and the notes are secured on at least an equal and ratable basis
with the obligations so secured or
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">42
</FONT>

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<DIV align="left">
<FONT size="2">(b)&nbsp;such Liens secure any other Indebtedness
the outstanding principal amount of which does not exceed at any
time $100.0&nbsp;million, on a basis that is junior to all
payments due under the indenture and the notes, and the lenders
become a party to the Pledge Agreements, or otherwise agree to
be bound by the terms thereof, in connection with the creation
of such Liens; provided that, following the Investment Grade
Date, an aggregate amount of Indebtedness at any time
outstanding of up to 15% of Consolidated Tangible Assets may be
secured by Liens on the Collateral on an equal and ratable basis
with, or junior to, the notes.
</FONT>
</DIV>

<P align="left">
<B><I><FONT size="2">Dividend and Other Payment Restrictions
Affecting Subsidiaries</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create
or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted
Subsidiary to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">pay dividends or make any other distributions on
    its Capital Stock to the Company or any of its Restricted
    Subsidiaries, or with respect to any other interest or
    participation in, or measured by, its profits, or pay any
    indebtedness owed to the Company or any of its Restricted
    Subsidiaries;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">make loans or advances to the Company or any of
    its Restricted Subsidiaries; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">transfer any of its properties or assets to the
    Company or any of its Restricted Subsidiaries.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">However, the preceding restrictions will not
apply to encumbrances or restrictions existing under or by
reason of:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">agreements governing Existing Indebtedness as in
    effect on the Issue Date and any amendments, modifications,
    restatements, renewals, increases, supplements, refundings,
    replacements or refinancings (collectively,
    &#147;Refinancings&#148;) of those agreements; provided that
    such Refinancings are no more restrictive, taken as a whole,
    with respect to such dividend and other payment restrictions
    than those contained in those agreements on the Issue Date;
    provided further that with respect to any Refinancings within
    six months of the Stated Maturity of any Existing Indebtedness
    or prior Refinancing, such Refinancings may contain restrictions
    that are in the reasonable opinion of the chief financial
    officer of the Company required by the lenders in order to
    obtain such Refinancings and are customary for such Refinancings;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">agreements governing Indebtedness of the Utility
    or any of its Subsidiaries existing at the time the Utility is
    designated a Restricted Subsidiary pursuant to and in accordance
    with the terms of the indenture; provided that the encumbrances
    and restrictions are not materially more restrictive than is
    customary in comparable financings;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the indenture, the notes and the Pledge
    Agreements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">applicable law or any applicable rule, regulation
    or order of any court or governmental authority;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any encumbrance imposed pursuant to the terms of
    Indebtedness incurred pursuant to clause&nbsp;(4),
    clause&nbsp;(5) (provided that any dividend or other payment
    restrictions contained in such Permitted Refinancing
    Indebtedness are no more restrictive, taken as a whole, than
    those contained in the Indebtedness being refinanced) or
    clause&nbsp;(13) (provided that such Indebtedness is
    Indebtedness of the Utility or any of its Subsidiaries) of the
    second paragraph of the covenant described under
    &#147;&#151;Incurrence of Indebtedness and Issuance of Preferred
    Stock&#148; above; provided that such encumbrance is not
    materially more restrictive than is customary for comparable
    financings;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any instrument governing Indebtedness or Capital
    Stock of a Person acquired by the Company or any of its
    Restricted Subsidiaries as in effect at the time of such
    acquisition (except to the extent such Indebtedness or Capital
    Stock was incurred in connection with or in contemplation of
    such acquisition), which encumbrance or restriction is not
    applicable to any Person, or the properties or assets of any
    Person, other than the Person, or the property or assets of the
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">43
</FONT>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">Person, so acquired; provided that, in the case
    of Indebtedness, such Indebtedness was permitted by the terms of
    the indenture to be incurred;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">customary non-assignment provisions in leases
    entered into in the ordinary course of business and consistent
    with past practices;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (8)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Capital Lease Obligations, mortgage financings or
    purchase money obligations for property acquired in the ordinary
    course of business that impose restrictions on that property of
    the nature described in clause&nbsp;(3) of the preceding
    paragraph;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (9)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any agreement for the sale or other disposition
    of a Restricted Subsidiary that restricts distributions by that
    Restricted Subsidiary pending its sale or other disposition;
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="4%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(10)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Permitted Refinancing Indebtedness; provided that
    the encumbrances or restrictions contained in the agreements
    governing such Permitted Refinancing Indebtedness are no more
    restrictive, taken as a whole, than those contained in the
    agreements governing the Indebtedness being refinanced;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(11)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Liens securing Indebtedness otherwise permitted
    to be incurred under the provisions of the covenant described
    under &#147;&#151;Liens&#148; that limit the right of the debtor
    to dispose of the assets subject to such Liens;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(12)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">provisions with respect to the disposition or
    distribution of assets or property in joint venture agreements,
    asset sale agreements, stock sale agreements and other similar
    agreements entered into in the ordinary course of business; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(13)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">restrictions on cash or other deposits or net
    worth imposed by customers under contracts entered into in the
    ordinary course of business.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><I><FONT size="2">Merger, Consolidation or Sale of
Assets</FONT></I></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company may not, directly or indirectly:
(1)&nbsp;consolidate or merge with or into another Person
(whether or not the Company is the surviving corporation) or
(2)&nbsp;sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the properties or assets
of the Company and its Restricted Subsidiaries, taken as a
whole, in one or more related transactions, to another Person
unless:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">either: (a)&nbsp;the Company is the surviving
    corporation; or (b)&nbsp;the Person formed by or surviving any
    such consolidation or merger (if other than the Company) or to
    which such sale, assignment, transfer, lease, conveyance or
    other disposition has been made is a corporation organized or
    existing under the laws of the United States, any state of the
    United States or the District of Columbia;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Person formed by or surviving any such
    consolidation or merger (if other than the Company) or the
    Person to which such sale, assignment, transfer, lease,
    conveyance or other disposition has been made assumes all the
    obligations of the Company under the notes, the indenture, the
    Pledge Agreements (other than in the case of a Reorganization
    Event, in which case the Pledge Agreements will terminate and
    the Collateral will be released) and the registration rights
    agreement pursuant to agreements reasonably satisfactory to the
    trustee; provided that in the case of a lease of all or
    substantially all of the assets of the Company and its
    Restricted Subsidiaries, the Company will not be released from
    the obligations to pay the principal of, whether at maturity or
    otherwise, and interest on the notes;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">immediately after such transaction no Material
    Default shall have occurred and be continuing; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Company or the Person formed by or surviving
    any such consolidation or merger (if other than the Company), or
    to which such sale, assignment, transfer, lease, conveyance or
    other disposition has been made, will, immediately after such
    transaction after giving pro forma effect thereto and any
    related financing transactions as if the same had occurred at
    the beginning of
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">44
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">the applicable four-quarter period, have a Fixed
    Charge Coverage Ratio that is equal to or greater than the Fixed
    Charge Coverage Ratio of the Company immediately prior to such
    transaction.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Notwithstanding clause&nbsp;(4), (i)&nbsp;any
Restricted Subsidiary of the Company may consolidate with, merge
into or transfer all or part of its properties and assets to the
Company and (ii)&nbsp;the Company may merge with an Affiliate
that has no significant assets or liabilities and was formed
solely for the purpose of changing the jurisdiction of
organization of the Company to another state of the United
States so long as the amount of the Company&#146;s Indebtedness
and the Indebtedness of its Restricted Subsidiaries is not
increased thereby. In addition, following an Investment Grade
Date the Company shall not be required to comply with
clause&nbsp;(4).
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><I><FONT size="2">Transactions with Affiliates</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell,
lease, transfer or otherwise dispose of any of its properties or
assets to, or purchase any property or assets from, or enter
into or make or amend any transaction, contract, agreement,
understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each, an &#147;Affiliate
Transaction&#148;), unless:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Affiliate Transaction is on terms that are no
    less favorable to the Company or the relevant Restricted
    Subsidiary than those that would have been obtained in a
    comparable transaction by the Company or such Restricted
    Subsidiary with an unrelated Person; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Company delivers to the trustee:
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(a)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">with respect to any Affiliate Transaction or
    series of related Affiliate Transactions involving aggregate
    consideration in excess of $25.0&nbsp;million, an officer&#146;s
    certificate of the chief financial officer of the Company
    certifying that such Affiliate Transaction complies with this
    covenant; and
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(b)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">with respect to any Affiliate Transaction or
    series of related Affiliate Transactions involving aggregate
    consideration in excess of $50.0&nbsp;million, an opinion issued
    by an accounting, appraisal or investment banking firm of
    national standing as to the fairness to the holders of such
    Affiliate Transaction from a financial point of view or that the
    terms of the Affiliate Transaction are no less favorable to the
    Company or the relevant Restricted Subsidiary than terms that
    would have been obtained in a comparable transaction with an
    unrelated person or entity.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following items will not be deemed to be
Affiliate Transactions and, therefore, will not be subject to
the provisions of this covenant:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any (a)&nbsp;employment or indemnification
    arrangements, (b)&nbsp;transactions relating to compensation,
    stock option or other benefit plans or arrangements, in each
    case with any employee, consultant or director of the Company or
    any of its Restricted Subsidiaries that is entered into by the
    Company or any of its Restricted Subsidiaries in the ordinary
    course of business or (c)&nbsp;any redemption or repurchase of
    the Capital Stock of the Company held by employees upon death,
    disability or termination of employment;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">transactions between or among any of the Company,
    its Restricted Subsidiaries and the Utility;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">transactions between the Company and any of its
    Restricted Subsidiaries, on the one hand, and any Unrestricted
    Subsidiary if such transaction: (a)&nbsp;is contemplated by or
    provided for in a confirmed plan of reorganization in a
    bankruptcy proceeding of NEGT or otherwise necessary to comply
    with such a plan or in connection with a court-approved judgment
    or settlement of litigation related to a bankruptcy proceeding
    of NEGT or (b)&nbsp;is subject to tariff or pricing regulation
    by the CPUC or the FERC or similar regulatory agencies or bodies;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">45
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any agreement in effect as of the Issue Date or
    any amendment thereto (so long as such amendment is not
    disadvantageous to the holders in any material respect) or any
    transaction contemplated thereby;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">transactions with a Person that is an Affiliate
    of the Company solely because the Company owns an Equity
    Interest in, or controls, such Person;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">payment of reasonable directors fees;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">sales of Equity Interests (other than
    Disqualified Stock) to Affiliates of the Company;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (8)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Restricted Payments that are permitted by the
    covenant described under &#147;&#151;Restricted Payments;&#148;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (9)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any payments or other transactions pursuant to
    any existing, substantially similar or customary tax sharing
    agreement between the Company and any other Person with which
    the Company files a consolidated tax return or with which the
    Company is or was part of a consolidated group for tax purposes;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="4%"></TD>
    <TD width="90%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(10)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Permitted Investments described in
    clauses&nbsp;(9) or (10) of the definition thereof;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(11)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the grant of intellectual property licenses by
    the Company or any Restricted Subsidiary to an Unrestricted
    Subsidiary; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(12)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the provision of general corporate
    administrative, operating and management services including,
    without limitation, procurement, construction, engineering,
    construction administration, legal, accounting, financial, tax,
    management, risk management, personnel, corporate
    communications, public and governmental relations, information
    technology, administration and business planning, operating,
    management, energy trading and price risk management service, in
    each case, on terms no less favorable to the Company or
    Restricted Subsidiary than cost-based.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<P align="left">
<B><I><FONT size="2">Designation of Restricted and Unrestricted
Subsidiaries</FONT></I></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board of Directors may designate any
Restricted Subsidiary to be an Unrestricted Subsidiary if that
designation would not cause a Default. If a Restricted
Subsidiary is designated as an Unrestricted Subsidiary, the
aggregate fair market value of all outstanding Investments owned
by the Company and its Restricted Subsidiaries in the Subsidiary
properly designated will be deemed to be an Investment made as
of the time of the designation and will reduce the amount
available for Restricted Payments under the first paragraph of
the covenant described under &#147;&#151;Restricted
Payments&#148; or Permitted Investments, as determined by the
Company. That designation will only be permitted if the
Investment would be permitted at that time and if the Restricted
Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary. The Board of Directors may redesignate any
Unrestricted Subsidiary to be a Restricted Subsidiary if the
redesignation would not cause a Default.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><I><FONT size="2">Business Activities</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company will not, and will not permit any
Restricted Subsidiary to, engage in any business other than
Permitted Businesses, except to such extent as would not be
material to the Company and its Subsidiaries taken as a whole.
</FONT>

<P align="left">
<B><I><FONT size="2">Payments for Consent</FONT></I></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, pay or cause to be
paid any consideration to or for the benefit of any noteholder
for or as an inducement to any consent, waiver or amendment of
any of the terms or provisions of the indenture or the notes
unless such consideration is offered to be paid and is paid to
all noteholders that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to
such consent, waiver or agreement.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">46
</FONT>

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<P align="left">
<B><I><FONT size="2">Reports</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Whether or not required by the SEC, so long as
any notes are outstanding, the Company will furnish to the
trustee within ten business days of the time periods specified
in the SEC&#146;s rules and regulations:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">all quarterly and annual financial information
    that would be required to be contained in a filing with the SEC
    on Forms 10-Q and 10-K if the Company were required to file such
    Forms, including a &#147;Management&#146;s Discussion and
    Analysis of Financial Condition and Results of Operations&#148;
    and, with respect to the annual information only, a report on
    the annual financial statements by the Company&#146;s certified
    independent accountants; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">all current reports that would be required to be
    filed with the SEC on Form&nbsp;8-K if the Company were required
    to file such reports.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, whether or not required by the SEC,
the Company will file a copy of all of the information and
reports referred to in clauses (1)&nbsp;and (2) above with the
SEC for public availability within the time periods specified in
the SEC&#146;s rules and regulations (unless the SEC will not
accept such a filing) and make such information available to
securities analysts and prospective investors upon request. The
Company has also agreed that, for so long as any notes remain
outstanding, at any time it is not required to file the reports
required by the preceding paragraph with the SEC, it will
furnish to the holders and to securities analysts and
prospective investors, upon their request, the information
required to be delivered pursuant to Rule&nbsp;144A(d)(4) under
the Securities Act.
</FONT>

<P align="left">
<B><FONT size="2">Events of Default and Remedies</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each of the following is an Event of Default:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">default by the Company for 30&nbsp;days in the
    payment when due of interest on the notes;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">default by the Company in payment when due of the
    principal of, or premium, if any, on the notes;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">failure by the Company or any of its Restricted
    Subsidiaries to comply with the provisions described under
    &#147;&#151;Repurchase at the Option of Holders&#151;Change of
    Control or Reorganization Event,&#148; &#147;&#151;Repurchase at
    the Option of Holders&#151;Asset Sales,&#148; or
    &#147;&#151;Certain Covenants&#151;Merger, Consolidation or Sale
    of Assets;&#148;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">failure by the Company or any of its Restricted
    Subsidiaries for 60&nbsp;days after notice to comply with any of
    the other covenants or agreements in the indenture;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">default under any mortgage, indenture or
    instrument under which there may be issued or by which there may
    be secured or evidenced any Indebtedness for money borrowed by
    the Company or any of its Restricted Subsidiaries (or the
    payment of which is guaranteed by the Company or any of its
    Restricted Subsidiaries) whether such Indebtedness or guarantee
    now exists, or is created after the Issue Date, if that default:
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(a)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">is caused by a failure to pay principal of, or
    interest or premium, if any, on such Indebtedness prior to the
    expiration of the grace period provided in such Indebtedness on
    the date of such default (a &#147;Payment Default&#148;); or
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(b)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">results in the acceleration of such Indebtedness
    prior to its Stated Maturity,
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">and, in each case, the principal amount of any
    such Indebtedness, together with the principal amount of any
    other such Indebtedness under which there has been a Payment
    Default or the maturity of which has been so accelerated,
    aggregates $50.0&nbsp;million or more;
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">failure by the Company or any of its Restricted
    Subsidiaries to pay final judgments aggregating in excess of
    $50.0&nbsp;million, which judgments are not paid, discharged or
    stayed for a period of 60 days;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">47
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">(a)&nbsp;except as permitted by the Pledge
    Agreements, any amendments thereto or the provisions of the
    indenture, and other than as a result of a Reorganization Event,
    either of the Pledge Agreements ceases to be in full force and
    effect or ceases to be effective, in all material respects, to
    create the Lien purported to be created in the Collateral in
    favor of the holders for 60&nbsp;days after notice, (b)&nbsp;the
    Company challenges the Lien on the Collateral under the Pledge
    Agreements prior to the time that the Collateral is to be
    released to the Company or (c)&nbsp;the Company asserts that
    either of the Pledge Agreements is invalid and unenforceable,
    other than in accordance with its terms; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(8)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">certain events of bankruptcy or insolvency
    described in the indenture with respect to the Company or any of
    its Significant Subsidiaries or any group of Restricted
    Subsidiaries that, taken as a whole, would constitute a
    Significant Subsidiary.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the case of an Event of Default arising from
certain events of bankruptcy or insolvency with respect to the
Company, all outstanding notes will become due and payable
immediately without further action or notice. If any other Event
of Default occurs and is continuing, the trustee or the holders
of at least 25% in principal amount of the then outstanding
notes may declare all the notes to be due and payable
immediately.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Noteholders may not enforce the indenture or the
notes except as provided in the indenture. Subject to certain
limitations, holders of a majority in principal amount of the
then outstanding notes may direct the trustee in its exercise of
any trust or power. The holders of a majority in aggregate
principal amount of the notes then outstanding by notice to the
trustee may on behalf of the holders of all of the notes
(i)&nbsp;waive any existing Default or Event of Default and its
consequences under the indenture except a continuing Default or
Event of Default in the payment of principal of, or interest or
premium, if any, on, the notes and (ii)&nbsp;rescind an
acceleration and its consequences, if the rescission would not
conflict with any judgment or decree and if all existing Events
of Default have been cured or waived.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon becoming aware of any Default or Event of
Default, the Company is required to deliver to the trustee a
statement specifying such Default or Event of Default. The
trustee may withhold from noteholders notice of any continuing
Default if it determines that withholding such notice is in
their interest, except a Default relating to the payment of
principal of, or interest or premium, if any, on, the notes.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">No Personal Liability of Directors, Officers,
Employees and Shareholders</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">No director, officer, employee, incorporator or
shareholder of the Company or any director, officer, employee or
incorporator of any Subsidiary of the Company, as such, will
have any liability for any obligations of the Company under the
notes, the indenture, the Pledge Agreements or for any claim
based on, in respect of, or by reason of, such obligations or
their creation. Each noteholder by accepting a note waives and
releases all such liability. The waiver and release are part of
the consideration for issuance of the notes. The waiver may not
be effective to waive liabilities under the federal securities
laws and it is the view of the SEC that such a waiver is against
public policy.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Legal Defeasance and Covenant
Defeasance</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company may, at its option and at any time,
elect to have all of its obligations and the obligations of the
Restricted Subsidiaries discharged with respect to the
outstanding notes (&#147;Legal Defeasance&#148;) except for:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the rights of holders of outstanding notes to
    receive payments in respect of the principal of, or interest or
    premium, if any, on such notes when such payments are due from
    the trust referred to below;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Company&#146;s obligations with respect to
    the notes concerning issuing temporary notes, registration of
    notes, mutilated, destroyed, lost or stolen notes and the
    maintenance of an office or agency for payment;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">48
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the rights, powers, trusts, duties and immunities
    of the trustee and the Company&#146;s obligations in connection
    therewith; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Legal Defeasance provisions of the indenture.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, the Company may, at its option and
at any time, elect to have the obligations of the Company
released with respect to certain covenants (including, but not
limited to, its obligations to make Change of Control Offers and
Asset Sale Offers) that are described in the indenture
(&#147;Covenant Defeasance&#148;) and thereafter any omission to
comply with those covenants will not constitute a Default or
Event of Default with respect to the notes. In the event
Covenant Defeasance occurs, certain events (not including
non-payment, bankruptcy, receivership, rehabilitation and
insolvency events) described under &#147;&#151;Events of Default
and Remedies&#148; will no longer constitute an Event of Default
with respect to the notes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order to exercise either Legal Defeasance or
Covenant Defeasance:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Company must irrevocably deposit with the
    trustee, in trust, for the benefit of the noteholders, cash in
    U.S. dollars, non-callable Government Securities, or a
    combination of cash in U.S. dollars and non-callable Government
    Securities, in amounts as will be sufficient, in the opinion of
    a nationally recognized firm of independent public accountants,
    to pay the principal of, or interest and premium, if any, on the
    outstanding notes on the Stated Maturity or on the applicable
    redemption date, as the case may be, and the Company must
    specify whether the notes are being defeased to maturity or to a
    particular redemption date;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">in the case of Legal Defeasance, the Company has
    delivered to the trustee an opinion of counsel reasonably
    acceptable to the trustee confirming that:
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(a)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Company has received from, or there has been
    published by, the Internal Revenue Service a ruling; or
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(b)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">since the Issue Date, there has been a change in
    the applicable federal income tax law, in either case to the
    effect that, and based thereon such opinion of counsel will
    confirm that, the holders of the outstanding notes will not
    recognize income, gain or loss for federal income tax purposes
    as a result of such Legal Defeasance and will be subject to
    federal income tax on the same amounts, in the same manner and
    at the same times as would have been the case if such Legal
    Defeasance had not occurred;
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">in the case of Covenant Defeasance, the Company
    has delivered to the trustee an opinion of counsel reasonably
    acceptable to the trustee confirming that the holders of the
    outstanding notes will not recognize income, gain or loss for
    federal income tax purposes as a result of such Covenant
    Defeasance and will be subject to federal income tax on the same
    amounts, in the same manner and at the same times as would have
    been the case if such Covenant Defeasance had not occurred;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">no Default or Event of Default has occurred and
    is continuing on the date of such deposit (other than a Default
    or Event of Default resulting from the borrowing of funds to be
    applied to such deposit);
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">such Legal Defeasance or Covenant Defeasance will
    not result in a breach or violation of, or constitute a default
    under, any material agreement or instrument (other than the
    indenture) to which the Company or any of its Subsidiaries is a
    party or by which the Company or any of its Subsidiaries is
    bound;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Company must deliver to the trustee an
    officer&#146;s certificate stating that the deposit was not made
    by the Company with the intent of preferring the noteholders
    over any other creditors of the Company or with the intent of
    defeating, hindering, delaying or defrauding any other creditors
    of the Company; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<P align="center"><FONT size="2">49
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Company must deliver to the trustee an
    officer&#146;s certificate and an opinion of counsel, each
    stating that all conditions precedent relating to the Legal
    Defeasance or the Covenant Defeasance have been complied with.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Satisfaction and Discharge</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The indenture will be discharged, and will cease
to be of further effect as to all notes issued thereunder, when:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">either:
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(a)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">all notes that have been authenticated, except
    lost, stolen or destroyed notes that have been replaced or paid
    and notes for whose payment money has been deposited in trust
    and thereafter repaid to the Company, have been delivered to the
    trustee for cancellation; or
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(b)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">all notes that have not been delivered to the
    trustee for cancellation have become due and payable or will
    become due and payable within one year by reason of the mailing
    of a notice of redemption or otherwise and the Company has
    irrevocably deposited or caused to be deposited with the trustee
    as trust funds in trust solely for the benefit of the holders,
    cash in U.S. dollars, non-callable Government Securities, or a
    combination of cash in U.S. dollars and non-callable Government
    Securities, in amounts as will be sufficient, without
    consideration of any reinvestment of interest, to pay and
    discharge the entire indebtedness on the notes not delivered to
    the trustee for cancellation for principal, premium, if any, and
    accrued interest to the date of maturity or redemption;
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">no Default or Event of Default has occurred and
    is continuing on the date of the deposit (other than a Default
    or Event of Default resulting from the borrowing of funds to be
    applied to such deposit) or will occur as a result of the
    deposit and the deposit will not result in a breach or violation
    of, or constitute a default under, any other instrument to which
    the Company or any of its Subsidiaries is a party or by which
    the Company or any of its Subsidiaries is bound;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Company has paid or caused to be paid all
    sums payable by it under the indenture; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Company has delivered irrevocable
    instructions to the trustee under the indenture to apply the
    deposited money toward the payment of the notes at maturity or
    the redemption date, as the case may be.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, the Company must deliver an
officer&#146;s certificate and an opinion of counsel to the
trustee stating that all conditions precedent to satisfaction
and discharge have been satisfied.
</FONT>

<P align="left">
<B><FONT size="2">Amendment, Supplement and Waiver</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Except as provided in the next two succeeding
paragraphs, the indenture and the notes may be amended or
supplemented with the consent of the holders of a majority in
principal amount of the notes then outstanding (including,
without limitation, consents obtained in connection with a
purchase of, or tender offer or exchange offer for, the notes),
and, subject to certain exceptions, any existing Default or
Event of Default or compliance with any provision of the
indenture or the notes may be waived with the consent of the
holders of a majority in principal amount of the then
outstanding notes (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or
exchange offer for, the notes).
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Without the consent of each holder affected, an
amendment, supplement or waiver may not (with respect to any
notes held by a non-consenting holder):
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">reduce the principal amount of notes whose
    holders must consent to an amendment, supplement or waiver;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">reduce the principal amount of or change the
    fixed maturity of any note or alter the provisions with respect
    to the redemption of the notes (other than provisions relating
    to the covenants described under &#147;&#151;Repurchase at the
    Option of Holders&#148;);
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<P align="center"><FONT size="2">50
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">reduce the rate of or change the time for payment
    of interest on any note;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">waive a Default or Event of Default in the
    payment of principal of, or interest or premium, if any, on the
    notes (except a rescission of acceleration of the notes by the
    holders of at least a majority in aggregate principal amount of
    the notes and a waiver of the payment default that resulted from
    such acceleration);
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">make any note payable in currency other than that
    stated in the notes;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">make any change in the provisions of the
    indenture relating to waivers of past Defaults or the rights of
    noteholders to receive payments of principal of, or interest or
    premium, if any, on the notes;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">waive a redemption payment with respect to any
    note (other than a payment required by one of the covenants
    described under &#147;&#151;Repurchase at the Option of
    Holders&#148;);
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(8)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">make any change in the ranking or priority of any
    note that would adversely affect the holder (other than any
    change resulting from an amendment to the Pledge Agreements in
    accordance with their terms); or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(9)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">make any change in the preceding amendment and
    waiver provisions.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any amendments to, or waivers of, the Pledge
Agreements will be made in accordance with their terms. These
terms include that any amendment to, or waiver of, the
provisions of the Pledge Agreements in any manner (i)&nbsp;that
adversely affects the rights of the noteholders or
(ii)&nbsp;that releases any of the Collateral from the Liens
under the Pledge Agreements (in each case, other than in
accordance with the terms of such documents) will require the
consent of the holders of at least 66&nbsp;2/3% of the aggregate
principal amount of notes then outstanding and, if holders of
any additional Indebtedness have become parties to the Pledge
Agreements in accordance with the terms thereof (&#147;New
Senior Secured Debt&#148;), the consent of the required amount
of such New Senior Secured Debt.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Notwithstanding the preceding, without the
consent of any holder of notes, the Company and the trustee may
amend or supplement the indenture, the Pledge Agreements or the
notes to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">cure any ambiguity, defect or inconsistency;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">provide for uncertificated notes in addition to
    or in place of certificated notes;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">provide for the assumption of the Company&#146;s
    obligations to noteholders in the case of a merger or
    consolidation or sale of all or substantially all of the
    Company&#146;s assets;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">make any change that would provide any additional
    rights or benefits to the noteholders or that does not adversely
    affect the legal rights under the indenture or the Pledge
    Agreements of any such holder;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">provide for the issuance of additional notes in
    accordance with the provisions set forth in the indenture;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">comply with requirements of the SEC in order to
    effect or maintain the qualification of the indenture under the
    Trust Indenture Act; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">evidence and provide for the acceptance and
    appointment under the indenture of a successor trustee pursuant
    to the requirements of the indenture.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The consent of the holders is not necessary under
the indenture to approve the particular form of any proposed
amendment. It is sufficient if such consent approves the
substance of the proposed amendment.
</FONT>

<P align="left">
<B><FONT size="2">The Pledge Agreements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Pledge Agreements provide for the pledge by
the Company of approximately 94% of the common stock of the
Utility to secure the Company&#146;s obligations under and in
respect of the indenture and the notes.
</FONT>

<P align="center"><FONT size="2">51
</FONT>

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<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left">
<FONT size="2">Upon the occurrence of an event of default under
the Base Pledge Agreement, the Collateral Agent is entitled to
exercise all the rights, powers and remedies for the protection
and enforcement of its rights with respect to that portion of
the Collateral not to exceed 35% of the common stock of the
Utility that is pledged, including the foreclosure upon and sale
of such Collateral. The only remedy provided to the Collateral
Agent with respect to the remaining 65% of the common stock of
the Utility that is pledged pursuant to the Protective Pledge
Agreement is the right to receive proceeds from the sale of such
common stock. In each case, the net proceeds of any sale of the
Collateral is distributed ratably first, to the holders of the
senior secured obligations (including the holders of the notes)
based upon the relevant amounts due and payable with respect to
such senior secured obligation and, second, to the holders of
junior secured obligations, if any. In addition, the Pledge
Agreements provide that until holders of New Senior Secured Debt
have become parties to the Pledge Agreements, the holders of
more than 50% of the outstanding principal amount of the notes
may direct the Collateral Agent with respect to decisions
relating to the exercise of remedies under the Pledge
Agreements, including whether to foreclose on the portion of the
Collateral representing 35% of the common stock of the Utility
owned by the Company following a default on the notes. After the
holders of any New Senior Secured Debt have become parties to
the Pledge Agreements, the holders of (1)&nbsp;more than 50% of
the outstanding principal amount of the notes, voting separately
as a class; (2)&nbsp;more than 50% of the outstanding principal
amount of any issuance of New Senior Secured Debt that the
Company has designated as having the right to separately vote as
a class, voting separately as a class and (3)&nbsp;more than 50%
of the outstanding principal amount of all New Senior Secured
Debt that has not been so designated, voting separately as a
class, shall direct the Collateral Agent with respect to
decisions relating to the exercise of remedies. Amendments to
the Pledge Agreements necessary to permit the incurrence of
additional Indebtedness secured by the Collateral and to add
additional secured parties thereto may be made without the
consent of the Trustee or the holders of the notes, insofar as
the foregoing is not prohibited under the indenture.
</FONT>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Release</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Liens on the Collateral will be released with
respect to the notes:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">in whole, upon payment in full of the principal
    of, accrued and unpaid interest and premium, if any, on the
    notes and payment in full of all other Obligations due and
    payable at or prior to the time such principal, accrued and
    unpaid interest and premium, if any, are paid;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">in whole, upon satisfaction and discharge of the
    indenture;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">in whole, upon a Legal Defeasance or Covenant
    Defeasance as set forth under &#147;&#151;Legal Defeasance and
    Covenant Defeasance;&#148;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">in part, as to any property constituting
    Collateral that is sold or otherwise disposed of by the Company
    in a transaction permitted by the indenture, the Pledge
    Agreements and any then-existing debt documents evidencing New
    Senior Secured Debt or junior secured obligations, at the time
    of such sale or disposition, to the extent of the interest sold
    or disposed of;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">if such Collateral constitutes all or
    substantially all of the Collateral, with the consent of at
    least 66&nbsp;2/3% in principal amount of the notes (including,
    without limitation, additional notes, if any) then outstanding
    voting as a single class (including, without limitation,
    consents obtained in connection with a tender offer or exchange
    offer for, or purchase of, notes);
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">if such Collateral constitutes less than all or
    substantially all of the Collateral, with the consent of at
    least a majority in principal amount of the notes (including,
    without limitation, additional notes, if any) then outstanding
    voting as a single class (including, without limitation,
    consents obtained in connection with a tender offer or exchange
    offer for, or purchase of, the notes); or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">upon the occurrence of a Reorganization Event.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Equal and Ratable Lien Sharing by Noteholders
and Holders of Certain Other Indebtedness</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Notwithstanding (i)&nbsp;anything to the contrary
contained in the indenture, Pledge Agreements, notes or any
other instrument governing, evidencing or relating to any
Indebtedness, (ii)&nbsp;the time, order or method of
</FONT>

<P align="center"><FONT size="2">52
</FONT>

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<DIV align="left">
<FONT size="2">attachment of any Liens, (iii)&nbsp;the time or
order of filing or recording of financing statements or other
documents filed or recorded to perfect any Lien upon any
Collateral, (iv)&nbsp;the time of taking possession or control
over any Collateral or (v)&nbsp;the rules for determining
priority under the Uniform Commercial Code or any other law
governing relative priorities of secured creditors:
</FONT>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Liens will rank equally and ratably with all
    valid, enforceable and perfected Liens, whenever granted upon
    any present or future Collateral, but only to the extent such
    Liens are permitted under the indenture; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">all proceeds of the Pledge Agreements shall be
    allocated and distributed equally and ratably as set forth in
    the Pledge Agreements.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Concerning the Trustee</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If the trustee becomes a creditor of the Company,
the indenture limits its right to obtain payment of claims in
certain cases, or to realize on certain property received in
respect of any such claim as security or otherwise. The trustee
will be permitted to engage in other transactions; however, if
it acquires any conflicting interest it must eliminate such
conflict within 90 days, apply to the SEC for permission to
continue or resign.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The holders of a majority in principal amount of
the then outstanding notes will have the right to direct the
time, method and place of conducting any proceeding for
exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event
of Default occurs and is continuing, the trustee will be
required, in the exercise of its rights and powers, to use the
degree of care of a prudent person in the conduct of such
person&#146;s own affairs. Subject to such provisions, the
trustee will be under no obligation to exercise any of its
rights or powers under the indenture at the request of any
holder of notes, unless such holder has offered to the trustee
security and indemnity satisfactory to it against any loss,
liability or expense.
</FONT>

<P align="left">
<B><FONT size="2">Book-Entry System; Global Notes</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Except as set forth below, the notes will
initially be issued in the form of one or more global notes.
Each global note will be deposited with DTC or the trustee on
behalf of DTC and will be registered in the name of DTC or its
nominee. Investors may hold their beneficial interests in a
global note directly through DTC or indirectly through
organizations which are participants in the DTC system.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unless and until they are exchanged in whole or
in part for certificated notes, the global notes may not be
transferred except as a whole by DTC or its nominee.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">DTC has advised us as follows:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">DTC is a limited purpose trust company organized
    under the laws of the State of New York, a &#147;banking
    organization&#148; within the meaning of the New York Banking
    Law, a member of the Federal Reserve System, a &#147;clearing
    corporation&#148; within the meaning of the Uniform Commercial
    Code and a &#147;clearing agency&#148; registered under the
    provisions of Section&nbsp;17A of the Exchange Act.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">DTC holds securities that its direct participants
    deposit with it. DTC also facilitates the post-trade settlement
    among direct participants of sales and other securities
    transactions in deposited securities through electronic
    book-entry transfers and pledges between direct
    participants&#146; accounts. This eliminates the need for
    physical movement of securities certificates. Direct
    participants include both U.S. and non-U.S. securities brokers
    and dealers, banks, trust companies, clearing corporations and
    certain other organizations. DTC is a wholly owned subsidiary of
    The Depository Trust &#38; Clearing Corporation, or DTCC. DTCC,
    in turn, is owned by a number of DTC&#146;s direct participants,
    all of which are members of the National Securities Clearing
    Corporation, Government Securities Clearing Corporation, MBS
    Clearing Corporation, and Emerging Markets Clearing Corporation,
    also subsidiaries of DTCC, and by the New York Stock Exchange,
    Inc., the American Stock Exchange LLC and the National
    Association of Securities Dealers, Inc. Access to the DTC system
    is available to others, including both U.S. and non-U.S.
    securities brokers and dealers, banks, trust companies
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">53
</FONT>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">and clearing corporations that clear through or
    maintain a custodial relationship with a direct participant,
    either directly or indirectly. DTC has S&#38;P&#146;s highest
    rating: AAA. The DTC rules applicable to its direct and indirect
    participants are on file with the SEC. More information about
    DTC can be found at www.dtcc.com.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Purchases of the notes under the DTC system must
    be made by or through direct participants, which will receive a
    credit for the notes on DTC&#146;s records. The ownership
    interest of each actual purchaser of each exchange note, or the
    beneficial owner, is, in turn, to be recorded on the direct and
    indirect participants&#146; record. Beneficial owners will not
    receive written confirmation from DTC of their purchase.
    Beneficial owners are, however, expected to receive written
    confirmations providing details of the transaction, as well as
    periodic statements of their holdings, from the direct or
    indirect participant through which the beneficial owner entered
    into the transaction. Transfers of ownership interests in the
    notes are to be accomplished by entries made on the books of
    direct and indirect participants acting on behalf of beneficial
    owners. Beneficial owners will not receive certificates
    representing their ownership interests in notes except in the
    event that use of the book-entry system for the exchange notes
    is discontinued.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">To facilitate subsequent transfers, all notes
    deposited by direct participants with DTC are registered in the
    name of DTC&#146;s partnership nominee, Cede &#38; Co., or such
    other name as may be requested by an authorized representative
    of DTC. The deposit of notes with DTC and their registration in
    the name of Cede &#38; Co. or such other DTC nominee do not
    effect any change in beneficial ownership. DTC has no knowledge
    of the actual beneficial owners of the notes; DTC&#146;s records
    reflect only the identity of the direct participants to whose
    accounts the notes are credited, which may or may not be the
    beneficial owners. The direct and indirect participants will
    remain responsible for keeping account of their holdings on
    behalf of their customers.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Conveyance of notices and other communications by
    DTC to direct participants, by direct participants to indirect
    participants, and by direct participants and indirect
    participants to beneficial owners will be governed by
    arrangements among them, subject to any statutory or regulatory
    requirements as may be in effect from time to time. Beneficial
    owners of the notes may wish to take certain steps to augment
    the transmission to them of notices of significant events with
    respect to the notes, such as redemptions, tenders, defaults and
    proposed amendments to the exchange note documents. For example,
    beneficial owners of notes may wish to ascertain whether the
    nominee holding the notes for their benefit has agreed to obtain
    and transmit notices to beneficial owners. In the alternative,
    beneficial owners may wish to provide their names and addresses
    to the registrar and request that copies of notices be provided
    directly to them.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Redemption notices shall be sent to DTC. If less
    than all of the notes within a series are being redeemed,
    DTC&#146;s practice is to determine by lot the amount of the
    interest of each direct participant in the series to be redeemed.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Neither DTC nor Cede &#38; Co. (nor any other DTC
    nominee) will consent or vote with respect to notes unless
    authorized by a direct participant in accordance with DTC&#146;s
    procedures. Under its usual procedures, DTC mails an omnibus
    proxy to the issuer as soon as possible after the record date.
    The omnibus proxy assigns Cede &#38; Co.&#146;s consenting or
    voting rights to those direct participants to whose accounts
    notes are credited on the record date (identified in a listing
    attached to the omnibus proxy).
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Redemption proceeds, distributions and dividend
    payments on the notes will be made to Cede &#38; Co. or such
    other nominee as may be requested by an authorized
    representative of DTC. DTC&#146;s practice is to credit direct
    participants&#146; accounts upon DTC&#146;s receipt of funds and
    corresponding detail information from the issuer or the agent,
    on payable date in accordance with their respective holdings
    shown on DTC&#146;s records. Payments by participants to
    beneficial owners will be governed by standing instructions and
    customary practices, as is the case with securities held for the
    accounts of customers in bearer form or registered in
    &#147;street name,&#148; and will be the responsibility of the
    participant and not of DTC nor its nominee, agent or the issuer,
    subject to any statutory or regulatory requirements as may be in
    effect from time to time. Payment of redemption proceeds,
    distributions and dividend
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<P align="center"><FONT size="2">54
</FONT>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">payments to Cede &#38; Co. (or such other nominee
    as may be requested by an authorized representative of DTC) is
    the responsibility of the issuer or agent, disbursement of the
    payments to direct participants will be the responsibility of
    DTC, and disbursement of such payments to the beneficial owners
    will be the responsibility of direct and indirect participants.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">A beneficial owner shall give notice to elect to
    have its note purchased or tendered, through its participant, to
    the agent, and shall effect delivery of the note by causing the
    direct participant to transfer the participant&#146;s interest
    in the note, on DTC&#146;s records, to the agent. The
    requirement for physical delivery of the note in connection with
    an optional tender or a mandatory purchase will be deemed
    satisfied when the ownership rights in the note are transferred
    by direct participants on DTC&#146;s records and followed by a
    book-entry credit of the tendered note to the agent&#146;s DTC
    account.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">DTC may discontinue providing its services as
    depositary with respect to the notes at any time by giving
    reasonable notice to the issuer or the agent. Under such
    circumstances, in the event that a successor depositary is not
    selected, note certificates are required to be printed and
    delivered.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor securities
depositary). In that event, note certificates will be printed
and delivered.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The information in this section concerning DTC
and DTC&#146;s book-entry system has been obtained from sources
that we believe to be reliable but we take no responsibility for
the accuracy thereof.
</FONT>

<P align="left">
<B><I><FONT size="2">Exchange of Global Notes for Certificated
Notes</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A global note is exchangeable for definitive
notes in registered certificated form (&#147;certificated
notes&#148;) if:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">DTC (a)&nbsp;notifies the Company that it is
    unwilling or unable to continue as depositary for such global
    notes or (b)&nbsp;has ceased to be a clearing agency registered
    under the Exchange Act, and the Company fails to appoint a
    successor depositary;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Company, at its option, notifies the trustee
    in writing that it elects to cause the issuance of the
    certificated notes; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">there has occurred and is continuing an Event of
    Default with respect to the notes.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, beneficial interests in a global
note may be exchanged for certificated notes upon prior written
notice given to the trustee by or on behalf of DTC in accordance
with the indenture. In all cases, certificated notes delivered
in exchange for any global note or beneficial interests in
global notes will be registered in the names, and issued in any
approved denominations, requested by or on behalf of the
depositary (in accordance with its customary procedures).
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><I><FONT size="2">Same-Day Settlement and
Payment</FONT></I></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company will make payments in respect of the
notes represented by the global notes (including principal,
interest and premium, if any) by wire transfer of immediately
available funds to the accounts specified by the global note
holder. The Company will make all payments of principal,
interest and premium, if any, with respect to certificated notes
by wire transfer of immediately available funds to the accounts
specified by the holders of the certificated notes if a holder
is the registered holder of at least $250,000 in principal
amount of the notes or, if no such account is specified or a
holder is not a registered holder of at least $250,000 in
principal amount of the notes, at the office or agency of the
Company maintained for such purpose within The City and State of
New York or, at the option of the Company, payment of interest
may be made by mailing a check to each such holder&#146;s
registered address. The notes represented by the global notes
are expected to be eligible to trade in The Portal<SUP>SM</SUP>
Market and to trade in DTC&#146;s Same-Day Funds Settlement
System, and any permitted secondary market trading activity in
such notes will, therefore, be required by DTC to be settled in
immediately available funds. The Company expects that secondary
trading in any certificated notes will also be settled in
immediately available funds.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">55
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Because of time zone differences, the securities
account of a Euroclear or Clearstream participant purchasing an
interest in a global note from a Participant in DTC will be
credited, and any such crediting will be reported to the
relevant Euroclear or Clearstream participant, during the
securities settlement processing day (which must be a business
day for Euroclear and Clearstream) immediately following the
settlement date of DTC. DTC has advised us that cash received in
Euroclear or Clearstream as a result of sales of beneficial
interests in a global note by or through a Euroclear or
Clearstream participant to a Participant in DTC will be received
with value on the settlement date of DTC but will be available
in the relevant Euroclear or Clearstream cash account only as of
the business day for Euroclear or Clearstream following
DTC&#146;s settlement date.
</FONT>

<P align="left">
<B><FONT size="2">Registration Rights</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company and the initial purchasers entered
into a registration rights agreement dated as of July&nbsp;2,
2003. Pursuant to the registration rights agreement, the Company
agreed to file with the SEC a registration statement on the
appropriate form for the exchange offer under the Securities Act
with respect to the exchange notes. The registration statement
of which this prospectus is a part constitutes the registration
statement that the Company was required to file pursuant to the
registration rights agreement.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Broker-dealers receiving exchange notes in the
exchange offer have a prospectus delivery requirement with
respect to resales of such exchange notes. Under the
registration rights agreement, the Company must use its
commercially reasonable best efforts to keep the exchange offer
registration statement continuously effective, supplemented and
amended to allow such broker-dealers and other persons, if any,
with similar prospectus delivery requirements to use the
prospectus contained in the exchange offer registration
statement in connection with the resale of such exchange notes
until &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;2004,
<I>i.e.</I>, 180&nbsp;days following the date of this prospectus
(or such shorter period during which such broker-dealers are
required by law to deliver such prospectus).
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Company is not permitted to consummate the
    exchange offer because the exchange offer is not permitted by
    applicable law or SEC policy; or
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any holder of Transfer Restricted Securities that
    is a &#147;qualified institutional buyer&#148; as such term is
    defined in Rule&nbsp;144A under the Securities Act notifies the
    Company within 20 business days following consummation of the
    exchange offer that:
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>
<P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(a)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">it is prohibited by law or SEC policy from
    participating in the exchange offer; or
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(b)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">it may not resell the exchange notes acquired by
    it in the exchange offer to the public without delivering a
    prospectus and the prospectus contained in the exchange offer
    registration statement is not appropriate or available for such
    resales; or
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(c)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">it is a broker-dealer and owns notes acquired
    directly from the Company or an affiliate of the Company,
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<FONT size="2">the Company will file with the SEC a shelf
registration statement to cover resales of the notes by the
noteholders who satisfy certain conditions in connection with
the shelf registration statement.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Holders reselling notes pursuant to the shelf
registration statement will be required to deliver certain
information to be used in connection with the shelf registration
statement within the time periods set forth in the registration
rights agreement in order to have their notes included in the
shelf registration statement. By acquiring Transfer Restricted
Securities, a holder will be deemed to have agreed to indemnify
the Company against certain losses arising out of information
furnished by such holder in writing for inclusion in any shelf
registration statement.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A holder reselling notes pursuant to the shelf
registration statement will be required to be named as a selling
security holder in the related prospectus and to deliver a
prospectus to purchasers, and will be subject to certain of the
civil liability provisions under the Securities Act in
connection with such resales.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">56
</FONT>

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<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left">
<FONT size="2">Noteholders will also be required to suspend
their use of the prospectus included in the shelf registration
statement under certain circumstances upon receipt of written
notice to that effect from the Company.
</FONT>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For purposes of the foregoing, &#147;Transfer
Restricted Securities&#148; means each note until:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the date on which such note has been exchanged by
    a Person other than a broker-dealer for an exchange note in the
    exchange offer;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">following the exchange by a broker-dealer in the
    exchange offer of a note for an exchange note, the date on which
    such exchange note is sold to a purchaser who receives from such
    broker-dealer on or prior to the date of such sale a copy of the
    prospectus contained in the exchange offer registration
    statement;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the date on which such note has been effectively
    registered under the Securities Act and disposed of in
    accordance with the shelf registration statement; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the date on which such note is sold pursuant to
    Rule&nbsp;144 under the Securities Act or may be sold pursuant
    to Rule&nbsp;144(k) under the Securities Act.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The registration rights agreement provides that:
</FONT>
<P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">unless the exchange offer would not be permitted
    by applicable law or SEC policy, the Company will:
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(a)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">commence the exchange offer; and
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(b)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">use its commercially reasonable best efforts to
    issue on or prior to 30 business days, or longer if required by
    the federal securities laws, after the date on which the
    exchange offer registration statement was declared effective by
    the SEC, exchange notes in exchange for all notes tendered prior
    thereto in the exchange offer; and
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">if obligated to file the shelf registration
    statement, the Company will use its commercially reasonable best
    efforts to file the shelf registration statement with the SEC on
    or prior to 30&nbsp;days after such filing obligation arises and
    to cause the shelf registration statement to be declared
    effective by the SEC on or prior to 90&nbsp;days after the
    filing deadline.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Certain Definitions</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Set forth below are certain defined terms used in
the indenture. Reference is made to the indenture for a full
description of all such terms, as well as any other capitalized
terms used herein for which no definition is provided.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Acquired Debt&#148;
</FONT></I><FONT size="2">means, with respect to any specified
Person:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Indebtedness of any other Person existing at the
    time such other Person is merged with or into or became a
    Restricted Subsidiary of such specified Person, whether or not
    such Indebtedness is incurred in connection with, or in
    contemplation of, such other Person merging with or into, or
    becoming a Restricted Subsidiary of, such specified Person; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Indebtedness secured by a Lien encumbering any
    asset acquired by such specified Person.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Additional Assets&#148;
</FONT></I><FONT size="2">means:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any property or assets, other than Capital Stock,
    Indebtedness or rights to receive payments over a period greater
    than 180&nbsp;days, that are used by or useful to the Company or
    any of its Restricted Subsidiaries in a Permitted Business; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Capital Stock of an entity that either is
    already at the time a Restricted Subsidiary or becomes a
    Restricted Subsidiary as a result of the acquisition of that
    Capital Stock by the Company or another of its Restricted
    Subsidiaries.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">57
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Affiliate&#148;
</FONT></I><FONT size="2">of any specified Person means any
other Person directly or indirectly controlling or controlled by
or under direct or indirect common control with such specified
Person. For purposes of this definition, &#147;control,&#148; as
used with respect to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of
the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the Voting
Stock of a Person will be deemed to be control. For purposes of
this definition, the terms &#147;controlling,&#148;
&#147;controlled by&#148; and &#147;under common control
with&#148; have correlative meanings.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Asset Sale&#148;
</FONT></I><FONT size="2">means:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the sale, lease, conveyance or other disposition
    of any assets or rights, including by means of a merger,
    consolidation or similar transaction; provided that the sale,
    lease, conveyance or other disposition of all or substantially
    all of the assets of the Company and its Restricted Subsidiaries
    taken as a whole will be governed by the provisions of the
    indenture described under &#147;&#151;Repurchase at the Option
    of Holders&#151;Change of Control or Reorganization Event,&#148;
    and/or the provisions described under &#147;&#151;Certain
    Covenants&#151;Merger, Consolidation or Sale of Assets&#148; and
    not by the covenant described under &#147;&#151;Repurchase at
    the Option of Holders&#151; <BR>
     Asset Sales;&#148; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the issuance of Equity Interests in any
    Restricted Subsidiary or the sale by the Company or a Restricted
    Subsidiary of their Equity Interests in any Subsidiary of the
    Company (other than directors&#146; qualifying shares).
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Notwithstanding the preceding, none of the
following items will be deemed to be Asset Sales:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any single transaction or series of related
    transactions that involves assets having a fair market value of
    less than $10.0 million;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a transfer of assets between or among the Company
    and its Restricted Subsidiaries;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an issuance of Equity Interests by a Restricted
    Subsidiary to the Company or to another Restricted Subsidiary;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the sale or lease of equipment, inventory,
    accounts receivable or other assets in the ordinary course of
    business;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the sale or other disposition of cash or Cash
    Equivalents;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a Restricted Payment or Permitted Investment that
    is permitted by the covenant described under &#147;&#151;Certain
    Covenants&#151;Restricted Payments;&#148;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any sale of Capital Stock of the Company by a
    Restricted Subsidiary;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(8)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any sale of Capital Stock of NEGT by the Company
    or any Restricted Subsidiary required by or provided for in a
    confirmed plan of reorganization in a bankruptcy proceeding of
    NEGT or otherwise necessary to comply with such a plan or in
    connection with a court-approved judgment or settlement of
    litigation related to NEGT&#146;s bankruptcy proceeding;
    provided that the Net Proceeds from any such sale is applied in
    accordance with the covenant described under
    &#147;&#151;Repurchase at the Option of Holders&#151;Asset
    Sales;&#148; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(9)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">dispositions in connection with Permitted Liens.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Attributable Debt&#148;
</FONT></I><FONT size="2">in respect of a sale and leaseback
transaction means, at the time of determination, the present
value of the obligation of the lessee for net rental payments
during the remaining term of the lease included in such sale and
leaseback transaction including any period for which such lease
has been extended or may, at the option of the lessor, be
extended. Such present value shall be calculated using a
discount rate equal to the rate of interest implicit in such
transaction, determined in accordance with GAAP.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Base Pledge Agreement&#148;
</FONT></I><FONT size="2">means the Utility Stock Base Pledge
Agreement, dated as of the Issue Date, among the Company, as
pledgor, the trustee and the Collateral Agent, as pledgee for
the benefit of the
</FONT>

<P align="center"><FONT size="2">58
</FONT>

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<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left">
<FONT size="2">noteholders and the holders of any additional
Indebtedness that become a party thereto pursuant to the terms
thereof, as amended, amended and restated or otherwise modified
from time to time.
</FONT>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Beneficial Owner&#148;
</FONT></I><FONT size="2">has the meaning assigned to such term
in Rule&nbsp;13d-3 and Rule&nbsp;13d-5 under the Exchange Act,
except that in calculating the beneficial ownership of any
particular &#147;person&#148; (as that term is used in
Sections&nbsp;13(d) and 14(d) of the Exchange Act), such
&#147;person&#148; will be deemed to have beneficial ownership
of all securities that such &#147;person&#148; has the right to
acquire by conversion or exercise of other securities, whether
such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition. The terms
&#147;Beneficially Owns&#148; and &#147;Beneficially Owned&#148;
have correlative meanings.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Board of Directors&#148;
</FONT></I><FONT size="2">means:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">with respect to a corporation, the board of
    directors of the corporation;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">with respect to a partnership, the board of
    directors of the general partner of the partnership; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">with respect to any other Person, the board or
    committee of such Person serving a similar function.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Business Day&#148;
</FONT></I><FONT size="2">means each day that is not a Saturday,
Sunday or other day on which banking institutions in New York,
New York are authorized or required by law to close.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Capital Lease Obligation&#148;
</FONT></I><FONT size="2">means, at the time any determination
is to be made, the amount of the liability in respect of a
capital lease that would at that time be required to be
capitalized on a balance sheet in accordance with GAAP.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Capital Stock&#148;
</FONT></I><FONT size="2">means:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">in the case of a corporation, corporate stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">in the case of an association or business entity,
    any and all shares, interests, participations, rights or other
    equivalents (however designated) of corporate stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">in the case of a partnership or limited liability
    company, partnership or membership interests (whether general or
    limited); and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any other interest or participation that confers
    on a Person the right to receive a share of the profits and
    losses of, or distributions of assets of, the issuing Person.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Cash Equivalents&#148;
</FONT></I><FONT size="2">means:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">United States dollars;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">securities issued or directly and fully
    guaranteed or insured by the United States government or any
    agency or instrumentality of the United States government
    (provided that the full faith and credit of the United States is
    pledged in support of those securities) having maturities of not
    more than one year from the date of acquisition;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">certificates of deposit and eurodollar time
    deposits with maturities of one year or less from the date of
    acquisition, bankers&#146; acceptances with maturities not
    exceeding one year and overnight bank deposits, in each case,
    with any domestic commercial bank having capital and surplus in
    excess of $200.0 million;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">repurchase obligations for underlying securities
    of the types described in clauses&nbsp;(2) and (3)&nbsp;above
    entered into with any financial institution meeting the
    qualifications specified in clause&nbsp;(3)&nbsp;above;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">commercial paper having the highest rating
    obtainable from S&#38;P or Moody&#146;s and in each case
    maturing within one year after the date of acquisition;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">59
</FONT>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">securities issued by any state of the United
    States of America or any political subdivision of any such state
    or any public instrumentality thereof maturing within one year
    of the date of acquisition thereof and, at the time of
    acquisition, having a rating of at least AAA from S&#38;P or at
    least Aaa from Moody&#146;s; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">money market funds substantially all of whose
    assets constitute securities of the kinds described in clauses
    (1)&nbsp;through (6)&nbsp;of this definition or that have a
    rating of at least AAA from S&#38;P or at least Aaa from
    Moody&#146;s.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Change of Control&#148;
</FONT></I><FONT size="2">means the occurrence of any of the
following:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the direct or indirect sale, transfer, conveyance
    or other disposition (other than by way of merger or
    consolidation), in one or a series of related transactions, of
    all or substantially all of the properties or assets of the
    Company and its Restricted Subsidiaries taken as a whole to any
    &#147;person&#148; (as that term is used in Sections&nbsp;13(d)
    and 14(d) of the Exchange Act);
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the adoption of a plan relating to the
    liquidation or dissolution of the Company;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the consummation of any transaction (including,
    without limitation, any merger or consolidation) the result of
    which is that any &#147;person&#148; (as that term is used in
    Sections&nbsp;13(d) and 14(d) of the Exchange Act) becomes the
    Beneficial Owner, directly or indirectly, of more than 50% of
    the voting power of the Voting Stock of the Company;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the first day on which a majority of the members
    of the Board of Directors of the Company are not Continuing
    Directors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the first day on which the Company and its
    Subsidiaries shall cease to be the Beneficial Owner, directly or
    indirectly, of at least 80% of the common stock or 70% of the
    Voting Stock of the Utility;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a Change of Control as defined in the
    Company&#146;s Indenture dated June&nbsp;25, 2002 governing the
    Company&#146;s 9.50% convertible subordinated notes due 2010, as
    amended, modified or supplemented from time to time; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Company consolidates with, or merges with or
    into, any Person, or any Person consolidates with, or merges
    with or into, the Company, in any such event pursuant to a
    transaction in which any of the outstanding Voting Stock of the
    Company or such other Person is converted into or exchanged for
    cash, securities or other property, other than any such
    transaction where the Voting Stock of the Company outstanding
    immediately prior to such transaction is converted into or
    exchanged for Voting Stock (other than Disqualified Stock) of
    the surviving Person constituting a majority of the outstanding
    shares of such Voting Stock of such surviving Person
    (immediately after giving effect to such transaction).
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Collateral&#148;
</FONT></I><FONT size="2">means all of the property from time to
time in which Liens are purported to be granted to secure the
notes pursuant to the Pledge Agreements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Collateral Agent&#148;
</FONT></I><FONT size="2">shall have the meaning given to it in
the Pledge Agreements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Consolidated Cash Flow&#148;
</FONT></I><FONT size="2">means, with respect to any specified
Person for any period, the Consolidated Net Income of such
Person for such period plus:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an amount equal to any extraordinary loss plus
    any net loss realized by such Person or any of its Subsidiaries
    in connection with an Asset Sale, to the extent such losses were
    deducted in computing such Consolidated Net Income; plus
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">provision for taxes based on income or profits of
    such Person and its Subsidiaries for such period, to the extent
    that such provision for taxes was deducted in computing such
    Consolidated Net Income; plus
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">60
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Fixed Charges of such Person and its Restricted
    Subsidiaries for such period, to the extent that any such Fixed
    Charges were deducted in computing such Consolidated Net Income;
    plus
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">depreciation, amortization (including
    amortization of intangibles but excluding amortization of
    prepaid cash expenses that were paid in a prior period) and
    other non-cash expenses (including impairment charges recorded
    in connection with the application of Financial Accounting
    Standard No.&nbsp;142 &#147;Goodwill and Other Intangibles&#148;
    but excluding any such non-cash expense to the extent that it
    represents an accrual of or reserve for cash expenses in any
    future period or amortization of a prepaid cash expense that was
    paid in a prior period) of such Person and its Subsidiaries for
    such period to the extent that such depreciation, amortization
    and other non-cash expenses were deducted in computing such
    Consolidated Net Income; plus
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">unrealized non-cash losses resulting from foreign
    currency balance sheet adjustments required by GAAP to the
    extent such losses were deducted in computing such Consolidated
    Net Income; minus
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">non-cash items increasing such Consolidated Net
    Income for such period, other than the accrual of revenue in the
    ordinary course of business and any items that represent the
    reversal of any accrual or reserve, taken in any prior period
    for anticipated cash expenses,
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">in each case, as determined in accordance with
GAAP.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Consolidated Net Income&#148;
</FONT></I><FONT size="2">means, with respect to any specified
Person for any period, the aggregate of the Net Income of such
Person and its Restricted Subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP; provided
that:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Net Income of any Person that is not a
    Restricted Subsidiary or that is accounted for by the equity
    method of accounting will be included only to the extent of the
    amount of dividends or distributions paid in cash to the
    specified Person or a Restricted Subsidiary of the Person;
    provided that, for the avoidance of doubt, the Consolidated Net
    Income of the Company shall not include any net loss of NEGT;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Net Income of any Restricted Subsidiary will
    be excluded to the extent that the declaration or payment of
    dividends or similar distributions by that Restricted Subsidiary
    of that Net Income is not at the date of determination permitted
    without any prior governmental approval (that has not been
    obtained) or, directly or indirectly, by operation of the terms
    of its charter or any agreement, instrument, judgment, decree,
    order, statute, rule or governmental regulation applicable to
    that Restricted Subsidiary or its stockholders; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the cumulative effect of a change in accounting
    principles will be excluded.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Consolidated Tangible Assets&#148;
</FONT></I><FONT size="2">means the total consolidated assets,
less goodwill and intangibles, of the Company and its
Subsidiaries, as shown on the most recent balance sheet of the
Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Continuing Directors&#148;
</FONT></I><FONT size="2">means, as of any date of
determination, any member of the Board of Directors of the
Company who:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">was a member of such Board of Directors on the
    Issue Date; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">was nominated for election or elected to such
    Board of Directors with the approval of a majority of the
    Continuing Directors who were members of such Board of Directors
    at the time of such nomination or election.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Credit Facilities&#148;
</FONT></I><FONT size="2">means one or more debt facilities or
commercial paper facilities, in each case with banks or other
institutional lenders providing for revolving credit loans, term
loans, receivables financing (including through the sale of
receivables to such lenders or to special purpose entities
formed to borrow from such lenders against such receivables) or
letters of credit, including any related notes, guarantees,
collateral documents, instruments and agreements executed in
connection therewith, in each case, as amended, restated,
modified, renewed, refunded, replaced or refinanced in whole or
in part from time to time (and
</FONT>

<P align="center"><FONT size="2">61
</FONT>

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<DIV align="left">
<FONT size="2">whether or not with the original lender or
lenders or another lender or lenders and whether provided under
the original Credit Facility or any other credit or other
agreement or indenture).
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Default&#148;
</FONT></I><FONT size="2">means any event that is, or with the
passage of time or the giving of notice or both would be, an
Event of Default.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Disqualified Stock&#148;
</FONT></I><FONT size="2">means any Capital Stock that, by its
terms (or by the terms of any security into which it is
convertible, or for which it is exchangeable, in each case at
the option of the holder of the Capital Stock), or upon the
happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder of the Capital Stock, in
whole or in part, on or prior to the date that is 91&nbsp;days
after the date on which the notes mature. Notwithstanding the
preceding sentence, any Capital Stock that would constitute
Disqualified Stock solely because the holders of the Capital
Stock have the right to require the Company to repurchase such
Capital Stock upon the occurrence of a change of control or an
asset sale will not constitute Disqualified Stock if the terms
of such Capital Stock provide that the Company may not
repurchase or redeem any such Capital Stock pursuant to such
provisions prior to compliance by the Company with the Change of
Control Offer and Asset Sale Offer provisions of the indenture
described under &#147;&#151;Repurchase at the Option of
Holders&#148; and unless such repurchase or redemption complies
with the covenant described under &#147;&#151;Certain
Covenants&#151;Restricted Payments.&#148;
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Equity Interests&#148;
</FONT></I><FONT size="2">means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding
any debt security that is convertible into, or exchangeable for,
Capital Stock).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Equity Offering&#148;
</FONT></I><FONT size="2">means any public sale of Capital Stock
(other than Disqualified Stock) made for cash on a primary basis
by the Company after the Issue Date.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Exchange Act&#148;
</FONT></I><FONT size="2">means the Securities Exchange Act of
1934, as amended.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Existing Indebtedness&#148;
</FONT></I><FONT size="2">means any Indebtedness of the Company
and its Restricted Subsidiaries (other than any other Permitted
Debt) in existence on the Issue Date, until such amounts are
repaid.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Fixed Charges&#148;
</FONT></I><FONT size="2">means, with respect to any specified
Person for any period, the sum, without duplication, of:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the consolidated interest expense of such Person
    and its Restricted Subsidiaries for such period, whether paid or
    accrued (including, without limitation, amortization of debt
    issue costs and original issue discount, non-cash interest
    payments, the interest component of any deferred payment
    obligations, the interest component of all payments associated
    with Capital Lease Obligations, imputed interest with respect to
    Attributable Debt, commissions, discounts and other fees and
    charges incurred in respect of letter of credit or bankers&#146;
    acceptance financings), and net of the effect of all payments
    made or received pursuant to Hedging Obligations incurred with
    respect to Indebtedness; plus
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the consolidated interest of such Person and its
    Restricted Subsidiaries that was capitalized during such period;
    plus
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any interest expense actually paid by the Company
    or a Restricted Subsidiary on Indebtedness of another Person
    that is Guaranteed by such Person or one of its Restricted
    Subsidiaries or secured by a Lien on assets of such Person or
    one of its Restricted Subsidiaries; plus
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the product of (a)&nbsp;all dividends, whether
    paid or accrued and whether or not in cash, on any series of
    Disqualified Stock of such Person or such Disqualified Stock or
    preferred stock of any of its Restricted Subsidiaries, other
    than dividends on Equity Interests payable solely in Equity
    Interests of the Company (other than Disqualified Stock) or to
    the Company or a Restricted Subsidiary of the Company, times (b)
    (i)&nbsp;in the case of dividends that are not deductible for
    income tax purposes, a fraction, the numerator of which is one
    and the denominator of which is one minus the then current
    combined federal, state and local statutory tax rate of such
    Person,
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">62
</FONT>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">expressed as a decimal, or (ii)&nbsp;one, in the
    case of dividends that are deductible for income tax purposes,
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">in each case, on a consolidated basis and in
accordance with GAAP.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Fixed Charge Coverage Ratio&#148;
</FONT></I><FONT size="2">means, with respect to any specified
Person for any four-quarter reference period, the ratio of the
Consolidated Cash Flow of such Person for such period to the
Fixed Charges of such Person for such period. In the event that
the specified Person or any of its Restricted Subsidiaries
incurs, assumes, Guarantees, repays, repurchases or redeems any
Indebtedness (other than ordinary working capital borrowings) or
issues, repurchases or redeems any Disqualified Stock or
preferred stock subsequent to the commencement of the applicable
four-quarter reference period and on or prior to the date on
which the event for which the calculation of the Fixed Charge
Coverage Ratio is made occurs (the &#147;Calculation
Date&#148;), then the Fixed Charge Coverage Ratio will be
calculated giving pro forma effect to such incurrence,
assumption, Guarantee, repayment, repurchase or redemption of
Indebtedness, or such issuance, repurchase or redemption of
Disqualified Stock or preferred stock, and the use of the
proceeds therefrom as if the same had occurred at the beginning
of such period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, for purposes of calculating the
Fixed Charge Coverage Ratio:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">acquisitions that have been made by the specified
    Person or any of its Restricted Subsidiaries, including through
    mergers or consolidations and including any related financing
    transactions, subsequent to the commencement of the applicable
    four-quarter reference period and on or prior to the Calculation
    Date will be given pro forma effect as if they had occurred on
    the first day of such period including any pro forma expense and
    cost reductions that have occurred or are reasonably expected to
    occur, in the reasonable judgment of the chief financial officer
    of the Company (regardless of whether those cost savings or
    operating improvements could then be reflected in pro forma
    financial statements in accordance with Regulation&nbsp;S-X
    promulgated under the Securities Act or any other regulation or
    policy of the SEC related thereto);
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Consolidated Cash Flow attributable to
    discontinued operations, as determined in accordance with GAAP,
    and operations or businesses disposed of prior to the
    Calculation Date, will be excluded; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Fixed Charges attributable to discontinued
    operations, as determined in accordance with GAAP, and
    operations or businesses disposed of prior to the Calculation
    Date, will be excluded, but only to the extent that the
    obligations giving rise to such Fixed Charges will not be
    obligations of the specified Person or any of its Restricted
    Subsidiaries following the Calculation Date.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;GAAP&#148;
</FONT></I><FONT size="2">means generally accepted accounting
principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements
of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a
significant segment of the accounting profession, which are in
effect on the Issue Date.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Government Securities&#148;
</FONT></I><FONT size="2">means direct obligations of, or
obligations guaranteed by, the United States of America for the
payment of which guarantee or obligations the full faith and
credit of the United States is pledged.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Guarantee&#148;
</FONT></I><FONT size="2">means a guarantee (other than by
endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, of all or any
part of any Indebtedness in any manner including, without
limitation, by way of a pledge of assets or through letters of
credit or reimbursement agreements in respect thereof.
</FONT>

<P align="center"><FONT size="2">63
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Hedging Obligations&#148;
</FONT></I><FONT size="2">means, with respect to any specified
Person, the obligations of such Person incurred under:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">interest rate swap agreements, interest rate cap
    agreements and interest rate collar agreements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">foreign exchange contracts and currency
    protection agreements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any commodity futures contract, commodity option
    or other similar agreement or arrangement; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">other similar agreements or arrangements.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Indebtedness&#148;
</FONT></I><FONT size="2">means, with respect to any specified
Person, any indebtedness of such Person, whether or not
contingent:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">in respect of borrowed money;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">evidenced by bonds, notes, debentures or similar
    instruments;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">in respect of banker&#146;s acceptances or
    letters of credit (or reimbursement agreements in respect
    thereof) or similar instruments;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">representing Capital Lease Obligations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">representing the balance deferred and unpaid of
    the purchase price of any property, except any such balance that
    constitutes an accrued expense or trade payable;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">representing the net obligations of such Person
    under any Hedging Obligations (the amount of any such
    obligations to be equal at any time to the termination value of
    the agreement or arrangement giving rise to such obligation that
    would be payable by such Person at such time); or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the principal component or liquidation preference
    of all obligations of such Person with respect to the
    redemption, repayment or other repurchase of any Disqualified
    Stock or, with respect to any Restricted Subsidiary, any
    preferred stock;
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">if and to the extent any of the preceding items
(other than letters of credit, Hedging Obligations, Disqualified
Stock or, with respect to any Restricted Subsidiary, preferred
stock) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition,
the term &#147;Indebtedness&#148; includes all Indebtedness of
others to the extent secured by a Lien on any asset of the
specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included,
the Guarantee by the specified Person of any Indebtedness of any
other Person.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The amount of any Indebtedness outstanding as of
any date will be:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the accreted value of the Indebtedness, in the
    case of any Indebtedness issued with original issue discount; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the principal amount of the Indebtedness,
    together with any interest on the Indebtedness that is more than
    30&nbsp;days past due, in the case of any other Indebtedness.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Investments&#148;
</FONT></I><FONT size="2">means, with respect to any Person, all
direct or indirect investments by such Person in other Persons
(including Affiliates) in the forms of loans (including
Guarantees or other obligations), advances or capital
contributions (excluding (x)&nbsp;commission, travel and similar
advances to officers and employees made in the ordinary course
of business and (y)&nbsp;advances to customers in the ordinary
course of business that are recorded as accounts receivable on
the balance sheet of the lender), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests
or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in
accordance with GAAP. If the Company or any Subsidiary of the
Company sells or otherwise disposes of any Equity Interests of
any direct or indirect Subsidiary of the Company such that,
after giving effect to any such sale or disposition, such Person
is no longer a Subsidiary of the Company, the Company will be
deemed to have made an Investment on the date
</FONT>

<P align="center"><FONT size="2">64
</FONT>

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<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left">
<FONT size="2">of any such sale or disposition in an amount
equal to the fair market value of the Equity Interests of and
other Investments in such Subsidiary not sold or disposed of in
an amount determined as provided in the final paragraph of the
covenant described under &#147;&#151;Certain
Covenants&#151;Restricted Payments.&#148;
</FONT>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Issue Date&#148;
</FONT></I><FONT size="2">means July&nbsp;2, 2003, the date of
the issuance of the original notes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Lien&#148;
</FONT></I><FONT size="2">means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset, whether or not filed,
recorded or otherwise perfected under applicable law, including
any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to
sell or give a security interest in such asset.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Make-Whole Amount&#148;
</FONT></I><FONT size="2">means, with respect to a note, an
amount equal to the greater of (1)&nbsp;1.0% of the principal
amount of the note or (2)&nbsp;the excess, if any, of
(a)&nbsp;the present value of (i)&nbsp;all required interest
payments due on such note through July&nbsp;15, 2006 (excluding
any portion of such payments of interest accrued as of the
redemption date) plus (ii)&nbsp;the redemption price of such
note at July&nbsp;15, 2006 (such redemption price being set
forth under &#147;&#151;Optional Redemption&#148;), computed
using a discount rate equal to the Treasury Rate plus 50 basis
points, over (b)&nbsp;the outstanding principal amount of such
note. &#147;Treasury Rate&#148; is defined as the yield to
maturity (calculated on a semi-annual bond-equivalent basis) at
the time of the computation of United States Treasury securities
with a constant maturity (as compiled by and published in the
most recent Federal Reserve Statistical Release H.15 (510),
which has become publicly available at least two business days
prior to the date of the redemption notice or, if such
Statistical Release is no longer published, any publicly
available source of similar market data) most nearly equal to
the then remaining maturity of the notes; provided that if the
Make-Whole Average Life of such note is not equal to the
constant maturity of the United States Treasury security for
which a weekly average yield is given, the Treasury Rate shall
be obtained by linear interpolation (calculated to the nearest
one-twelfth of a year) from the weekly average yields of United
States Treasury securities for which such yields are given,
except that if the Make-Whole Average Life of such note is less
than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant
maturity of one year shall be used. &#147;Make-Whole Average
Life&#148; means the number of years (calculated to the nearest
one-twelfth) between the date of redemption and the Stated
Maturity of the notes.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Make-Whole Price&#148;
</FONT></I><FONT size="2">means the sum of the outstanding
principal amount of the notes to be redeemed plus the Make-Whole
Amount of those notes.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Material Default&#148;
</FONT></I><FONT size="2">means (i)&nbsp;any Default; provided
that with respect to a Default of the type contemplated under
clause (4)&nbsp;under &#147;&#151;Events of Defaults and
Remedies,&#148; if the Company has not received a notice of
default from the holders within 45&nbsp;days after it provided
notice of such Default to the trustee, then such Default shall
no longer be deemed to be a Material Default until such time, if
any, as the Company receives a notice of default in respect of
such Default or (ii)&nbsp;an Event of Default, unless, in either
case, such Default or Event of Default has been cured or waived.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;NEGT&#148;
</FONT></I><FONT size="2">means National Energy &#38; Gas
Transmission, Inc., formerly known as PG&#38;E National Energy
Group, Inc, and each of its subsidiaries.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Net Cash Proceeds&#148;
</FONT></I><FONT size="2">means the proceeds in the form of cash
or Cash Equivalents, including payments in respect of deferred
payment obligations to the extent corresponding to the
principal, but not interest, component thereof when received in
the form of cash or Cash Equivalents, net of attorneys&#146;
fees, accountants&#146; fees, underwriters&#146; or placements
agents&#146; fees, discounts or commissions and brokerage,
consultant and other fees incurred in connection therewith and
net of taxes paid or payable as a result thereof.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Net Income&#148;
</FONT></I><FONT size="2">means, with respect to any specified
Person, the net income (loss)&nbsp;of such Person, determined in
accordance with GAAP and before any reduction in respect of
preferred stock dividends of such specified person, excluding,
however:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any gains and losses, together with any related
    provision for taxes on such gains and losses, realized in
    connection with: (a)&nbsp;any Asset Sale; or (b)&nbsp;the
    disposition of any securities by such
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">65
</FONT>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">Person or any of its Subsidiaries or the
    extinguishment of any Indebtedness of such Person or any of its
    Subsidiaries;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any extraordinary gain or loss, together with any
    related provision for taxes on such extraordinary gain or loss;
    and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any non-cash impairment loss determined in
    accordance with GAAP related to the carrying value of goodwill.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Net Proceeds&#148;
</FONT></I><FONT size="2">means the aggregate cash proceeds
received by the Company or any of its Restricted Subsidiaries in
respect of any Asset Sale (including, without limitation, any
cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct
costs relating to such Asset Sale, including, without
limitation, legal, accounting and investment banking fees, and
sales commissions, and any relocation expenses incurred as a
result of the Asset Sale, taxes paid or payable as a result of
the Asset Sale, in each case, after taking into account any
available tax credits or deductions and any tax sharing
arrangements, any amounts required to be applied to the
repayment of Senior Debt secured by a Lien on the asset or
assets that were the subject of such Asset Sale, and any reserve
for adjustment in respect of the sale price of such asset or
assets established in accordance with GAAP.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Non-Recourse Debt&#148;
</FONT></I><FONT size="2">means Indebtedness:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">as to which neither the Company nor any of its
    Restricted Subsidiaries (a)&nbsp;provides credit support of any
    kind (including any undertaking, agreement or instrument that
    would constitute Indebtedness), (b)&nbsp;is directly or
    indirectly liable as a guarantor or otherwise, or (c)&nbsp;is
    the lender;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">no default with respect to which (including any
    rights that the holders of the Indebtedness may have to take
    enforcement action against an Unrestricted Subsidiary) would
    permit upon notice, lapse of time or both any holder of any
    other Indebtedness (other than the notes) of the Company or any
    of its Restricted Subsidiaries to declare a default on such
    other Indebtedness or cause the payment of the Indebtedness to
    be accelerated or payable prior to its stated maturity; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">as to which the lenders have been notified in
    writing that they will not have any recourse to the stock or
    assets of the Company or any of its Restricted Subsidiaries.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Obligations&#148;
</FONT></I><FONT size="2">means any principal and premium, if
any, interest (including interest accruing on or after the
filing of any petition in bankruptcy or for reorganization,
whether or not a claim for post-filing interest is allowed in
such proceeding), penalties, fees, charges, expenses,
indemnifications, reimbursement obligations, damages,
guarantees, and other liabilities or amounts payable under the
documentation governing any Indebtedness or in respect thereof.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Permitted Business&#148;
</FONT></I><FONT size="2">means the lines of business conducted
by the Company and its Subsidiaries on the Issue Date and any
business incidental or reasonably related thereto or which is a
reasonable extension thereof as determined in good faith by the
Company&#146;s chief financial officer and set forth in an
officer&#146;s certificate delivered to the trustee.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Permitted Investments&#148;
</FONT></I><FONT size="2">means:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any Investment in the Company or in a Restricted
    Subsidiary of the Company;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any Investment in Cash Equivalents;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any Investment by the Company or any Restricted
    Subsidiary of the Company in a Person, if as a result of such
    Investment:
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(a)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">such Person becomes a Restricted Subsidiary of
    the Company; or
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(b)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">such Person is merged, consolidated or
    amalgamated with or into, or transfers or conveys substantially
    all of its assets to, or is liquidated into, the Company or a
    Restricted Subsidiary of the Company;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">66
</FONT>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any Investment made as a result of the receipt of
    non-cash consideration from an Asset Sale that was made pursuant
    to and in compliance with the covenant described under
    &#147;&#151;Repurchase at the Option of Holders&#151;Asset
    Sales;&#148;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any acquisition of assets solely in exchange for
    the issuance of Equity Interests (other than Disqualified Stock)
    of the Company;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any Investments received (a)&nbsp;in satisfaction
    of judgments or in compromise of obligations of trade creditors
    or customers that were incurred in the ordinary course of
    business, including pursuant to any plan of reorganization or
    similar arrangement upon the bankruptcy or insolvency of any
    trade creditor or customer or (b)&nbsp;as a result of a
    foreclosure by the Company or any of its Restricted Subsidiaries
    with respect to any secured Investment in default;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">guarantees by the Company or any of its
    Restricted Subsidiaries of Indebtedness permitted under the
    covenant described under &#147;&#151;Certain
    Covenants&#151;Incurrence of Indebtedness and Issuance of
    Preferred Stock;&#148;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(8)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Hedging Obligations permitted to be incurred
    under the covenant described under &#147;&#151;Certain
    Covenants&#151;Incurrence of Indebtedness and Issuance of
    Preferred Stock;&#148;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(9)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">payroll, travel and similar advances to officers,
    directors or employees of the Company and any of its
    Subsidiaries to cover matters that are expected at the time of
    such advances ultimately to be treated as expenses for
    accounting purposes and that are made in the ordinary course of
    business;
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="4%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(10)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">loans or advances to employees made in the
    ordinary course of business of the Company or such Restricted
    Subsidiary;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(11)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Investments in the Utility if the Company
    reasonably determines that such Investments are required to
    comply with the conditions set forth by the CPUC in
    Decision&nbsp;96-11-017 or Decision&nbsp;99-04-068 and any
    decision of the CPUC which imposes a requirement or condition on
    the Company affecting the Company&#146;s relationship with the
    Utility or are otherwise required by law or any court-approved
    settlement;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(12)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Investments in Unrestricted Subsidiaries by the
    Company or a Restricted Subsidiary pursuant to agreements in
    effect on the Issue Date, as such agreements may be modified or
    amended; provided that no such amendment or modification may
    materially increase the investment obligations of the Company or
    applicable Restricted Subsidiary thereunder;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(13)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">other Investments in any Person having an
    aggregate fair market value (measured on the date each such
    Investment was made and without giving effect to subsequent
    changes in value), when taken together with all other
    Investments made pursuant to this clause (13)&nbsp;that are at
    the time outstanding, not to exceed $50.0&nbsp;million;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(14)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any Investment in prepaid expenses, negotiable
    instruments held for collection and lease, utility and
    workers&#146; compensation, performance and other similar
    deposits;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(15)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any Investment or payment required by an
    investment contract, in each case as in effect on the Issue
    Date, and any amendment, modification, extension or renewal
    thereof to the extent such amendment, modification, extension or
    renewal does not require the Company or any of its Restricted
    Subsidiaries to make any additional Investment or payment in
    connection therewith; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(16)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any payments to NEGT by the Company or a
    Restricted Subsidiary required by or provided for in a confirmed
    plan of reorganization in a bankruptcy proceeding of NEGT or
    otherwise necessary to comply with such a plan or in connection
    with a court-approved judgment or settlement related to an NEGT
    bankruptcy proceeding.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<P align="center"><FONT size="2">67
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Permitted Liens&#148; means:</FONT></I>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Liens on assets (other than assets that
    constitute Collateral) securing Permitted Debt;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Liens securing the notes;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Liens existing on the Issue Date;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Liens in favor of the Company;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Liens to secure Indebtedness of any Restricted
    Subsidiaries; provided that the Indebtedness is permitted by the
    terms of the indenture to be incurred;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Liens on property of a Person existing at the
    time such Person is merged with or into or consolidated with the
    Company or any Restricted Subsidiary of the Company or otherwise
    becomes a Restricted Subsidiary of the Company; provided that
    such Liens were in existence prior to the contemplation of such
    merger or consolidation or such Person becoming a Restricted
    Subsidiary of the Company and do not extend to any assets other
    than those of such Person;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Liens on property existing at the time of
    acquisition of the property by the Company or any Restricted
    Subsidiary of the Company; provided that such Liens were not
    incurred in connection with such acquisition;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (8)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Liens to secure Indebtedness (including Capital
    Lease Obligations) permitted by clause (4)&nbsp;of the second
    paragraph of the covenant described under &#147;&#151;Certain
    Covenants&#151;Incurrence of Indebtedness and Issuance of
    Preferred Stock;&#148;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&nbsp; (9)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Liens securing Permitted Refinancing Indebtedness
    Incurred to refinance Indebtedness that was previously so
    secured; provided that any such Lien is limited to all or part
    of the same property or assets (plus improvements, accessions,
    proceeds or distributions in respect thereof) that secured or,
    under the written arrangements under which the original Lien
    arose, could secure the Indebtedness being refinanced;
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="4%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(10)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Liens securing Hedging Obligations so long as the
    related Indebtedness is, and is permitted to be under the
    indenture, secured by a Lien on the same property securing such
    Hedging Obligation;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(11)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Liens to secure the performance of statutory
    obligations, surety or appeal bonds, performance bonds or other
    obligations of a like nature incurred in the ordinary course of
    business;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(12)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Liens for taxes, assessments or governmental
    charges or claims that are not yet delinquent or that are being
    contested in good faith by appropriate proceedings promptly
    instituted and diligently conducted; provided that any reserve
    or other appropriate provision as is required in conformity with
    GAAP has been made therefor;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(13)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">pledges or deposits by such Person under
    workmen&#146;s compensation laws, unemployment insurance laws
    and other types of social security or similar legislation, or
    good faith deposits in connection with bids, tenders, contracts
    (other than for the payment of Indebtedness) or leases to which
    such Person is a party, or deposits to secure public or
    statutory obligations of such Person or deposits of cash or
    United States government bonds to secure surety or appeal bonds
    to which such Person is a party, or deposits as security for
    contested taxes or import or customs duties or for the payment
    of rent, in each case incurred in the ordinary course of
    business;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(14)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Liens imposed by law, including carriers&#146;,
    warehousemen&#146;s and mechanics&#146; Liens, in each case for
    sums not yet delinquent or that are being contested in good
    faith by appropriate proceedings promptly instituted and
    diligently conducted; provided that any reserve or other
    appropriate provision as is required in conformity with GAAP has
    been therefor;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">68
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="4%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(15)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Liens arising solely by virtue of any statutory
    or common law provisions relating to banker&#146;s Liens, rights
    of set-off or similar rights and remedies as to deposit accounts
    or other funds maintained with a depositary institution;
    provided that (a)&nbsp;such deposit account is not a dedicated
    cash collateral account and is not subject to restrictions
    against access by the Company in excess of those set forth by
    regulations promulgated by the Federal Reserve Board and
    (b)&nbsp;such deposit account is not intended by the Company or
    any Restricted Subsidiary to provide collateral to the
    depositary institution;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(16)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">easements, rights-of-way, minor survey
    exceptions, zoning and similar restrictions and other similar
    encumbrances or title defects incurred or imposed, which do not
    materially interfere with the ordinary conduct of its business
    or the business of its Subsidiaries;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(17)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">judgment Liens not giving rise to an Event of
    Default so long as such Liens are adequately bonded and any
    appropriate legal proceedings that may have been duly initiated
    for the review of such judgment have not been finally terminated
    or the period within which such proceedings may be initiated has
    not expired;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(18)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Liens incurred or deposits made in the ordinary
    course of business of the Company or any Restricted Subsidiary
    of the Company with respect to obligations that do not exceed
    $10.0&nbsp;million at any one time outstanding;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(19)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Liens consisting of any interest or title of a
    licensor in the property subject to a license;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(20)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Liens arising from sales or other transfers of
    accounts receivable in the ordinary course of business; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(21)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any extensions, substitutions, replacements or
    renewals of the foregoing.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Permitted Refinancing Indebtedness&#148;
</FONT></I><FONT size="2">means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace,
defease or refund other Indebtedness of the Company or any of
its Subsidiaries (other than intercompany Indebtedness);
provided that:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the principal amount (or accreted value, if
    applicable), the principal component or liquidation preference,
    as the case may be, of such Permitted Refinancing Indebtedness
    does not exceed the principal amount (or accreted value, if
    applicable), the principal component or liquidation preference,
    as the case may be, of the Indebtedness extended, refinanced,
    renewed, replaced, defeased or refunded (plus all accrued
    interest on the Indebtedness and the amount of all expenses and
    premiums incurred in connection therewith);
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">such Permitted Refinancing Indebtedness has a
    final maturity date later than the final maturity date of, and
    has a Weighted Average Life to Maturity equal to or greater than
    the Weighted Average Life to Maturity of, the Indebtedness being
    extended, refinanced, renewed, replaced, defeased or refunded;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">if the Indebtedness being extended, refinanced,
    renewed, replaced, defeased or refunded is subordinated in right
    of payment to the notes, such Permitted Refinancing Indebtedness
    is subordinated in right of payment to, the notes on terms at
    least as favorable to the noteholders as those contained in the
    documentation governing the Indebtedness being extended,
    refinanced, renewed, replaced, defeased or refunded; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">such Permitted Refinancing Indebtedness is
    incurred either by (i)&nbsp;the Company or (ii)&nbsp;by the
    Subsidiary that is the obligor on the Indebtedness being
    extended, refinanced, renewed, replaced, defeased or refunded.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Person&#148;
</FONT></I><FONT size="2">means any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, limited liability company or
government or other entity.
</FONT>

<P align="center"><FONT size="2">69
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Pledge Agreements&#148;
</FONT></I><FONT size="2">means, collectively, the Base Pledge
Agreement and the Protective Pledge Agreement.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Protective Pledge Agreement&#148;
</FONT></I><FONT size="2">means the Utility Stock Protective
Pledge Agreement, dated as of the Issue Date, among the Company,
as pledgor, the trustee and the Collateral Agent, as pledgee for
the benefit of the noteholders and the holders of any additional
Indebtedness that become a party thereto pursuant to the terms
thereof, as amended, amended and restated or otherwise modified
from time to time.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Reorganization Event&#148;
</FONT></I><FONT size="2">means a merger of the Company into an
Affiliate of the Company as a result of which the Collateral is
released under the terms of the Pledge Agreements; provided that
either (1)&nbsp;the notes are secured on an equal and ratable
basis with any senior secured Indebtedness of such Affiliate at
any time outstanding or (2)&nbsp;the notes are rated Baa3 or
better by Moody&#146;s and BBB&#151;&nbsp;or better by S&#38;P
immediately after the consummation of such transaction.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Restricted Investment&#148;
</FONT></I><FONT size="2">means an Investment other than a
Permitted Investment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Restricted Subsidiary&#148;
</FONT></I><FONT size="2">means any Subsidiary of the Company
that is not an Unrestricted Subsidiary.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Senior Debt&#148;
</FONT></I><FONT size="2">means
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">all Indebtedness of the Company or any Restricted
    Subsidiary outstanding under Credit Facilities and all Hedging
    Obligations with respect thereto;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any other Indebtedness of the Company or any
    Restricted Subsidiary permitted to be incurred under the terms
    of the indenture, unless the instrument under which such
    Indebtedness is incurred expressly provides that it is
    subordinated in right of payment to the notes; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">all Obligations with respect to the items listed
    in the preceding clauses (1)&nbsp;and (2).
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Notwithstanding anything to the contrary in the
preceding sentence, Senior Debt will not include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(a)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any liability for federal, state, local or other
    taxes owed or owing by the Company;
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(b)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any intercompany Indebtedness of the Company or
    any of its Subsidiaries to the Company or any of its Affiliates;
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(c)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any trade payables; or
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="3%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(d)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any Indebtedness that is incurred in violation of
    the indenture.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Significant Subsidiary&#148;
</FONT></I><FONT size="2">means any Restricted Subsidiary that
would be a &#147;significant subsidiary&#148; as defined in
Article&nbsp;1, Rule&nbsp;1-02(w) of Regulation&nbsp;S-X,
promulgated pursuant to the Securities Act, as such Regulation
is in effect on the date hereof; provided that only the Company
and its Restricted Subsidiaries, including without limitation
their Investments in Unrestricted Subsidiaries, will be used for
purposes of calculations under Rule&nbsp;1-02(w) of
Regulation&nbsp;S-X.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Stated Maturity&#148;
</FONT></I><FONT size="2">means, with respect to any installment
of interest or principal on any series of Indebtedness, the date
on which the payment of interest or principal was scheduled to
be paid in the original documentation governing such
Indebtedness, and will not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Subsidiary&#148;
</FONT></I><FONT size="2">means, with respect to any specified
Person:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any corporation, association or other business
    entity of which more than 50% of the total voting power of
    shares of Capital Stock entitled (without regard to the
    occurrence of any contingency) to vote in the election of
    directors, managers or trustees of the corporation, association
    or other business entity is at the time owned or controlled,
    directly or indirectly, by that Person or one or more of the
    other Subsidiaries of that Person (or a combination thereof); and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any partnership (a)&nbsp;the sole general partner
    or the managing general partner of which is such Person or a
    Subsidiary of such Person or (b)&nbsp;the only general partners
    of which are that Person or one or more Subsidiaries of that
    Person (or any combination thereof).
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">70
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Unrestricted Subsidiary&#148;
</FONT></I><FONT size="2">means any Subsidiary of the Company
that is designated by the Board of Directors as an Unrestricted
Subsidiary pursuant to a Board Resolution, but only to the
extent that such Subsidiary:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">has no Indebtedness other than Non-Recourse Debt;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">is not party to any agreement, contract,
    arrangement or understanding with the Company or any Restricted
    Subsidiary of the Company unless the terms of any such
    agreement, contract, arrangement or understanding are no less
    favorable to the Company or such Restricted Subsidiary than
    those that might be obtained at the time from Persons who are
    not Affiliates of the Company;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">is a Person with respect to which neither the
    Company nor any of its Restricted Subsidiaries has any direct or
    indirect obligation (a)&nbsp;to subscribe for additional Equity
    Interests or (b)&nbsp;to maintain or preserve such Person&#146;s
    financial condition or to cause such Person to achieve any
    specified levels of operating results;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">has not guaranteed or otherwise directly or
    indirectly provided credit support for any Indebtedness of the
    Company or any of its Restricted Subsidiaries; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">has at least one director on its Board of
    Directors that is not a director or executive officer of the
    Company or any of its Restricted Subsidiaries and has at least
    one executive officer that is not a director or executive
    officer of the Company or any of its Restricted Subsidiaries.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Notwithstanding the foregoing, each of the
Utility and NEGT, and each of their respective direct and
indirect subsidiaries shall be deemed to be Unrestricted
Subsidiaries, unless the Company designates one or more of them
as Restricted Subsidiaries in accordance with the terms set
forth in the indenture.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any designation of a Subsidiary of the Company as
an Unrestricted Subsidiary will be evidenced to the trustee by
filing with the trustee a certified copy of a resolution of the
Board of Directors giving effect to such designation and an
officer&#146;s certificate certifying that such designation
complied with the preceding conditions and was permitted by the
covenant described under &#147;&#151;Certain Covenants&#151;
Restricted Payments.&#148; If, at any time, any Unrestricted
Subsidiary other than the Utility or NEGT, and each of their
respective direct and indirect subsidiaries, would fail to meet
the preceding requirements as an Unrestricted Subsidiary, it
will thereafter cease to be an Unrestricted Subsidiary for
purposes of the indenture and any Indebtedness of such
Subsidiary will be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date and, if such
Indebtedness is not permitted to be incurred as of such date
under the covenant described under &#147;&#151;Certain
Covenants&#151;Incurrence of Indebtedness and Issuance of
Preferred Stock,&#148; the Company will be in default of such
covenant. The Board of Directors of the Company may at any time
designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that such designation will be deemed to be
an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation will only be permitted if
(1)&nbsp;such Indebtedness is permitted under the covenant
described under &#147;&#151;Certain Covenants&#151;Incurrence of
Indebtedness and Issuance of Preferred Stock,&#148; calculated
on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period; and (2)&nbsp;no
Default would be in existence following such designation.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Utility&#148;
</FONT></I><FONT size="2">means Pacific Gas and Electric
Company, a California corporation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">&#147;Voting Stock&#148;
</FONT></I><FONT size="2">of any Person as of any date means the
Capital Stock of such Person that is at the time entitled to
vote in the election of the Board of Directors of such Person.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;<I>Weighted Average Life to
Maturity</I>&#148; means, when applied to any Indebtedness or
Disqualified Stock at any date, the number of years obtained by
dividing:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(1)&nbsp;the sum of the products obtained by
    multiplying (a)&nbsp;the amount of each then remaining
    installment, sinking fund, serial maturity or other required
    payments of principal, including payment at final maturity, in
    respect of the Indebtedness or redemption or similar payment in
    respect of the Disqualified Stock by (b)&nbsp;the number of
    years (calculated to the nearest one-twelfth) that will elapse
    between such date and the making of such payment; by
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">71
</FONT>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(2)&nbsp;the then outstanding principal amount of
    such Indebtedness or principal component or liquidation
    preference of Disqualified Stock, as the case may be.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">72
</FONT>

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<!-- link1 "CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES" -->
<DIV align="left"><A NAME="006"></A></DIV>

<P align="center">
<B><FONT size="2">CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following summary describes certain United
States federal income tax consequences of the purchase,
ownership and disposition of the exchange notes as of the date
hereof. Except where noted, it deals only with purchasers that
acquired the original notes pursuant to the offering at the
initial offering price and who will hold the exchange notes as
capital assets within the meaning of Section&nbsp;1221 of the
Code, and does not deal with specific situations, such as those
of dealers in securities or currencies, financial institutions,
life insurance companies, persons holding notes as part of a
hedging or conversion transaction or a straddle, or persons
whose functional currency is not the United States dollar.
Furthermore, the discussion below is based upon the provisions
of the Code, existing and proposed United States Treasury
regulations promulgated thereunder, and current administrative
rulings and judicial decisions thereon, all of which are subject
to change, possibly on a retroactive basis, so as to result in
United States federal income tax consequences different from
those discussed below.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Prospective holders should consult with their
tax advisors as to the United States federal income tax
consequences of the acquisition, ownership and disposition of
the exchange notes in light of their particular circumstances,
as well as the effect of any state, local or other tax
laws.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As used in this prospectus, the term &#147;United
States holder&#148; means a beneficial owner of an exchange note
that is (i)&nbsp;a citizen or resident of the United States for
United States federal income tax purposes, (ii)&nbsp;a
corporation or partnership (or any entity treated as a
corporation or partnership for United States federal income tax
purposes) created or organized under the laws of the United
States, any state thereof or the District of Columbia,
(iii)&nbsp;an estate the income of which is subject to United
States federal income tax without regard to its source or
(iv)&nbsp;a trust if (x)&nbsp;a court within the United States
is able to exercise primary supervision over the administration
of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust or
(y)&nbsp;the trust has a valid election in effect under
applicable United States Treasury regulations to be treated as a
United States holder. If a partnership (including any entity
treated as a partnership for United States federal income tax
purposes) is a holder of the exchange notes, the United States
federal income tax treatment of a partner in such a partnership
will generally depend on the status of the partner and the
activities of the partnership. Partners in such a partnership
should consult their own tax advisors as to the particular
federal income tax consequences applicable to them.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A &#147;non-United States holder&#148; is any
beneficial holder of an exchange note that is not a United
States holder.
</FONT>

<P align="left">
<B><FONT size="2">Exchange Offer</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For United States federal income tax purposes, a
beneficial owner of an original note will not recognize any
taxable gain or loss on the exchange of the original notes for
exchange notes under the exchange offer, and a beneficial
owner&#146;s tax basis and holding period in the exchange notes
will be the same as in the original notes.
</FONT>

<P align="left">
<B><FONT size="2">United States Holders</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Stated interest on an exchange note generally
will be taxable to a United States holder as ordinary income at
the time it accrues or is received in accordance with the United
States holder&#146;s method of accounting for United States
federal income tax purposes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the sale, exchange, redemption, retirement
or other disposition of an exchange note, a United States holder
generally will recognize gain or loss equal to the difference
between the amount realized upon the sale, exchange, redemption,
retirement or other disposition (not including amounts
attributable to accrued but unpaid interest, which will be
taxable as ordinary income) and such United States holder&#146;s
adjusted tax basis in the exchange note. A United States
holder&#146;s adjusted tax basis in an exchange note will, in
general, be the United States holder&#146;s adjusted basis in
the original note exchanged for the exchange note, less any
principal payments received by such holder. Such gain or loss
will generally be capital gain or loss, and will be long term
capital gain or loss if the exchange note has been held for more
than one year. A United States
</FONT>

<P align="center"><FONT size="2">73
</FONT>

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<DIV align="left">
<FONT size="2">holder&#146;s holding period for an exchange note
will include the holding period of the original note exchanged
for the exchange note.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Non-United States Holders</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under present United States federal income tax
law, subject to the discussion of backup withholding and
information reporting below:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(a)&nbsp;payments of interest on the exchange
    notes to any non-United States holder will not be subject to
    United States federal income, branch profits or withholding tax
    provided that:
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the non-United States holder does not actually or
    constructively own 10% or more of the total combined voting
    power of all classes of our stock entitled to vote;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the non-United States holder is not a bank
    receiving interest on an extension of credit pursuant to a loan
    agreement entered into in the ordinary course of its trade or
    business;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the non-United States holder is not a controlled
    foreign corporation that is related to us (directly or
    indirectly) through stock ownership;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">such interest payments are not effectively
    connected with a United States trade or business;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the non-United States holder is not a foreign tax
    exempt organization or foreign private foundation for United
    States federal income tax purposes; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">certain certification requirements are met. Such
    certification will be satisfied if the beneficial owner of the
    exchange note certifies on IRS Form&nbsp;W-8BEN or a
    substantially similar substitute form, under penalties of
    perjury, that it is not a United States person and provides its
    name and address, and (x)&nbsp;such beneficial owner files such
    form with the withholding agent or (y)&nbsp;in the case of an
    exchange note held through a foreign partnership or
    intermediary, the beneficial owner and the foreign partnership
    or intermediary satisfy certification requirements of applicable
    United States Treasury regulations.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(b)&nbsp;a non-United States holder will not be
    subject to United States federal income or branch profits tax on
    gain realized on the sale, exchange, redemption, or retirement
    or other disposition of an exchange note, unless (i) the gain is
    effectively connected with a trade or business carried on by
    such holder within the United States or, if a treaty applies
    (and the holder complies with applicable certification and other
    requirements to claim treaty benefits), is generally
    attributable to a United States permanent establishment
    maintained by the holder, or (ii)&nbsp;the holder is an
    individual who is present in the United States for 183&nbsp;days
    or more in the taxable year of disposition and certain other
    requirements are met.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">An exchange note held by an individual who at the
time of death is not a citizen or resident of the United States
will not be subject to United States federal estate tax with
respect to a note as a result of such individual&#146;s death,
provided that (i)&nbsp;the individual does not actually or
constructively own 10% or more of the total combined voting
power of all classes of our stock entitled to vote and
(ii)&nbsp;the interest accrued on the exchange note was not
effectively connected with the conduct of a United States trade
or business.
</FONT>

<P align="left">
<B><FONT size="2">Backup Withholding and Information
Reporting</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In general, payments of interest and the proceeds
of the sale, exchange, redemption, retirement or other
disposition of the exchange notes payable by a United States
paying agent or other United States intermediary will be subject
to information reporting. In addition, backup withholding will
generally apply to these payments if (i)&nbsp;in the case of a
United States holder, the holder fails to provide an accurate
taxpayer identification number, or fails to certify that such
holder is not subject to backup withholding or fails to report
all interest and dividends required to be shown on its United
States federal income tax returns, or (ii)&nbsp;in the case of a
non-United States holder, the holder fails to provide the
certification on IRS Form&nbsp;W-8BEN described above or
otherwise does not provide evidence of exempt status. Certain
United States holders (including, among others, corporations)
and non-United States holders that comply with certain
</FONT>

<P align="center"><FONT size="2">74
</FONT>

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<DIV align="left">
<FONT size="2">certification requirements are not subject to
backup withholding. Any amount paid as backup withholding will
be creditable against the holder&#146;s United States federal
income tax liability provided that the required information is
timely furnished to the IRS. Holders of exchange notes should
consult their tax advisors as to their qualification for
exemption from backup withholding and the procedure for
obtaining such an exemption.
</FONT>
</DIV>

<!-- link1 "PLAN OF DISTRIBUTION" -->
<DIV align="left"><A NAME="007"></A></DIV>

<P align="center">
<B><FONT size="2">PLAN OF DISTRIBUTION</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each broker-dealer that receives exchange notes
in exchange for original notes that were acquired for its own
account as a result of market-making activities or other trading
activities may be deemed to be an &#147;underwriter&#148; within
the meaning of the Securities Act. Such broker-dealers must
acknowledge in the letter of transmittal that they will deliver
a prospectus meeting the requirements of the Securities Act in
connection with any resale of these exchange notes. We have
agreed that we will allow this prospectus to be used by those
broker-dealers in any resale of exchange notes for a period of
180&nbsp;days from the date the registration statement related
to this prospectus is declared effective, or for a shorter
period during which those broker-dealers are required by law to
deliver the prospectus.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We will not receive any proceeds from any sale of
exchange notes by broker-dealers. Broker-dealers may sell
exchange notes received for their own account under the exchange
offer:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">in transactions in the over-the-counter market,
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">in negotiated transactions,
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">through the writing of options on the exchange
    notes, or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">through a combination of such methods of resale.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The prices at which these sales occur may be:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">at market prices prevailing at the time of resale,
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">at prices related to such prevailing market
    prices, or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">at negotiated prices.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Broker-dealers may make any such resale directly
to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions
from any such broker-dealer or the purchasers of any such
exchange notes. Any broker-dealer that receives exchange notes
for its own account under the exchange offer and any broker or
dealer that participates in a distribution of such exchange
notes may be deemed to be an &#147;underwriter&#148; within the
meaning of the Securities Act. Any profit on any such resale of
exchange notes and any commission or concessions received by any
such persons may be deemed to be underwriting compensation under
the Securities Act. The letter of transmittal states that, by
acknowledging that it will deliver, and by delivering, a
prospectus, a broker-dealer will not admit that it is an
&#147;underwriter&#148; within the meaning of the Securities Act.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Furthermore, any broker-dealer that acquired any
of its original notes directly from us:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">may not rely on the applicable interpretation of
    the staff of the SEC&#146;s position contained in Exxon Capital
    Holdings Corp., SEC no-action letter (available May&nbsp;13,
    1988) and Morgan, Stanley &#38; Co. Inc., SEC no-action letter
    (available June&nbsp;5, 1991), as interpreted in K-III
    Communications Corporation, SEC no-action letter (available
    May&nbsp;14, 1993), Shearman &#38; Sterling, SEC no-action
    letter (available July&nbsp;2, 1993), Brown&nbsp;&#38; Wood, SEC
    no-action letter (available February&nbsp;7, 1997) and similar
    no-action letters; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">must also be named as a selling noteholder in
    connection with the registration and prospectus delivery
    requirements of the Securities Act relating to any resale
    transaction.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For a period of 180&nbsp;days from the date the
registration statement related to this prospectus is declared
effective, or for a shorter period during which broker-dealers
are required by law to deliver the prospectus, we will promptly
send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests
such documents in the letter of transmittal. We will bear the
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">75
</FONT>

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<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left">
<FONT size="2">expenses of soliciting tenders for the exchange
offer other than commissions or concessions of any
broker-dealers. These expenses include fees and expenses of the
exchange agent and the trustee, the registration fee, our
accounting and legal fees and up to $10,000 of the legal fees of
counsel to the initial purchasers, printing costs, and related
fees and expenses. We also will indemnify the noteholders
(including any broker-dealers) against some liabilities,
including certain liabilities under the Securities Act.
</FONT>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<!-- link1 "LEGAL MATTERS" -->
<DIV align="left"><A NAME="008"></A></DIV>

<P align="center">
<B><FONT size="2">LEGAL MATTERS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The legality of the exchange notes has been
passed on for us by Orrick, Herrington &#38; Sutcliffe LLP, San
Francisco, California.
</FONT>

<!-- link1 "EXPERTS" -->
<DIV align="left"><A NAME="009"></A></DIV>

<P align="center">
<B><FONT size="2">EXPERTS</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The consolidated financial statements and related
consolidated financial statement schedules of PG&#38;E
Corporation and subsidiaries and Pacific Gas and Electric
Company and subsidiaries as of December&nbsp;31, 2003 and 2002,
and for each of the three years in the period ended
December&nbsp;31, 2003 incorporated by reference in this
prospectus have been audited by Deloitte &#38; Touche LLP,
independent registered public accounting firm, as stated in
their reports which are incorporated herein (which reports
express an unqualified opinion and include explanatory
paragraphs relating to (i)&nbsp;PG&#38;E Corporation and Pacific
Gas and Electric Company&#146;s adoption of new accounting
standards in 2003 to account for asset retirement obligations
and financial instruments with characteristics of both
liabilities and equity, (ii) PG&#38;E Corporation&#146;s change
in 2003 in the method of reporting hedge transactions,
(iii)&nbsp;PG&#38;E Corporation&#146;s adoption of new
accounting standards in 2002 relating to accounting for goodwill
and intangible assets, impairment of long-lived assets,
discontinued operations, gains and losses on debt
extinguishment, and certain derivative contracts,
(iv)&nbsp;PG&#38;E Corporation&#146;s and Pacific Gas and
Electric Company&#146;s adoption of new accounting standards in
2001 related to derivatives and certain interpretations of the
Derivatives Implementation Group of the Financial Accounting
Standards Board, (v)&nbsp;PG&#38;E Corporation&#146;s adoption
of new accounting standards in 2004 related to earnings per
share, (vi)&nbsp;the revisions of revenues and expenses of
discontinued operations for the years ended December&nbsp;31,
2002 and 2001, and (vii)&nbsp;the ability of PG&#38;E
Corporation and Pacific Gas and Electric Company to continue as
going concerns), and have been so incorporated in reliance upon
the reports of such firm given upon their authority as experts
in accounting and auditing.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<!-- link1 "AVAILABLE INFORMATION" -->
<DIV align="left"><A NAME="010"></A></DIV>

<P align="center">
<B><FONT size="2">AVAILABLE INFORMATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This prospectus is part of a registration
statement on Form&nbsp;S-4 that we filed with the SEC. This
prospectus does not contain all of the information in the
registration statement. For further information with respect to
us and the exchange notes offered by this prospectus, you should
review the registration statement. Statements in this prospectus
as to the contents of any contract or other document are not
necessarily complete and, where any contract or other document
is an exhibit to the registration statement, we refer you to
that exhibit for a more complete description of the matter
involved.
</FONT>

<!-- link1 "WHERE YOU CAN FIND MORE INFORMATION" -->
<DIV align="left"><A NAME="011"></A></DIV>

<P align="center">
<B><FONT size="2">WHERE YOU CAN FIND MORE INFORMATION</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We and the Utility each file annual, quarterly
and special reports, information statements and other
information with the SEC under File No. 001-12609 and File
No.&nbsp;001-02348, respectively. These SEC filings are
available to the public over the Internet at the SEC&#146;s
website at http://www.sec.gov. You may also read and copy any of
these SEC filings at the SEC&#146;s public reference room at
450&nbsp;Fifth Street, N.W., Room&nbsp;1200, Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further
information on its public reference room.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have &#147;incorporated by reference&#148;
into this prospectus certain information that we file with the
SEC. This means that we can disclose important business,
financial and other information in this prospectus by referring
you to the documents containing this information. All
information incorporated by reference is
</FONT>

<P align="center"><FONT size="2">76
</FONT>

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<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left">
<FONT size="2">deemed to be part of this prospectus except to
the extent that the information is updated or superseded by the
information contained in this prospectus or any information
filed with the SEC. Any information that we subsequently file
with the SEC that is incorporated by reference, as described
below, will automatically update and supersede any previous
information that is part of this prospectus.
</FONT>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We incorporate by reference the documents listed
below and any future filings (other than information furnished,
and not filed, pursuant to Items&nbsp;9 or 12 in any
Form&nbsp;8-K filing) we or the Utility makes with the SEC under
Section&nbsp;13(a), 13(c), 14 or 15(d) of the Exchange Act until
the completion of the exchange offer:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our and the Utility&#146;s Annual Report on
    Form&nbsp;10-K for the year ended December&nbsp;31, 2003;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our and the Utility&#146;s Quarterly Report on
    Form 10-Q for the quarter ended March&nbsp;31, 2004;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our and the Utility&#146;s Current Reports on
    Form&nbsp;8-K filed on January&nbsp;22, 2004, February&nbsp;3,
    2004, February&nbsp;19, 2004, March&nbsp;2, 2004, March&nbsp;10,
    2004, March&nbsp;12, 2004, March&nbsp;16, 2004, March&nbsp;18,
    2004, March&nbsp;23, 2004, March&nbsp;26, 2004, March&nbsp;31,
    2004, April&nbsp;7, 2004, April&nbsp;12, 2004, April&nbsp;12,
    2004, April&nbsp;19, 2004, April&nbsp;27, 2004, May&nbsp;4,
    2004, May&nbsp;13, 2004 (as amended by our and the
    Utility&#146;s Current Report on Form&nbsp;8-K/A filed on
    May&nbsp;14, 2004), May&nbsp;14, 2004, May&nbsp;25, 2004,
    May&nbsp;28, 2004 and June&nbsp;18, 2004 (including specifically
    Exhibit&nbsp;99.1, which supersedes the information contained in
    Exhibit&nbsp;13 to our and the Utility&#146;s Annual Report on
    Form&nbsp;10-K for the year ended December&nbsp;31, 2003 and
    Exhibit&nbsp;99.1 to our and the Utility&#146;s Current Report
    on Form&nbsp;8-K filed on March&nbsp;2, 2004).
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You may request a copy of these filings and
copies of the indenture and the other documents which establish
the terms of the notes offered hereby at no cost by writing or
contacting us at the following address:
</FONT>

<P align="center">
<FONT size="2">The Office of the Corporate Secretary
</FONT>

<DIV align="center">
<FONT size="2">PG&#38;E Corporation
</FONT>
</DIV>

<DIV align="center">
<FONT size="2">One Market Street, Spear Tower
</FONT>
</DIV>

<DIV align="center">
<FONT size="2">Suite&nbsp;2400
</FONT>
</DIV>

<DIV align="center">
<FONT size="2">San Francisco, CA 94105
</FONT>
</DIV>

<DIV align="center">
<FONT size="2">Telephone: 415-267-7070
</FONT>
</DIV>

<DIV align="center">
<FONT size="2">Facsimile: 415-267-7268
</FONT>
</DIV>

<P align="center"><FONT size="2">77
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">
</FONT>
</DIV>

<P align="center">
<IMG src="f97982a1f9798214.gif" alt="PG&#38;E LOGO">

<DIV>&nbsp;</DIV>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">PART II</FONT></B>

<P align="center">
<B><FONT size="2">INFORMATION NOT REQUIRED IN
PROSPECTUS</FONT></B>

<P align="left">
<B><FONT size="2">Item&nbsp;20.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indemnification
of Directors and Officers.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are a California corporation. Section&nbsp;317
of the California Corporations Code provides for indemnification
of a corporation&#146;s directors and officers under certain
circumstances. Our articles of incorporation authorize us to
provide indemnification of any person who is or was our
director, officer, employee or other agent, or is or was serving
at our request as a director, officer, employee or agent of
another foreign or domestic corporation, partnership, joint
venture, trust or other enterprise, or was a director, officer,
employee or agent of a foreign or domestic corporation which was
a predecessor corporation of us or of another enterprise at the
request of the predecessor corporation through our bylaws,
resolutions of our board of directors, agreements with agents,
vote of shareholders or disinterested directors, or otherwise,
in excess of the indemnification otherwise permitted by
Section&nbsp;317 of the California Corporations Code, subject
only to the applicable limits set forth in Section&nbsp;204 of
the California Corporations Code. Our articles of incorporation
also eliminate the liability of our directors to the fullest
extent permissible by California law. Our board of directors has
adopted a resolution regarding our policy of indemnification and
we maintain insurance which insures our directors and officers
against certain liabilities.
</FONT>

<P align="left">
<B><FONT size="2">Item&nbsp;21.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibits
and Financial Statement Schedules.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;Exhibits*
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="85%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exhibit</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Indenture dated as of July&nbsp;2, 2003 between
    PG&#38;E Corporation and J.P. Morgan Trust Company, National
    Association (formerly Bank One, N.A.), as Trustee (incorporated
    by reference to PG&#38;E Corporation&#146;s Form&nbsp;8-K filed
    July&nbsp;2, 2003 (File No.&nbsp;1-12609), Exhibit&nbsp;4.1).
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Utility Stock Base Pledge Agreement dated as of
    July&nbsp;2, 2003 by and among PG&#38;E Corporation, J.P. Morgan
    Trust Company, National Association (formerly Bank One, N.A.),
    and Deutsche Bank Trust Company Americas (incorporated by
    reference to PG&#38;E Corporation&#146;s Form&nbsp;8-K filed
    July&nbsp;2, 2003 (File No.&nbsp;1-12609), Exhibit&nbsp;4.2).
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Utility Stock Protective Pledge Agreement dated
    as of July&nbsp;2, 2003 by and among PG&#38;E Corporation, J.P.
    Morgan Trust Company, National Association (formerly Bank One,
    N.A), and Deutsche Bank Trust Company Americas (incorporated by
    reference to PG&#38;E Corporation&#146;s Form&nbsp;8-K filed
    July&nbsp;2, 2003 (File No.&nbsp;1-12609), Exhibit&nbsp;4.3).
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of 6&nbsp;7/8% Senior Secured Note due
    2008.**
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Registration Rights Agreement dated as of
    July&nbsp;2, 2003 between PG&#38;E Corporation and Lehman
    Brothers Inc., as representative for the initial purchasers of
    the 6&nbsp;7/8% Senior Secured Notes due 2008.**
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">5</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Opinion of Orrick, Herrington &#38; Sutcliffe
    LLP.**
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">12</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Ratio of earnings to fixed charges.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Deloitte &#38; Touche LLP.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Orrick, Herrington &#38; Sutcliffe LLP
    (included in Exhibit&nbsp;5.1).**
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">24</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Resolutions of the Board of Directors of PG&#38;E
    Corporation authorizing the execution of this registration
    statement.**
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">24</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Power of Attorney.**
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">25</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form&nbsp;T-1 Statement of Eligibility under
    Trust Indenture Act of 1939 of J.P. Morgan Trust Company,
    National Association.**
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">99</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Letter of Transmittal.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">99</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Notice of Guaranteed Delivery.
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&nbsp; *&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">PG&#38;E Corporation agrees to provide a copy of
    certain instruments with respect to long-term debt not
    registered under the Securities Act of 1933, as amended (the
    total amount of which is less than 10% of the total assets of
    PG&#38;E Corporation and its consolidated subsidiaries),
    supplementally to the SEC upon request.
    </FONT></TD>
</TR>

</TABLE>
<P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">**&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Previously filed.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">II-1
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">Item&nbsp;22.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Undertakings.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The undersigned registrant hereby undertakes:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(1)&nbsp;To file, during any period in which
offers or sales are being made, a post-effective amendment to
this registration statement:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(i)&nbsp;To include any prospectus required by
    Section&nbsp;10(a)(3) of the Securities Act of 1933;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(ii)&nbsp;To reflect in the prospectus any facts
    or events arising after the effective date of the registration
    statement (or the most recent post-effective amendment thereof)
    which, individually or in the aggregate, represent a fundamental
    change in the information set forth in the registration
    statement. Notwithstanding the foregoing, any increase or
    decrease in volume of securities offered (if the total dollar
    value of securities offered would not exceed that which was
    registered) and any deviation from the low or high end of the
    estimated maximum offering range may be reflected in the form of
    prospectus filed with the Commission pursuant to
    Rule&nbsp;424(b) if, in the aggregate, the changes in volume and
    price represent no more than a 20% change in the maximum
    aggregate offering price set forth in the &#147;Calculation of
    Registration Fee&#148; table in the effective registration
    statement;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(iii)&nbsp;To include any material information
    with respect to the plan of distribution not previously
    disclosed in the registration statement or any material change
    to such information in the registration statement.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(2)&nbsp;That, for the purpose of determining any
liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(3)&nbsp;To remove from registration by means of
a post-effective amendment any of the securities being
registered which remain unsold at the termination of the
offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The undersigned registrant hereby undertakes to
respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item&nbsp;4, 10(b), 11
or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the
request.
</FONT>

<P align="center"><FONT size="2">II-2
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">SIGNATURES</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the requirements of the Securities
Act, the registrant has duly caused this amendment to
registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of San
Francisco, state of California, on June&nbsp;18, 2004.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">PG&#38;E CORPORATION
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">By:&nbsp;</FONT></TD>
    <TD align="center">
    <FONT size="2">ROBERT D. GLYNN, JR.*
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <HR size="1" align="left" noshade></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Robert D. Glynn, Jr.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Chairman, Chief Executive Officer and President
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">Pursuant to the requirements of the Securities
    Act of 1933, this registration statement has been signed by the
    following persons in the capacities and on the dates indicated.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="31%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="42%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="11%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Signature</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Title</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Date</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">ROBERT D. GLYNN, JR.*<BR>
    <HR size="1" noshade>Robert D. Glynn, Jr.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Chairman of the Board of Directors, Chief
    Executive Officer and President (Principal Executive Officer)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">June&nbsp;18, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">PETER A. DARBEE*<BR>
    <HR size="1" noshade>Peter A. Darbee
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Senior Vice President and Chief Financial Officer
    (Principal Financial Officer)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">June&nbsp;18, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">CHRISTOPHER P. JOHNS*<BR>
    <HR size="1" noshade>Christopher P. Johns
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Senior Vice President and Controller (Principal
    Accounting Officer)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">June&nbsp;18, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">DAVID R. ANDREWS*<BR>
    <HR size="1" noshade>David R. Andrews
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">June&nbsp;18, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <BR>
    <HR size="1" noshade><FONT size="2">Leslie S. Biller
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">June&nbsp;&nbsp;&nbsp;, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">DAVID A. COULTER*<BR>
    <HR size="1" noshade>David A. Coulter
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">June&nbsp;18, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">C. LEE COX*<BR>
    <HR size="1" noshade>C. Lee Cox
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">June&nbsp;18, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">DAVID M. LAWRENCE*<BR>
    <HR size="1" noshade>David M. Lawrence, M.D.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">June&nbsp;18, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">MARY S. METZ*<BR>
    <HR size="1" noshade>Mary S. Metz
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">June&nbsp;18, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">BARRY LAWSON WILLIAMS*<BR>
    <HR size="1" noshade>Barry Lawson Williams
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">June&nbsp;18, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">*By:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">/s/ GARY P. ENCINAS<BR>
    <HR size="1" noshade>Gary P. Encinas<BR>
    attorney-in-fact
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">II-3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">EXHIBIT INDEX</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="86%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Indenture dated as of July&nbsp;2, 2003 between
    PG&#38;E Corporation and J.P. Morgan Trust Company, National
    Association (formerly Bank One, N.A.), as Trustee (incorporated
    by reference to PG&#38;E Corporation&#146;s Form&nbsp;8-K filed
    July&nbsp;2, 2003 (File No.&nbsp;1-12609), Exhibit&nbsp;4.1).
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Utility Stock Base Pledge Agreement dated as of
    July&nbsp;2, 2003 by and among PG&#38;E Corporation, J.P. Morgan
    Trust Company, National Association (formerly Bank One, N.A.),
    and Deutsche Bank Trust Company Americas (incorporated by
    reference to PG&#38;E Corporation&#146;s Form&nbsp;8-K filed
    July&nbsp;2, 2003 (File No.&nbsp;1-12609), Exhibit&nbsp;4.2).
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Utility Stock Protective Pledge Agreement dated
    as of July&nbsp;2, 2003 by and among PG&#38;E Corporation, J.P.
    Morgan Trust Company, National Association (formerly Bank One,
    N.A.), and Deutsche Bank Trust Company Americas (incorporated by
    reference to PG&#38;E Corporation&#146;s Form&nbsp;8-K filed
    July&nbsp;2, 2003 (File No.&nbsp;1-12609), Exhibit&nbsp;4.3).
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of 6&nbsp;7/8% Senior Secured Note due 2008.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Registration Rights Agreement dated as of
    July&nbsp;2, 2003 between PG&#38;E Corporation and Lehman
    Brothers Inc., as representative for the initial purchasers of
    the 6&nbsp;7/8% Senior Secured Notes due 2008.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">5</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Opinion of Orrick, Herrington &#38; Sutcliffe
    LLP.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">12</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Ratio of earnings to fixed charges.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Deloitte &#38; Touche LLP.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Orrick, Herrington &#38; Sutcliffe LLP
    (included in Exhibit&nbsp;5.1).*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">24</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Resolutions of the Board of Directors of PG&#38;E
    Corporation authorizing the execution of this registration
    statement.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">24</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Power of Attorney.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">25</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form&nbsp;T-1 Statement of Eligibility under
    Trust Indenture Act of 1939 of J.P. Morgan Trust Company,
    National Association.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">99</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Letter of Transmittal.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">99</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Notice of Guaranteed Delivery.
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Previously filed.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>
</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1
<SEQUENCE>2
<FILENAME>f97982a1exv12w1.htm
<DESCRIPTION>EXHIBIT 12.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv12w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>Exhibit&nbsp;12.1<BR>
PG&#038;E Corporation<BR>
Ratios of Earnings to Fixed Charges</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="49%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Three</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Months</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ended<BR>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Pro-Forma</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23"><B>Year Ended December  31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD align="center"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1"><B>(dollars in millions)</B></FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><SUP><B>(1)</B></SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2000</B><SUP><B>(2)</B></SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1999</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Earnings</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Pre-tax income (loss)&nbsp;from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">668</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(5,543</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,368</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Add:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Fixed Charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">673</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Less:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Pre-tax earnings required to cover preferred
dividend requirements of subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><B>Earnings</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,745</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4,872</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,016</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Fixed Charges</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest expense, net, including amortization
of debt issue costs, premiums and discounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,078</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">615</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">AFUDC Debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Estimate of interest expense within rents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Preferred dividend requirements of subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Preferred security requirements of wholly-owned
trust</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><B>Fixed Charges</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">673</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Ratio of Earnings to Fixed Charges</B><SUP><B>(3)</B></SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.9</TD>
    <TD><SUP>(4)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="99%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><SUP>(1)</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The pro forma ratio is computed as
if the Utility&#146;s exit from Chapter&nbsp;11 and the transactions
related thereto, including recognition of certain regulatory assets,
the effects of the rate reduction resulting from the implementation
of the rate design settlement approved by the CPUC on
February&nbsp;26, 2004 (which incorporated the revenue requirements
ultimately approved in the Utility&#146;s general rate case), the
reduction of interest expense related to repayment of existing
indebtedness and the issuance by the Utility of $6.7&nbsp;billion in
mortgage bonds, draws on the Utility&#146;s accounts receivable
financing facility, and borrowings under the Utility&#146;s fifteen-month term loan
and reimbursement facility, elimination of reorganization
professional fees and expenses and elimination of reorganization
interest income, had occurred on January&nbsp;1, 2003.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<tr>
<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><SUP>(2)</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The ratio of earnings to fixed charges for 2000 indicates a
ratio of less than one-to-one. The dollar amount of the deficiency is
approximately $5.6&nbsp;billion.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<tr>
<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><SUP>(3)</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">For the purpose of computing ratios of earnings to fixed charges,
&#147;earnings&#148; represents pre-tax income from continuing
operations plus fixed
charges, as computed, less the pre-tax earnings required to cover the
preferred dividend requirements of subsidiaries. &#147;Fixed charges&#148; include interest, including amortization of debt issue
costs, premiums and discounts, the debt portion of the allowance for funds
used during construction, an estimate of the amount of interest within
rents, and the preferred security requirements of consolidated
subsidiaries.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">



<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><SUP>(4)</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The ratio of earnings to fixed
charges for the three months ended March&nbsp;31, 2004 includes the
earnings associated with recognition of approximately
$4.9&nbsp;billion of regulatory assets.</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>




<P align="center" style="font-size: 10pt">
</DIV>


</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>3
<FILENAME>f97982a1exv23w1.htm
<DESCRIPTION>EXHIBIT 23.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv23w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="right">
<B><FONT size="2">EXHIBIT&nbsp;23.1</FONT></B>


<P align="left">
<B><FONT size="2">CONSENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM</FONT></B>



<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We consent to the incorporation by reference in
this Amendment No.&nbsp;1 to Registration Statement
No.&nbsp;333-114923 of PG&#38;E Corporation on Form&nbsp;S-4 of
our reports dated February&nbsp;18, 2004 (March&nbsp;1, 2004 as
to the last three paragraphs of Note&nbsp;1 and June&nbsp;18,
2004 as to the first three paragraphs of &#147;Adoption of New
Accounting Policies&#148; in Note&nbsp;1) (which reports express
an unqualified opinion and include explanatory paragraphs
relating to accounting changes, a revision of revenues and
expenses of discontinued operations to the 2002 and 2001
financial statements of PG&#38;E Corporation and going concern
uncertainties), appearing in the current report on Form&nbsp;8-K
dated June&nbsp;18, 2004 (of PG&#38;E Corporation and Pacific
Gas and Electric Company) and to the reference to us under the
heading of &#147;Experts&#148; in the Prospectus, which is part
of this Registration Statement.
</FONT>


<P align="left">
<FONT size="2">/s/ DELOITTE&nbsp;&#38; TOUCHE LLP
</FONT>

<P align="left">
<FONT size="2">San&nbsp;Francisco, California
</FONT>


<DIV align="left">
<FONT size="2">June&nbsp;18, 2004
</FONT>
</DIV>

</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>4
<FILENAME>f97982a1exv99w1.htm
<DESCRIPTION>EXHIBIT 99.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv99w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<P style="font-family: 'Times New Roman',Times,serif">

<P align="right" style="font-size: 10pt"><B>EXHIBIT 99.1</B>

<P align="center" style="font-size: 10pt"><B>Letter of Transmittal</B>



<P align="center" style="font-size: 10pt"><B>PG&#038;E CORPORATION</B>



<P align="center" style="font-size: 10pt"><B>Offer to Exchange Its<BR>
6 7/8% Senior Secured Notes Due 2008<BR>
(registered under the Securities Act of 1933)</B>



<P align="center" style="font-size: 10pt"><B>For Any and All of Its Outstanding<BR>
6 7/8% Senior Secured Notes Due 2008</B>



<P align="center" style="font-size: 10pt"><B>Pursuant to the Prospectus<BR>
Dated</B><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
&nbsp;</U> &nbsp;&nbsp;<U>&nbsp; &nbsp; &nbsp; &nbsp;</U><B>, 2004</B>



<P align="center" style="font-size: 10pt"><B>THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT<BR>
5:00 P.M., NEW YORK CITY TIME, ON </B><U>&nbsp; &nbsp; &nbsp; &nbsp;
&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><B>, </B><U>&nbsp;
&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
&nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
</U>&nbsp;&nbsp;<U>&nbsp; &nbsp; &nbsp; &nbsp;</U><B>, 2004,<BR>
UNLESS EXTENDED (THE &#147;EXPIRATION DATE&#148;).</B>



<P align="center" style="font-size: 10pt"><I>The Exchange Agent Is:</I>



<P align="center" style="font-size: 10pt"><B>J.P. Morgan Trust Company, National Association</B>



<P align="center" style="font-size: 10pt"><I>By mail, overnight delivery or hand:</I><BR>
J.P. Morgan Trust Company, National Association,<BR> as Exchange Agent<BR>
Institutional Trust Services<BR>
2001 Bryan Street, 9th Floor<BR>
Dallas, Texas 75201<BR>
Attention: Exchanges, Frank Ivins<BR>
PG&#038;E Corporation Exchange Offer



<P align="center" style="font-size: 10pt"><I>By facsimile:</I><BR>
Fax: (214)&nbsp;468-6494<BR>
Attention: Frank Ivins<BR>
PG&#038;E Corporation Exchange Offer



<P align="center" style="font-size: 10pt"><I>Online:</I><BR>
www.jpmorgan.com/bondholder



<P align="center" style="font-size: 10pt"><I>Confirm by telephone:</I><BR>
(800)&nbsp;275-2048



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Delivery
of this Letter of Transmittal to the Exchange Agent at an address other than as set forth above or transmission via a facsimile transmission to a number other than
as set forth above will not constitute a valid delivery.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
undersigned acknowledges receipt of the prospectus dated <U>&nbsp;
&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; </U>&nbsp;&nbsp;<U>&nbsp; &nbsp; &nbsp;</U>,
2004 (the &#147;Prospectus&#148;) of PG&#038;E Corporation, a California corporation ( the
&#147;Company&#148;), and this letter of transmittal (the &#147;Letter of Transmittal&#148;), which
together describe the Company&#146;s offer (the &#147;Exchange Offer&#148;) to exchange its 6
7/8% Senior Secured Notes due 2008 (the &#147;Exchange Notes&#148;), which have been
registered under the Securities Act of 1933, as amended (the &#147;Securities Act&#148;),
for each of its outstanding 6 7/8% Senior Secured Notes due 2008 issued in a
private placement that closed on July&nbsp;2, 2003 (the &#147;Original Notes&#148;) with the
holders thereof.


<P align="center" style="font-size: 10pt">&nbsp;


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The terms of the Exchange Notes are substantially identical to the terms
of the Original Notes for which they may be exchanged pursuant to the Exchange
Offer, except that the Exchange Notes will not contain transfer restrictions
and will not have the registration rights that apply to the Original Notes or
entitle their holders to additional interest for the Company&#146;s failure to
comply with these registration rights.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CONTACT YOUR BANK OR BROKER TO ASSIST YOU IN COMPLETING THIS FORM. THE
INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE
PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE
AGENT.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.


<P align="center" style="font-size: 10pt"><B>PLEASE READ THIS ENTIRE<BR>
LETTER OF TRANSMITTAL AND THE PROSPECTUS<BR>
CAREFULLY BEFORE COMPLETING THE SPACES BELOW.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;List below the Original Notes to which this Letter of Transmittal relates.
If the space provided below is inadequate, the certificate numbers and
aggregate principal amounts should be listed on a separate signed schedule
affixed hereto.

<P>
<HR align="center" size="1" width="45%" noshade>



<P align="center" style="font-size: 10pt"><B>DESCRIPTION OF ORIGINAL NOTES TENDERED</B>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="1%"></TD>
    <TD width="48%"></TD>
    <TD width="0%"></TD><!-- VRule -->
    <TD width="1%"></TD>
    <TD width="17%"></TD>
    <TD width="0%"></TD><!-- VRule -->
    <TD width="1%"></TD>
    <TD width="17%"></TD>
    <TD width="0%"></TD><!-- VRule -->
    <TD width="1%"></TD>
    <TD width="17%"></TD>

    <TD width="1%">&nbsp;</TD>
</TR><TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="12" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">    <TD width="1%" style="border-left: 1px solid #000000">&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Principal Amount of</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">    <TD width="1%" style="border-left: 1px solid #000000">&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Original Notes</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">    <TD width="1%" style="border-left: 1px solid #000000">&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Aggregate</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Tendered (If Less</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">    <TD width="1%" style="border-left: 1px solid #000000">&nbsp;</TD>

    <TD nowrap align="center">Name(s) and Addresses of Holder(s)</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Certificate</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Principal Amount of</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Than All</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">    <TD width="1%" style="border-left: 1px solid #000000">&nbsp;</TD>

    <TD nowrap align="center">(Please Fill In, if Blank)</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Number(s)*</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Original Notes</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Tendered)**</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR style="font-size: 24pt" valign="bottom">
    <TD width="1%" style="border-left: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
                  <TD style="border-top: 1px solid #000000"><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 24pt" valign="bottom">
    <TD width="1%" style="border-left: 1px solid #000000">&nbsp;</TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 24pt" valign="bottom">
    <TD width="1%" style="border-left: 1px solid #000000">&nbsp;</TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 24pt" valign="bottom">
    <TD width="1%" style="border-left: 1px solid #000000">&nbsp;</TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 24pt" valign="bottom">
    <TD width="1%" style="border-left: 1px solid #000000">&nbsp;</TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 18pt" valign="bottom">
    <TD width="1%" style="border-left: 1px solid #000000">&nbsp;<br>&nbsp;</TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;<br>&nbsp;</DIV></TD>
    <TD style="border-right: 1px solid #000000;">&nbsp;<br>&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;<br>&nbsp;</TD>
    <TD align="center" valign="middle" style="font-size: 10pt; border-top: 1px solid #000000">Total Principal<BR>Amount Tendered</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;<br>&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;<br>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;<br>&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;<br>&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;<br>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;<br>&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;<br>&nbsp;</TD>
</TR>

<TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="12" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Need not be completed by book-entry holders.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">**&nbsp;&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Original Notes may be tendered in whole or in part in integral multiples
of $1,000. All Original Notes held shall be deemed tendered unless a
lesser number is specified in this column.</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of Original Notes whose Original Notes are not immediately
available or who cannot deliver their Original Notes and all other required
documents to the Exchange Agent on or prior to the Expiration Date or who
cannot complete the procedures for book-entry transfer on a timely basis must
tender their Original Notes according to the guaranteed delivery procedures set
forth in the Prospectus.


<P align="center" style="font-size: 10pt">2


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless the context otherwise requires, the term &#147;holder&#148; for purposes of
this Letter of Transmittal means any person in whose name Original Notes are
registered or any other person who has obtained a properly completed bond power
from the registered holder or any person whose Original Notes are held of
record by The Depository Trust Company (&#147;DTC&#148;).

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="99%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT face="Wingdings">&#111;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Check here and enclose a photocopy of the Notice of Guaranteed
Delivery if tendered Original Notes are being delivered pursuant to a
Notice of Guaranteed Delivery previously sent to the Exchange Agent
and complete the following:</B></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name of registered holders(s)<U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name of Institution which guaranteed delivery <U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; </U>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Date of execution of Notice of Guaranteed Delivery <U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp;</U></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">If Delivered by Book-Entry Transfer:</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name of tendering Institution <U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">DTC Account Number <U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; </U>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Transaction Code Number <U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; </U></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT face="Wingdings">&#111;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Check here if Exchange Notes are to be delivered to a person other
than the person signing this Letter of Transmittal and complete the
following:</B></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name: <U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Address: <U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; </U></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT face="Wingdings">&#111;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Check here if Exchange Notes are to be delivered to an address
different from that listed elsewhere in this Letter of Transmittal and
complete the following:</B></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name: <U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Address: <U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; </U></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT face="Wingdings">&#111;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Check here and complete the following if you are a broker-dealer who
acquired the original notes for your own account as a result of market
making or other trading activities (a &#147;participating broker-dealer&#148;)
and wish to receive 10 additional copies of the prospectus and 10
copies of any amendments or supplements thereto:</B></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name: <U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Address: <U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; </U></TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of the
Exchange Notes. If the undersigned is a broker-dealer holding Original Notes
acquired for its own account as a result of market-making activities or other
trading activities, it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of Exchange Notes received in
respect of such Original Notes pursuant to the Exchange Offer; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an &#147;underwriter&#148; within the meaning of the
Securities Act. Any holder who is an &#147;affiliate&#148; of the Company or who has an
arrangement or understanding with respect to the distribution of the Exchange
Notes to be acquired pursuant to the Exchange Offer, or any broker-dealer who
purchased Original Notes from the Company to resell pursuant to Rule&nbsp;144A under
the Securities Act or any other available exemption under the Securities Act
must comply with the registration and prospectus delivery requirements under
the Securities Act.


<P align="center" style="font-size: 10pt">3


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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY</B>


<P align="left" style="font-size: 10pt">Ladies and Gentlemen:



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned hereby tenders to PG&#038;E Corporation, a California
corporation (the &#147;Company&#148;), the above described aggregate principal amount of
the Company&#146;s 6 7/8% Senior Secured Notes due 2008 (the &#147;Original Notes&#148;) in
exchange for like 6 7/8% Senior Secured Notes due 2008 (the &#147;Exchange Notes&#148;)
which have been registered under the Securities Act of 1933, as amended (the
&#147;Securities Act&#148;), upon the terms and subject to the conditions set forth in
the Prospectus dated <U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
&nbsp;</U>&nbsp;&nbsp;<U> &nbsp; &nbsp; &nbsp;</U> , 2004 (as the same may be amended or
supplemented from time to time, the &#147;Prospectus&#148;), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which, together with the
Prospectus, constitute the &#147;Exchange Offer&#148;).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to and effective upon the acceptance for exchange of all or any
portion of the Original Notes tendered in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby exchanges, assigns and transfers to or upon the order of the
Company all right, title and interest in and to such Original Notes as are
being tendered in accordance herewith. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as its true and lawful agent and
attorney-in-fact (with full knowledge that the Exchange Agent is also acting as
agent of the Company in connection with the Exchange Offer) to cause the
Original Notes to be assigned, transferred and exchanged.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned hereby represents and warrants that it has full power and
authority to tender, exchange, sell, assign and transfer the Original Notes and
to acquire Exchange Notes issuable upon the exchange of such tendered Original
Notes, and that, when the same are accepted for exchange, the Company will
acquire good, marketable and unencumbered title thereto, free and clear of all
liens, restrictions, charges and encumbrances, and not subject to any adverse
claim. The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company to
be necessary or desirable to complete the exchange, assignment and transfer of
the Original Notes or to transfer ownership of such Original Notes on the
account books maintained by the book-entry transfer facility. The undersigned
further agrees that acceptance of any and all validly tendered Original Notes
by the Company and the issuance of the Exchange Notes in exchange therefor
shall constitute full performance by the Company of its obligations under the
Registration Rights Agreement, dated as of July&nbsp;2, 2003, by and among the
Company and the initial purchasers of the Original Notes (the &#147;Registration
Rights Agreement&#148;) and that the Company will have no further obligations or
liabilities thereunder. The undersigned will comply with its obligations under
the Registration Rights Agreement. The undersigned has read and agrees to all
of the terms of the Exchange Offer.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If any tendered Original Notes are not exchanged pursuant to the Exchange
Offer for any reason, the Original Notes not exchanged will be returned or, in
the case of Original Notes tendered by book-entry transfer, such Original Notes
will be credited to an account maintained at DTC, without expense to the
tendering holder, promptly following the expiration or termination of the
Exchange Offer.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned understands that tenders of Original Notes pursuant to any
one of the procedures described in &#147;The Exchange Offer&#151;Procedures for
Tendering&#148; in the Prospectus and in the instructions herein will, upon the
Company&#146;s acceptance for exchange of such tendered Original Notes, constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer. The undersigned recognizes
that, under certain circumstances set forth in the Prospectus, the Company may
not be required to accept for exchange any of the Original Notes tendered by
the undersigned.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By tendering Original Notes and executing this Letter of Transmittal, the
undersigned hereby represents and agrees that:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;the undersigned is not an &#147;affiliate&#148; of the Company (as defined in
Rule&nbsp;405 under the Securities Act),


<P align="center" style="font-size: 10pt">4


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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;any Exchange Notes to be received by the undersigned are being
acquired in the ordinary course of its business and the undersigned received
the Original Notes being tendered for exchange in the ordinary course of its
business,


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;if the undersigned is not a broker-dealer, the undersigned or the
person receiving the Exchange Notes is not engaged in, does not intend to
engage in and has no arrangement or understanding with any person to engage in
a distribution (within the meaning of the Securities Act) of Exchange Notes to
be received in the Exchange Offer, and


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;the undersigned is not a broker-dealer tendering Original Notes
acquired directly from the Company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If any holder of Original Notes cannot meet the requirements set forth in
paragraphs (i)&nbsp;through (iv)&nbsp;above, such holder (i)&nbsp;may not rely on certain
interpretive letters issued by the staff of the Division of Corporation Finance
of the Securities and Exchange Commission to third parties relating to exchange
offers and (ii)&nbsp;must comply with the registration and prospectus delivery
requirements of the Securities Act or ensure the availability of an exemption
from the registration requirements of the Securities Act in connection with any
resale transaction.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By tendering Original Notes pursuant to the Exchange Offer, a holder of
Original Notes who is a broker-dealer represents and agrees that (a)&nbsp;such
Original Notes held by the broker-dealer are held only as a nominee, or (b)
such Original Notes were acquired by such broker-dealer for its own account as
a result of market-making activities or other trading activities and it will
deliver a Prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes (provided that, by so
acknowledging and by delivering a Prospectus, such broker-dealer will not be
deemed to admit that it is an &#147;underwriter&#148; within the meaning of the
Securities Act).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has agreed that, subject to the provisions of the Registration
Rights Agreement, the Prospectus may be used by a broker-dealer who acquired
Original Notes for its own account as a result of market-making or other
trading activities (a &#147;Participating Broker-Dealer&#148;) in connection with resales
of Exchange Notes received in exchange for such Original Notes, until
<U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U>, 2004 or such shorter period during which the Participating
Broker-Dealer is required by law to deliver the Prospectus. However, a
Participating Broker-Dealer who intends to use the Prospectus in connection
with the resale of Exchange Notes received in exchange for Original Notes
pursuant to the Exchange Offer must notify the Company, or cause the Company to
be notified, on or prior to the Expiration Date, that it is a Participating
Broker-Dealer. Such notice may be given in the space provided herein for that
purpose or may be delivered to the Exchange Agent at the address set forth on
the cover page of this Letter of Transmittal. In that regard, each
Participating Broker-Dealer, by tendering such Original Notes, agrees that,
upon receipt of notice from the Company of the occurrence of any event or the
discovery of any fact which makes any statement contained or incorporated by
reference in the Prospectus untrue in any material respect or which causes the
Prospectus to omit to state a material fact necessary in order to make the
statements contained or incorporated by reference therein, in light of the
circumstances under which they were made, not misleading or of the occurrence
of certain other events specified in the Registration Rights Agreement, such
Participating Broker-Dealer will suspend the sale of Exchange Notes pursuant to
the Prospectus until the Company has amended or supplemented the Prospectus to
correct such misstatement or omission and has furnished copies of the amended
or supplemented Prospectus to the Participating Broker-Dealer or the Company
has given notice that the sale of the Exchange Notes may be resumed, as the
case may be. If the Company gives such notice to suspend the sale of the
Exchange Notes, it shall extend the period referred to above during which
Participating Broker-Dealers are entitled to use the Prospectus in connection
with the resale of Exchange Notes by the number of days during the period from
and including the date of the giving of such notice to and including the date
when Participating Broker-Dealers shall have received copies of the
supplemented or amended Prospectus necessary to permit resales of the Exchange
Notes or to and including the date on which the Company has given notice that
the sale of Exchange Notes may be resumed, as the case may be.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and


<P align="center" style="font-size: 10pt">5


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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">assigns of the undersigned. Except as stated in the Prospectus, tenders
of Original Notes may be withdrawn at any time prior to the Expiration Date.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The undersigned, by completing the section titled &#147;Description of Original
Notes Tendered&#148; above and signing this letter, will be deemed to be tendering
the Original Notes in the amount set forth in such section.</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise indicated herein in the box entitled &#147;Special Issuance
Instructions&#148; below, the undersigned hereby directs that the Exchange Notes be
issued in the name(s) of the undersigned or, in the case of a book-entry
transfer of Original Notes, the undersigned hereby directs that such Exchange
Notes be credited to the DTC account of the DTC participant in whose name the
Original Notes are registered. Unless otherwise indicated under &#147;Special
Delivery Instructions,&#148; please deliver certificates evidencing Exchange Notes
to the undersigned at the address shown below the undersigned&#146;s signature.


<P align="center" style="font-size: 10pt">6


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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>TENDERING HOLDER(S) SIGN HERE</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Must be signed by the registered holder(s) exactly as the name(s)
appear(s) on the certificate(s) for the Original Notes being tendered or on a
security position listing or by any person(s) authorized to become the
registered holder(s) by endorsements and documents transmitted herewith
(including such opinions of counsel, certifications and other information as
may be required by the Company or the Exchange Agent to comply with the
restrictions on transfer applicable to the Original Notes). If signature is by
an attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary capacity or representative
capacity, please set forth the signer&#146;s full title. See Instruction 3.


<P align="left" style="font-size: 10pt"><HR align="center" size="1" noshade width="100%">


<DIV align="center" style="font-size: 10pt">(Signature(s) of holder(s))</DIV>


<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD valign="top" width="1%">Date&nbsp;&nbsp;</TD>
    <TD width="94%"><HR  style="margin-top:10px" noshade size="1"></TD>
    <TD width="5%" nowrap valign="top">, 2004</TD>
</TR>
</TABLE>
<P>
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%" valign="top" nowrap>Name(s)&nbsp;&nbsp;</TD>
    <TD width="94%"><HR  style="margin-top:10px" noshade size="1"></TD>
</TR>
</TABLE>



<P align="left" style="font-size: 10pt"><HR align="center" size="1" noshade width="100%">



<DIV align="center" style="font-size: 10pt">(Please Print)</DIV>
<P>
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%" valign="top" nowrap>Capacity (full title)&nbsp;&nbsp;</TD>
    <TD width="94%"><HR  style="margin-top:10px" noshade size="1"></TD>
</TR>
</TABLE>

<P>
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%" valign="top" nowrap>Address&nbsp;&nbsp;</TD>
    <TD width="94%"><HR  style="margin-top:10px" noshade size="1"></TD>
</TR>
</TABLE>




<P align="left" style="font-size: 10pt"><HR align="center" size="1" noshade width="100%">



<DIV align="center" style="font-size: 10pt">(Include Zip Code)</DIV>

<P>
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%" valign="top" nowrap>Area Code and Telephone Number&nbsp;&nbsp;</TD>
    <TD width="94%"><HR  style="margin-top:10px" noshade size="1"></TD>
</TR>
</TABLE>


<P>
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%" valign="top" nowrap>Tax Identification or Social Security Number(s)&nbsp;&nbsp;</TD>
    <TD width="94%"><HR  style="margin-top:10px" noshade size="1"></TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><B>GUARANTEE OF SIGNATURE(S)<BR>
(If Required&#151;See Instruction 3)</B>

<P>
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%" valign="top" nowrap>Authorized Signature&nbsp;&nbsp;</TD>
    <TD width="94%"><HR  style="margin-top:10px" noshade size="1"></TD>
</TR>
</TABLE>
<P>
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%" valign="top" nowrap>Dated&nbsp;&nbsp;</TD>
    <TD width="94%"><HR  style="margin-top:10px" noshade size="1"></TD>
</TR>
</TABLE>

<P>
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%" valign="top" nowrap>Name&nbsp;&nbsp;</TD>
    <TD width="94%"><HR  style="margin-top:10px" noshade size="1"></TD>
</TR>
</TABLE>






<P>
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%" valign="top" nowrap>Capacity or Title&nbsp;&nbsp;</TD>
    <TD width="94%"><HR  style="margin-top:10px" noshade size="1"></TD>
</TR>
</TABLE>

<P>
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%" valign="top" nowrap>Name of Firm &nbsp;&nbsp;</TD>
    <TD width="94%"><HR  style="margin-top:10px" noshade size="1"></TD>
</TR>
</TABLE>
<P>
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%" valign="top" nowrap>Address&nbsp;&nbsp;</TD>
    <TD width="94%"><HR  style="margin-top:10px" noshade size="1"></TD>
</TR>
</TABLE>











<P align="left" style="font-size: 10pt"><HR align="center" size="1" noshade width="100%">


<DIV align="center" style="font-size: 10pt">(Include Zip Code)</DIV>


<P>
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%" valign="top" nowrap>Area Code and Telephone Number &nbsp;&nbsp;</TD>
    <TD width="94%"><HR  style="margin-top:10px" noshade size="1"></TD>
</TR>
</TABLE>




<P align="center" style="font-size: 10pt">7


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<TABLE align="center" style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">

<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>SPECIAL ISSUANCE INSTRUCTIONS</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>SPECIAL DELIVERY INSTRUCTIONS</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>(See Instructions 3 and 4)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>(See Instructions 3 and 4)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<!-- End Table Head -->

<!-- Begin Table Body -->


<TR valign="bottom">

    <TD style="border-top: 1px solid #000000; border-left: 1px solid #000000">&nbsp;</TD>

 <TD valign="top" style="border-top: 1px solid #000000">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To be completed ONLY if the Exchange
Notes and/or any non-tendered or
non-exchanged Original Notes are to be
issued in the name of someone other
than the holder of the Original Notes
whose name(s) appear(s) above.</TD>

    <TD style="border-top: 1px solid #000000; border-right: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>

    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To be completed
ONLY if the Exchange Notes and/or
non-tendered or non-exchanged Original Notes are to
be sent to someone other than the registered holder
of the Original Notes whose name(s) appear(s)
above, or to such registered holder(s) at an
address other than that shown above.</TD>

    <TD style="border-top: 1px solid #000000; border-right: 1px solid #000000">&nbsp;</TD>
</TR>



<TR valign="bottom">
    <TD style="border-top: 1px solid #000000; border-left: 1px solid #000000">&nbsp;</TD>
    <TD valign="top" style="border-top: 1px solid #000000">
<DIV style="margin-left:0px; text-indent:-0px">Issue:</DIV></TD>

    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">Deliver:</TD>
    <TD style="border-top: 1px solid #000000; border-right: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD style="border-left: 1px solid #000000">&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#091;&nbsp;&nbsp;&nbsp;&#093; Exchange Notes to:
</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;&nbsp;&nbsp;&nbsp;&#093; Exchange Notes to:</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD style="border-left: 1px solid #000000">&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#091;&nbsp;&nbsp;&nbsp;&#093; Non-tendered or
non-exchanged Original Notes to:
</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;&nbsp;&nbsp;&nbsp;&#093; Non-tendered or non-exchanged Original Notes to:</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>


<TR style="font-size: 2px" valign="bottom">
    <TD style="border-left: 1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>



<TR valign="bottom">
    <TD style="border-left: 1px solid #000000">&nbsp;</TD>
    <TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px">Name</DIV></TD>

<TD style="border-right: 1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Name</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 1px" valign="bottom">
    <TD style="border-left: 1px solid #000000">&nbsp;</TD>

<TD align="right" valign="top"><DIV style="width: 88%; border-top: 1px solid #000000">&nbsp;</DIV></TD>
<TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD align="right" valign="top"><DIV style="width: 88%; border-top: 1px solid #000000">&nbsp;</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD style="border-left: 1px solid #000000">&nbsp;</TD>
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">(Please Print)
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    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Please Print)</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>



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    <TD style="border-left: 1px solid #000000">&nbsp;</TD>
<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Address</DIV></TD>
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    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Address</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>


<TR style="font-size: 1px" valign="bottom">
    <TD style="border-left: 1px solid #000000">&nbsp;</TD>

<TD align="right" valign="top"><DIV style="width: 83%; border-top: 1px solid #000000">&nbsp;</DIV></TD>
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    <TD>&nbsp;</TD>
<TD align="right" valign="top"><DIV style="width: 83%; border-top: 1px solid #000000">&nbsp;</DIV></TD>
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<TR style="font-size: 1px" valign="bottom">
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<TD>&nbsp;</TD>
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<TD align="right" valign="top"><DIV style="width: 100%; border-bottom: 1px solid #000000">&nbsp;</DIV></TD>
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    <TD>&nbsp;</TD>
<TD align="right" valign="top"><DIV style="width: 100%; border-bottom: 1px solid #000000">&nbsp;</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD style="border-left: 1px solid #000000">&nbsp;</TD>
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">(Include Zip Code)
</DIV></TD>
<TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Include Zip Code)</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>

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    <TD style="border-left: 1px solid #000000">&nbsp;</TD>

<TD align="right" valign="top"><DIV style="width: 100%; border-bottom: 1px solid #000000">&nbsp;</DIV></TD>
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    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD style="border-left: 1px solid #000000">&nbsp;</TD>
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">(Taxpayer Identification or<BR>
Social Security Number)
</DIV></TD>
<TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Taxpayer Identification or<BR>
Social Security Number)</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD style="border-left: 1px solid #000000">&nbsp;</TD>

<TD align="right" valign="top"><DIV style="width: 100%; border-bottom: 1px solid #000000">&nbsp;</DIV></TD>
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    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
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<TR valign="bottom">
    <TD style="border-left: 1px solid #000000">&nbsp;</TD>
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">(Telephone Number, with Area Code)
</DIV></TD>
<TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD align="center" valign="top">(Telephone Number, with Area Code)</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
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<tr><td>&nbsp;</td></tr>


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</TABLE>




<P align="center" style="font-size: 10pt"><B>SEE INSTRUCTIONS</B>


<P>&nbsp;
<P>&nbsp;

<P align="center" style="font-size: 10pt">8


</DIV>
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<P style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>INSTRUCTIONS</B>



<P align="center" style="font-size: 10pt">Forming Part of the Terms and Conditions of the Exchange Offer



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;<I>Delivery of This Letter of Transmittal and Notes; Guaranteed Delivery
Procedures. </I>A holder of Original Notes may tender the same by (i)&nbsp;properly
completing and signing this Letter of Transmittal or a facsimile hereof (all
references in the Prospectus to the Letter of Transmittal shall be deemed to
include a facsimile thereof) and delivering the same, together with the
certificate or certificates, if applicable, representing the Original Notes
being tendered, and any required signature guarantees and any other documents
required by this Letter of Transmittal, to the Exchange Agent at its address
set forth on the cover of this Letter of Transmittal on or prior to the
Expiration Date, or (ii)&nbsp;complying with the procedure for book-entry transfer
described below, or (iii)&nbsp;complying with the guaranteed delivery procedures
described below.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of Original Notes may tender Original Notes by book-entry transfer
by crediting the Original Notes to the Exchange Agent&#146;s account at DTC in
accordance with DTC&#146;s Automated Tender Offer Program (&#147;ATOP&#148;) and by complying
with applicable ATOP procedures with respect to the Exchange Offer. DTC
participants that are accepting the Exchange Offer should transmit their
acceptance to DTC, which will edit and verify the acceptance and execute a
book-entry delivery to the Exchange Agent&#146;s account at DTC. DTC will then send
a computer-generated message (an &#147;Agent&#146;s Message&#148;) to the Exchange Agent for
its acceptance in which the holder of the Original Notes acknowledges and
agrees to be bound by the terms of, and makes the representations and
warranties contained in, this Letter of Transmittal, the DTC participant
confirms on behalf of itself and the beneficial owners of such Original Notes
all provisions of this Letter of Transmittal (including any representations and
warranties) applicable to it and such beneficial owner as fully as if it had
completed the information required herein and executed and transmitted this
Letter of Transmittal to the Exchange Agent. Delivery of the Agent&#146;s Message by
DTC will satisfy the terms of the Exchange Offer as to execution and delivery
of a Letter of Transmittal by the participant identified in the Agent&#146;s
Message. DTC participants may also accept the Exchange Offer by submitting a
Notice of Guaranteed Delivery through ATOP.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The method of delivery of this Letter of Transmittal, the Original Notes
and any other required documents is at the election and risk of the holder, and
except as otherwise provided below, the delivery will be deemed made only when
actually received or confirmed by the Exchange Agent. Rather than mail these
items, the Company recommends that holders use an overnight or hand delivery
service. If delivery is by mail, it is suggested that certified or registered
mail with return receipt requested, properly insured, be used. In all cases,
sufficient time should be allowed to permit timely delivery. NO ORIGINAL NOTES
OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO THE COMPANY. Holders may request
their respective brokers, dealers, commercial banks, trust companies or other
nominees to effect the above transactions for them.</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders whose Original Notes are not immediately available or who cannot
deliver their Letter of Transmittal and all other required documents to the
Exchange Agent on or prior to the Expiration Date or who cannot complete the
procedures for book-entry transfer on a timely basis must tender their Original
Notes pursuant to the guaranteed delivery procedures set forth in the
Prospectus. Pursuant to such procedure: (i)&nbsp;such tender must be made by or
through an Eligible Institution (as defined below); (ii)&nbsp;prior to the
Expiration Date, the Exchange Agent must have received from such Eligible
Institution a properly completed and duly executed notice of guaranteed
delivery, by facsimile transmission, mail or hand delivery, setting forth the
name and address of the holder, the principal amount of Original Notes
tendered, stating that the tender is being made thereby, and guaranteeing that,
within three (3)&nbsp;New York Stock Exchange trading days after the Expiration
Date, this Letter of Transmittal, or a facsimile of this Letter of Transmittal,
duly executed, together with a book-entry confirmation, and any other documents
required by this Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and (iii)&nbsp;the properly completed and
executed Letter of Transmittal, or facsimile thereof, as well as a book-entry
confirmation, and all other documents required by this Letter of Transmittal,
must be received by the Exchange Agent within three (3)&nbsp;New York Stock Exchange
trading days after the Expiration Date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;<I>Partial Tenders and Withdrawal Rights. </I>If less than the entire
principal amount of Original Notes evidenced by a
submitted certificate is tendered, the tendering holder must fill in the
aggregate principal amount of Original Notes tendered in the box entitled
&#147;Description of Original Notes Tendered.&#148; Original Notes may be


<P align="center" style="font-size: 10pt">9


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<P style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">tendered in whole or in part in integral multiples of $1,000.
A newly issued certificate for the Original Notes submitted but not tendered
will be sent to such holder as soon as practicable after the Expiration Date.
All Original Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise clearly indicated.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If not yet accepted, a tender pursuant to the Exchange Offer may be
withdrawn prior to the Expiration Date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To be effective with respect to the tender of Original Notes, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at the address for the Exchange Agent set forth above. Any notice of
withdrawal must (i)&nbsp;specify the name of the person who tendered the Original
Notes to be withdrawn; (ii)&nbsp;identify the Original Notes to be withdrawn
including the certificate number or numbers and principal amount of such
Original Notes; and (iii)&nbsp;be signed by the holder in the same manner as the
original signature on this Letter of Transmittal (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the trustee with respect to the Original Notes register the transfer of
the Original Notes into the name of the person withdrawing the tender. If
Original Notes have been tendered pursuant to the procedure for book-entry
transfer, any notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawn Original Notes and otherwise
comply with DTC procedures. All questions as to the validity of notices of
withdrawals, including time of receipt, will be determined by the Company, and
such determination will be final and binding on all parties.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any Original Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Original Notes
which have been tendered for exchange but which are not exchanged for any
reason will be returned to the holder thereof without cost to such holder (or,
in the case of Original Notes tendered by book-entry transfer into the Exchange
Agent&#146;s account at DTC pursuant to the book-entry transfer procedures described
above, such Original Notes will be credited to an account with DTC for Original
Notes as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer). Properly withdrawn Original Notes may be
retendered by following one of the procedures described under the caption &#147;The
Exchange Offer&#151;Procedures for Tendering&#148; in the Prospectus at any time prior to
the Expiration Date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;<I>Signature on This Letter of Transmittal; Written Instruments and
Endorsements; Guarantee of Signatures</I>. If this Letter of Transmittal is signed
by the registered holder(s) of the Original Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the
certificates without alteration, enlargement or any change whatsoever.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If any of the Original Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If a number of Original Notes registered in different names are tendered,
it will be necessary to complete, sign and submit as many separate copies of
this Letter of Transmittal as there are different registrations of Original
Notes.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When this Letter of Transmittal is signed by the registered holder or
holders (which term, for the purposes described herein, shall include the
book-entry transfer facility whose name appears on a security listing as the
owner of the Original Notes) of Original Notes listed and tendered hereby, no
endorsements of certificates or separate written instruments of transfer or
exchange are required.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Signatures on this Letter of Transmittal or a notice of withdrawal must be
guaranteed by a member firm of a registered national securities exchange or of
the National Association of Securities Dealers, Inc., a commercial bank or
trust company having an office or correspondent in the United States or another
&#147;eligible guarantor institution&#148; within the meaning of Rule&nbsp;17Ad-15 under the
Securities Exchange Act of 1934, as amended (each, an &#147;Eligible Institution&#148;),
unless the Original Notes tendered pursuant hereto are tendered: (i)&nbsp;by a
registered holder who has not completed the box entitled &#147;Special Issuance
Instructions&#148; or &#147;Special Delivery Instructions&#148; on this Letter of Transmittal;
or (ii)&nbsp;for the account of an Eligible Institution.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this Letter of Transmittal is signed by a person other than the
registered holder or holders of the Original Notes listed, such Original Notes
must be endorsed by the registered holder with the signature
guaranteed by an Eligible Institution or accompanied by proper documentation of transfer or
exchange, in satisfactory form as


<P align="center" style="font-size: 10pt">10


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<P style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">determined by the Company in its sole
discretion, and signed by the registered holder with the signature guaranteed
by an Eligible Institution.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority to so act must be submitted with
this Letter of Transmittal.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;<I>Special Issuance and Delivery Instructions</I>. Tendering holders should
indicate the name and address to which the Exchange Notes or
certificates for Original Notes not exchanged are to be issued or sent, if
different from the name and address of the person signing this Letter of
Transmittal. In the case of issuance in a different name, the tax
identification number of the person named must also be indicated. Holders
tendering Original Notes by book-entry transfer may request that Original Notes
not exchanged be credited to such account maintained at the book-entry transfer
facility as such holder may designate.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;<I>Transfer Taxes</I>. Holders who tender their Original Notes for exchange
will not be obligated to pay any transfer taxes in connection therewith, except
that holders who instruct the Company to register Exchange Notes in the name
of, or request that Original Notes not tendered or not accepted in the Exchange
Offer be returned to, a person other than the registered tendering holder will
be responsible for the payment of any applicable transfer tax thereon. If
satisfactory evidence of payment of such transfer taxes or exemption therefrom
is not submitted herewith, the amount of such transfer taxes will be billed
directly to such tendering holder.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;<I>Waiver of Conditions</I>. The Company reserves the absolute right to
waive, in whole or in part, any of the conditions to the Exchange Offer set
forth in the Prospectus or the Letter of Transmittal.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;<I>Mutilated, Lost, Destroyed or Stolen Certificates</I>. Any holder whose
Original Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated on the cover page for further
instructions.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;<I>Questions, Requests for Assistance and Additional Copies</I>. Questions
and requests for assistance may be directed to the Exchange Agent at its
address and telephone number set forth on the front of this Letter of
Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed
Delivery and the Letter of Transmittal may be obtained from the Exchange Agent
or from your broker, dealer, commercial bank, company or other nominee.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;<I>No Conditional Tenders</I>. No alternative, conditional, irregular or
contingent tenders will be accepted except as set forth in the Prospectus. All
tendering holders of Original Notes, by execution of this Letter of
Transmittal, shall waive any right to receive notice of the acceptance of their
Original Notes for exchange.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of
Original Notes nor shall any of them incur any liability for failure to give
any such notice.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Important: This Letter of Transmittal or a facsimile or copy thereof
(together with certificates of original notes or confirmation of book-entry
transfer and all other required documents) or a Notice of Guaranteed Delivery
must be received by the Exchange Agent on or prior to the Expiration Date.</B>



<P align="center" style="font-size: 10pt">11



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<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>5
<FILENAME>f97982a1exv99w2.htm
<DESCRIPTION>EXHIBIT 99.2
<TEXT>
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<TITLE>exv99w2</TITLE>
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</FONT></DIV>
<P align="RIGHT" style="font-size: 10pt"><B>EXHIBIT 99.2</B>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center" style="font-size: 10pt"><B>Notice of Guaranteed Delivery<BR>
for Tender of<BR>
6 7/8% Senior Secured Notes Due 2008<BR>
of</B>



<P align="center" style="font-size: 10pt"><B>PG&#038;E CORPORATION</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Notice of Guaranteed Delivery, or one substantially equivalent to
this form, must be used to accept the Exchange Offer (as defined below) if (i)
certificates for the Company&#146;s (as defined below) 6 7/8% Senior Secured Notes
due 2008 (the &#147;Original Notes&#148;) are not immediately available, (ii)&nbsp;the Letter
of Transmittal and all other required documents cannot be delivered to J.P.
Morgan Trust Company, National Association, as Exchange Agent (the &#147;Exchange
Agent&#148;), on or prior to the Expiration Date (as defined in the Prospectus
referred to below) or (iii)&nbsp;the procedures for delivery by book-entry transfer
cannot be completed on or prior to the Expiration Date. This Notice of
Guaranteed Delivery may be delivered by hand, overnight courier or mail, or
transmitted by facsimile transmission, to the Exchange Agent. See &#147;The
Exchange Offer&#151;Procedures for Tendering&#148; in the Prospectus.


<P align="center" style="font-size: 10pt"><I>The Exchange Agent Is:</I>



<P align="center" style="font-size: 10pt"><B>J.P. Morgan Trust Company, National Association</B>



<P align="center" style="font-size: 10pt"><I>By mail, overnight delivery or hand:</I><BR>
J.P. Morgan Trust Company, National Association, as Exchange Agent<BR>
Institutional Trust Services<BR>
2001 Bryan Street, 9th Floor<BR>
Dallas, Texas 75201<BR>
Attention: Exchanges, Frank Ivins<BR>
PG&#038;E Corporation Exchange Offer



<P align="center" style="font-size: 10pt"><I>By facsimile:</I><BR>
Fax: (214)&nbsp;468-6494<BR>
Attention: Frank Ivins<BR>
PG&#038;E Corporation Exchange Offer



<P align="center" style="font-size: 10pt"><I>Online:</I><BR>
www.jpmorgan.com/bondholder



<P align="center" style="font-size: 10pt"><I>Confirm by telephone:</I><BR>
(800)&nbsp;275-2048



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of this Notice of Guaranteed Delivery via
facsimile to a number other than as set forth above will not constitute a valid
delivery.</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an &#147;Eligible Institution&#148; under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">Ladies and Gentlemen:



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned hereby tenders to PG&#038;E Corporation, a California
corporation (the &#147;Company&#148;), upon the terms and subject to the conditions set
forth in the Prospectus dated <U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
&nbsp; &nbsp; </U>&nbsp;&nbsp;<U>&nbsp; &nbsp; &nbsp;</U>, 2004 (as the same may be amended or
supplemented from time to time, the &#147;Prospectus&#148;), and the related Letter of
Transmittal (which together constitute the &#147;Exchange Offer&#148;), receipt of which
is hereby acknowledged, the aggregate principal amount of Original Notes set
forth below pursuant to the guaranteed delivery procedures set forth in the
Prospectus under the caption &#147;The Exchange Offer&#151;Guaranteed Delivery
Procedures.&#148;

<P align="left" style="font-size: 10pt">Aggregate Principal Amount Tendered: <U>___________________________________________________________________</U>


<P align="left" style="font-size: 10pt">Name(s) of Registered Holder(s): <U>________________________________________________________________________</U>


<P align="left" style="font-size: 10pt">Address(es): <U>_________________________________________________________________________________________</U>


<P align="left" style="font-size: 10pt">Area Code and Telephone Number(s): <U>____________________________________________________________________</U>


<P align="left" style="font-size: 10pt">Certificate No(s).: <U>____________________________________________________________________________________</U>


<DIV align="left" style="font-size: 10pt">(if available)</DIV>


<P align="left" style="font-size: 10pt">If Original Notes will be tendered by book-entry transfer, provide the following information:


<P align="left" style="font-size: 10pt">Signature(s): <U>________________________________________________________________________________________</U>


<P align="left" style="font-size: 10pt">DTC Account Number: <U>_______________________________________________________________________________</U>


<P align="left" style="font-size: 10pt">Date: <U>______________________________________________________________________________________________</U>



<P align="center" style="font-size: 10pt"><B>THE GUARANTEE ON THE NEXT PAGE MUST BE COMPLETED.</B>



<P align="center" style="font-size: 10pt">2
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>GUARANTEE</B>



<P align="center" style="font-size: 10pt"><B>(Not to be used for signature guarantee)</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned, a firm or other entity identified in Rule&nbsp;17Ad-15 under
the Securities Exchange Act of 1934, as amended, as an &#147;eligible guarantor
institution,&#148; including (as such terms are defined therein): (i)&nbsp;a bank; (ii)
a broker, dealer, municipal securities broker, municipal securities dealer,
government securities broker or government securities dealer; (iii)&nbsp;a credit
union; (iv)&nbsp;a national securities exchange, registered securities association
or clearing agency; or (v)&nbsp;a savings association that is a participant in a
Securities Transfer Association recognized program (each of the foregoing being
referred to as an &#147;Eligible Institution&#148;), hereby guarantees to deliver to the
Exchange Agent, at its address set forth above, either the Original Notes
tendered hereby in proper form for transfer together with one or more properly
completed and duly executed Letter(s) of Transmittal (or facsimile thereof), or
confirmation of the book-entry transfer of such Original Notes to the Exchange
Agent&#146;s account at The Depository Trust Company (&#147;DTC&#148;), pursuant to the procedures
for book-entry transfer set forth in the Prospectus, together with, in either
case, any other required documents within three business days after the date of
execution of this Notice of Guaranteed Delivery.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned acknowledges that it must deliver the Letter(s) of
Transmittal and the Original Notes tendered hereby to the Exchange Agent within
the time period set forth above and that failure to do so could result in a
financial loss to the undersigned.

<P align="left" style="font-size: 10pt">Name of Firm:
<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;&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;&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 align="left" style="font-size: 10pt">Authorized Signature: <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;
&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;&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 align="left" style="font-size: 10pt">Title: <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;&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;&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;</U>

<P align="left" style="font-size: 10pt">Address: <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;&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;&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 align="left" style="font-size: 10pt"><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;&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;&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;</U>


<DIV align="left" style="font-size: 10pt;text-indent:600px">(Zip Code)</DIV>


<P align="left" style="font-size: 10pt">Telephone Number (Including
Area Code): <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;&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;&nbsp;&nbsp;&nbsp;</U>

<P align="left" style="font-size: 10pt">Date: <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;
&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;&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 align="left" style="font-size: 10pt"><B>DO NOT SEND CERTIFICATES FOR ORIGINAL NOTES WITH THIS NOTICE OF GUARANTEED
DELIVERY. ACTUAL SURRENDER OF CERTIFICATES FOR ORIGINAL NOTES MUST BE MADE
PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY EXECUTED
LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.</B>




<P align="center" style="font-size: 10pt">3
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