PART I

Item 1. Business.

          General

     PG&E Funding LLC is a special purpose, single member limited liability company organized under the laws of the State of Delaware. Pacific Gas and Electric Company, a provider of electricity and natural gas services, owns all of the equity of PG&E Funding LLC. The principal executive office of PG&E Funding LLC is located at 245 Market Street, Suite 424, San Francisco, California 94105. PG&E Funding LLC's mailing address is Mail Code N4E, P.O. Box 770000, San Francisco, California 94177 and its phone number is (415) 972-5467.

     PG&E Funding LLC was organized in July 1997 for the limited purpose of (1) purchasing, holding, and servicing the Transition Property (as described below), (2) issuing notes secured by the Transition Property, and (3) performing related activities. PG&E Funding LLC has no employees and is restricted by its organizational documents from engaging in other activities. Additionally, PG&E Funding LLC's organizational documents require it to operate in a manner such that it should not be included in the bankruptcy estate of Pacific Gas and Electric Company.

     PG&E Funding LLC issued $2,901,000,000 in principal amount of PG&E Funding LLC Notes, Series 1997-1, Class A-1 through Class A-8 (the "Notes") pursuant to an Indenture ("the Indenture") between PG&E Funding LLC and Deutsche Bank National Trust Company (formerly Bankers Trust Company of California, N.A.), as "Trustee". PG&E Funding LLC sold the Notes to the California Infrastructure and Economic Development Bank Special Purpose Trust PG&E-1, a Delaware business trust (the "Trust"). The Trust then issued certificates corresponding to each class of Notes (the "Certificates") in a public offering.

     PG&E Funding LLC entered into a servicing agreement (the "Servicing Agreement") with Pacific Gas and Electric Company. The Servicing Agreement requires Pacific Gas and Electric Company (as "Servicer") to service the Transition Property on behalf of PG&E Funding LLC. In addition, PG&E Funding LLC entered into an Administrative Services Agreement with Pacific Gas and Electric Company. This agreement requires Pacific Gas and Electric Company to perform administrative and operational duties for PG&E Funding LLC. (These agreements are discussed in greater detail in Note E of the Notes to the Financial Statements.)

     Since the purchase of the Transition Property and issuance of the Notes, the only material business conducted by PG&E Funding LLC has been the collection of the "FTA Charges" as described below and the repayment of the Notes. During 2002, PG&E Funding LLC collected approximately $422,534,000 in FTA Charges and paid $399,061,000 in principal, interest and other expenses. As of December 31, 2002, approximately $1,450,500,000 in principal amount of Notes remains outstanding, with scheduled maturities ranging from 2003 through 2007 with a final maturity date of 2009. The specific interest rate and maturity of each class of Notes still outstanding is specified in Note D of the Notes to Financial Statements.

     
          Transition Property

     The California Public Utilities Code (the "PU Code") provides for the creation of "Transition Property". Transition Property is the right to receive a specified amount (presented in the financial statements as "Transition Property receivable") from non-bypassable Fixed Transition Amount Charges (the "FTA Charges") payable by residential and small commercial electric customers. The FTA Charges were established by a financing order dated September 3, 1997 (the "Financing Order") issued by the California Public Utilities Commission (the "CPUC"), together with the related Issuance Advice Letter. Under the PU Code and the Financing Order, the owner of Transition Property (i.e. PG&E Funding LLC) is entitled to collect the FTA Charges until a sufficient amount has been received to:

• repay in full the Certificates,

• fund the Overcollateralization and Capital Subaccounts (the "Subaccounts") established under the Indenture, and

• pay all related costs and fees.

• future expenses relating to the Transition Property, the Notes, and the Certificates; and

• the rate of delinquencies and write-offs.

     The Servicer has filed and the CPUC has approved the following advice letters:

• In December 2001, the Servicer filed a routine advice letter advising the CPUC of an increase to the FTA Charges effective January 1, 2002. The increase was necessary due to an under-collection of FTA Charges in 2001 and an anticipated decline in electricity sales in 2002.

• In December 2002, the Servicer filed a routine advice letter advising the CPUC of a decrease to the FTA Charges effective January 1, 2003. The decrease was necessary due to the achievement of the required level of funding in the Subaccounts at the end of 2002.

PART II

Investing Activities:

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     This Annual Report on Form 10-K contains forward looking statements that future collections of FTA Charges are expected to be sufficient to cover scheduled principal and interest payments on the Notes and related expenses. These statements involve risks and uncertainties and are based on the beliefs and assumptions of management and on information currently available to management.

     Actual results or outcomes could differ materially as a result of

various factors, including:

• future electricity sales levels, which are affected by a variety of factors, including general economic and financial market conditions, weather, conservation efforts, and outages; and

• updated assumptions by the Servicer as to future expenses relating       to the Transition Property, the Notes, and the rate of       delinquencies and write-offs.

Item 7A:  Quantitative and Qualitative Disclosures About Market Risk.

Long-term Debt.
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The table below provides information about the Notes at December 31, 2002:

The estimated fair value of the Notes based on quoted market prices was approximately $1.6 billion at December 31, 2002.

Item 8.   Financial Statements and Supplementary Data.

     The financial statements and related financial information of PG&E Funding LLC are set forth below.

     The Trust is a pass-through entity with no assets other than the Notes and no liabilities other than the Certificates. It does not have, and will not have, income or losses separate from payments on the Notes. Expenses of the trustees of the Trust are payable by PG&E Funding LLC pursuant to the terms of a Fee and Indemnity Agreement. For these reasons, no separate financial statements of the Trust are included.

                  INDEPENDENT AUDITORS' REPORT

To the Members of PG&E Funding LLC:

We have audited the accompanying balance sheets of PG&E Funding LLC (a Delaware Limited Liability Company and wholly-owned subsidiary of Pacific Gas and Electric Company (a Debtor-in-Possession)) as of December 31, 2002 and 2001, and the related statements of income and changes in member's equity and of cash flows for each of the three years in the period ended December 31, 2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PG&E Funding LLC as of December 31, 2002 and 2001, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United

States of America.

As discussed in Note A to the financial statements, Pacific Gas and Electric Company (a Debtor-in-Possession), the Servicer of the Transition Property, sought protection from its creditors by filing a voluntary petition under the provisions of Chapter 11 of the United States Bankruptcy Code.

/s/ DELOITTE & TOUCHE LLP

San Francisco, California

March 6, 2003

The accompanying Notes to the Financial Statements are an integral part of these statements.

The accompanying Notes to the Financial Statements are an integral part of these statements.

The accompanying Notes to the Financial Statements are an integral part of these statements.

Notes to the Financial Statements
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A. Basis of Presentation

     The financial statements include the accounts of PG&E Funding LLC, a special purpose, single member limited liability company organized under the laws of the State of Delaware. PG&E Funding LLC's sole member is Pacific Gas and Electric Company, a provider of electricity and natural gas services. Pacific Gas and Electric Company is a wholly owned subsidiary of PG&E Corporation.

     PG&E Funding LLC was formed in July 1997, to effect the issuance of $2,901,000,000 in principal amount of PG&E Funding LLC notes (the "Notes"). The proceeds from the Notes were paid to Pacific Gas and Electric Company in return for Transition Property (described below). Pacific Gas and Electric Company used the proceeds to finance a ten percent electric rate reduction, which became effective on January 1, 1998. The reduction is provided to Pacific Gas and Electric Company's residential and small commercial electric customers in connection with the electric industry restructuring mandated by California Assembly Bill 1890, as amended by California Senate Bill 477 (electric industry restructuring legislation). PG&E Funding LLC issued the Notes in December 1997 (described in Note D of the Notes to the Financial Statements).

     PG&E Funding LLC was organized for the limited purpose of issuing the Notes and purchasing the "Transition Property" from Pacific Gas and Electric Company. Transition Property is the right to be paid a specified amount (presented in the financial statements as "Transition Property receivable") from non-bypassable Fixed Transition Amount charges (the "FTA Charges") payable by residential and small commercial electric customers. The California Public Utilities Commission (the "CPUC") authorized the FTA Charges pursuant to the electric restructuring legislation. PG&E Funding LLC issued the Notes in December 1997 to the California Infrastructure and Economic Development Bank Special Purpose Trust PG&E-1, a Delaware business trust (the "Trust"). The Trust then issued certificates corresponding to each class of Notes in a public offering (the "Certificates").

     Deutsche Bank National Trust Company (formerly Bankers Trust Company of California, N.A.) (the "Trustee") holds the collected FTA Charges in separate bank accounts. The funds in these bank accounts are restricted and can only be used to pay principal and interest on the Notes and related expenses. These funds are classified as "Restricted funds" in the Balance Sheets. The Restricted funds balance was approximately $66,951,000 at December 31, 2002 and $42,763,000 at December 31, 2001.

     PG&E Funding LLC is restricted by its organizational documents from engaging in other activities. In addition, its organizational documents require it to operate in a manner such that it should not be included in the bankruptcy estate of Pacific Gas and Electric Company (discussed below). PG&E Funding LLC is legally separate from Pacific Gas and Electric Company. The assets of PG&E Funding LLC are not available to creditors of Pacific Gas and Electric Company or PG&E Corporation. The Transition Property is legally not an asset of Pacific Gas and Electric Company or PG&E Corporation. PG&E Funding LLC is expected to terminate after the scheduled maturity of the Notes on December 26, 2007.

     On April 6, 2001, Pacific Gas and Electric Company (the "Servicer") filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. The Servicer has informed PG&E Funding LLC that, despite the bankruptcy filing, it will continue to perform all duties as servicer, including remitting daily to the Trustee all FTA Charges collected. PG&E Funding LLC has not experienced any delay in FTA Charge remittances from the Servicer since the Servicer's bankruptcy filing in 2001.

     The Servicer's bankruptcy proceedings resulted in a default under Section 7.01(d) of the Servicing Agreement (as described in Note E of the Notes to the Financial Statements). On April 11, 2001, the Trustee informed holders of the Certificates of the default. The Trustee indicated that it did not intend to pursue any remedies without the written request of the necessary number of holders of Certificates.

     On September 20, 2001, the Servicer and its parent company, PG&E Corporation, jointly filed with the United States Bankruptcy Court of the Northern District of California (the "Bankruptcy Court") a proposed plan of reorganization (the "Plan") under Chapter 11 of the U.S. Bankruptcy Code and a proposed disclosure statement describing the Plan. The Plan was amended on several occasions after the initial filing. The CPUC has proposed an alternative plan of reorganization. Creditor voting on both plans concluded on August 12, 2002. On September 9, 2002, the voting results were filed with the Bankruptcy Court. Confirmation hearings on the CPUC's alternative plan began on November 18, 2002. The trial on the Plan began on December 16, 2002. PG&E Funding LLC does not expect payments on the Notes to be affected by the Servicer's plan or the CPUC's alternative plan. The Servicer has asserted that neither the Servicer's plan nor the CPUC's alternative plan will have an adve rse effect on its ability to perform all duties as servicer.
    

B. Summary of Accounting Policies

Cash Equivalents

     Cash equivalents (stated at cost, which approximates market) include working funds and short-term investments with original maturities of three months or less.

Restricted Funds

     Restricted funds include (1) amounts required under the Indenture (as described below), (2) surplus collections, and (3) interest earned on these funds. The Restricted funds balance was as follows at December 31 (in thousands):

     
     Pursuant to an Indenture between PG&E Funding LLC and the Trustee, PG&E Funding LLC is required to maintain funds equal to approximately 0.50 percent of the original principal amount of the Notes, less $100,000 ($14,405,000), in the "Capital Subaccount" with the Trust. These funds are to be held in reserve and used only in the event that collections of the FTA Charges provide insufficient funds to make scheduled payments on the Notes and to pay other expenses of PG&E Funding LLC.

     Additionally, the CPUC Financing Order provides that PG&E Funding LLC is to collect and maintain an additional reserve over the life of the Notes in the Overcollateralization Subaccount. The amount to be maintained increases in equal increments of $363,000 each quarter. The amount required at the end of 2002 was $7,253,000. The use of these funds is the same as the Capital Subaccount except that these funds are depleted before those in the Capital Subaccount are used.

     A shortfall in collections of FTA Charges results when scheduled payments of principal and interest on the Notes, and related expenses, exceed the FTA Charges collected. A surplus in collections of FTA Charges results when collections of these charges exceeds payments of principal and interest on the Notes and related expenses. Collections of FTA Charges resulted in a surplus of approximately $25,122,000 in 2002 and a shortfall of approximately $6,438,000 in 2001.

Unamortized Debt Issuance Expenses and Discount on Notes

     The expenses associated with the issuance of the Notes have been capitalized. These expenses and the discount on the Notes are being amortized on a straight-line basis over the life of each respective class of Notes. The expenses are reflected in interest expense in the accompanying statement of income and changes in member's equity.

Income Taxes

     PG&E Funding LLC is a single-member limited liability company. Accordingly, all federal income tax effects and all material State of California franchise tax effects of PG&E Funding LLC's activities accrue to Pacific Gas and Electric Company.

Use of Estimates

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amount of income, expenses, assets, and liabilities and the disclosure of contingencies. Actual results could differ from these estimates.

Revenue Recognition

     PG&E Funding LLC has one major source of income, which is the income from the Transition Property receivable. The other small source of income is the interest earned on the restricted cash accounts and temporary investment of the FTA Charges collected by Pacific Gas and Electric Company, as the servicer, and remitted to PG&E Funding LLC.

C. Transition Property Receivable

     Changes in the value of the Transition Property receivable balance are shown below (in thousand):