According to the Company’s FORM 10-Q for the quarterly period ended June 30, 2003, in June 2002, the District Court dismissed the second amended complaint with prejudice, prohibiting the plaintiffs from filing a further complaint. The plaintiffs' appeal of the dismissal was argued before the U.S. Court of Appeals for the Ninth Circuit on June 10, 2003. In July 2003, the Ninth Circuit court upheld the District Court's dismissal of the plaintiffs' second amended complaint.

As summarized by the same SEC filing, this matter involves a second amended complaint that was filed against PG&E Corporation and an executive officer of PG&E Corporation on February 4, 2002, in the U.S. District Court for the Northern District of California, purportedly brought on behalf of all persons who purchased PG&E Corporation common stock or certain shares of the Utility's preferred stock between July 20, 2000, and April 9, 2001. In January 2002, the District Court dismissed the plaintiffs' first amended complaint. The first and second amended complaints alleged that the defendants caused PG&E Corporation's Consolidated Financial Statements for the second and third quarters of 2000 to be materially misleading in violation of federal securities laws as a result of recording as a deferred cost and capitalizing as a regulatory asset the under-collections that resulted when escalating wholesale energy prices caused the Utility to pay far more to purchase electricity than it was permitted to collect from customers. In the second amended complaint, the plaintiffs also repeated some of the allegations that appear in the California Attorney General's complaint. The plaintiffs sought an unspecified amount of compensatory damages, plus costs and attorneys' fees. In dismissing the first amended complaint, the District Court found that the complaint failed to state a claim in light of the public disclosures by PG&E Corporation, the Utility, and others regarding the under-collections, the risk that they might not be recoverable, the financial consequences of non-recovery, and other information from which analysts and investors could assess for themselves the probability of recovery.

The case was first filed in the U.S. District Court for the Central District of California and was later transferred to the Northern District California by the Order issued in the Central District on May 29, 2001.

The original Complaint charges Defendants, PG&E Corporation and PG&E Corp.'s utility subsidiary, Pacific Gas & Electricity Company, with securities fraud violations of the Securities Act of 1934 and Rule 10(b)(5) promulgated thereunder. The false representations are contained in PG&E Corp.'s financial statements which it published for the second and third quarters of 2000, including a net income for the parent of $753 million for the nine month period ending September 30, 2000.