Item 8.01. Other Events

Cost of Capital Proceeding

On October 15, 2009, the California Public Utilities Commission (CPUC) approved a decision that maintains Pacific Gas and Electric Company's (Utility) authorized cost of capital, including a return on equity (ROE) of 11.35%, through 2010. The decision approves a joint request made by the Utility and the CPUC's Division of Ratepayer Advocates (DRA) to avoid imposing a rate increase corresponding to an increase in the Utility's ROE during a time of economic hardship. This increase would otherwise have been triggered as of January 1, 2010 by the cost of capital adjustment mechanism previously adopted by the CPUC on May 29, 2008 The Utility's capital structure, including a 52% equity component, will be maintained through 2012.

In addition, as requested by the Utility and the DRA, the CPUC extended the cost of capital adjustment mechanism through 2012. The cost of capital adjustment mechanism will be triggered if the 12-month October-through-September average yield for the applicable Moody's Investors Services utility bond index increases or decreases by more than 1% as compared to the applicable benchmark. Finally, the CPUC agreed to defer the due date for the Utility's next full cost of capital application from April 20, 2010 until April 20, 2012, so that any resulting changes would become effective on January 1, 2013.

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