Fitch Comments On CA Rate Reduction Bonds.

Business Editors

NEW YORK--(BUSINESS WIRE)---April 9, 2001

The `AAA' ratings on the California Infrastructure and Economic Development Bank Special Purpose (IEDB SP) Trust PG&E1 transaction are not currently affected by the filing of Pacific Gas & Electric (PGE) for protection under Chapter 11 of the US Bankruptcy Code.

In December 1997, Fitch rated the rate reduction bonds issued by the California IEDB SP Trust PGE 1 `AAA'. At closing, the ratings incorporated risks associated with, among other things, bankruptcy of the utility. The legal analysis performed at the initial rating of the bonds remains unchanged by the current financial condition of PGE.

Fitch received legal opinions at closing that in the event of the utility bankruptcy, the transfer of the transition property to the funding vehicle would constitute an absolute sale rather than a borrowing, so that the transition property would not be considered property of the bankruptcy estate. Nonetheless, Fitch tested in stress cases whether the trust could withstand an interruption of 60 days of revenues due to commingling if it were necessary to apply to the Bankruptcy Court to release the funds. However, it is important to note that PGE began remitting funds on a daily basis in January 2001, which was triggered by its downgrade to below investment grade. Consequently, the risk of commingling was reduced to two days of exposure.

Since the closing of the transaction, collections of the fixed transition amounts (FTA charges) have generally been in line with expectations. Currently, the capital subaccount is fully funded at $14.4 million and the overcollateralization subaccount has built up according to its required schedule. In addition, funds are available in the reserve subaccount, which can be used fund payment shortfalls.

Fitch will continue to closely monitor this situation for any potential disruptions in collections or in servicing which could affect the cash flow to the bonds.

For further information, please refer to Fitch report, `California Infrastructure and Economic Development Bank PG&E-1', dated Jan. 12, 1998, and available on Fitch's web site a-t `www.fitchratings.com', or contact Market Services at 1-800-853-4824.