EDITORS: Please do not use "Pacific Gas and Electric" or "PG&E" when referring to PG&E Corporation or its National Energy Group. The PG&E National Energy Group is not the same company as Pacific Gas and Electric Company, the utility, and is not regulated by the California Public Utilities Commission. Customers of Pacific Gas and Electric Company do not have to buy products or services from the National Energy Group in order to continue to receive quality regulated services from Pacific Gas and Electric Company.

NATIONAL ENERGY GROUP ANNOUNCES SALE OF TEXAS NATURAL GAS BUSINESS

Houston, TX – The PG&E National Energy Group today announced that it has signed a definitive stock purchase agreement to sell its Texas natural gas and natural gas liquids business to El Paso Energy Field Services Company, a subsidiary of El Paso Energy Corporation (NYSE:EPG). The value of the transaction to the National Energy Group is approximately $903 million, which includes debt with a book value of $624 million associated with the operations of PG&E Gas Transmission, Texas Corporation and PG&E Gas Transmission Teco, Inc. The transaction will be accretive to the National Energy Group’s earnings in the year 2000 and beyond.

The holdings, which consist of 8,500 miles of natural gas and natural gas liquids pipeline, nine natural gas processing plants, and natural gas storage facilities, are all located in Texas.

"The market prices for natural gas transportation and natural gas liquids, combined with the price we paid to acquire these businesses, resulted in a significant drag on earnings despite recent improvements in operational and financial performance," said Thomas G. Boren, President and CEO of the National Energy Group. "This transaction will eliminate a negative impact on our earnings and will help the National Energy Group achieve its financial goals by 2002."

The transaction is expected to close by mid-year 2000. The sale of these businesses, which have total assets of $2.5 billion, will result in a one-time charge against 1999 earnings of $890 million, or $2.42 per share that, pursuant to accounting requirements, will be reflected in the National Energy Group’s financial results of operations for 1999.

"We continually review the operational and financial performance of our competitive businesses, assessing their ability to deliver shareholder value," said Boren. "When assets or businesses such as this one aren’t expected to deliver shareholder value, we will act decisively to move them out of our portfolio. This transaction frees up human and financial resources we will use to grow our National Energy Group."

Lehman Brothers is acting as financial advisor for the transaction and Andrews & Kurth, L.P.P. is acting as legal advisor.

The National Energy Group, which includes non-utility generation, natural gas pipelines and energy trading and services businesses in 27 states and Canada, had 1998 revenues of almost $12 billion and $10 billion in assets.