Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Note 1. Basis of Presentation

     The Quarterly Report on Form 10-Q includes the unaudited condensed financial statements and notes 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 in northern and central California. Pacific Gas and Electric Company is a 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, or the Notes. The proceeds from the Notes were paid to Pacific Gas and Electric Company in return for Transition Property, as 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, or the electric industry restructuring legislation.

     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 condensed financial statements as "Transition Property receivable") from nonbypassable Fixed Transition Amount Charges, or the FTA Charges, payable by residential and small commercial electric customers. The California Public Utilities Commission, or the CPUC, authorized the FTA Charges pursuant to the electric industry 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, or the Trust. The Trust then issued certificates corresponding to each class of Notes, or the Certificates, in a public offering.

     Deutsche Bank National Trust Company (formerly known as Bankers Trust Company of California, N.A.), or the Trustee, holds the collected FTA Charges in separate bank accounts. The funds in these bank accounts are restricted and can be used only to pay principal and interest on the Notes and related expenses. These funds are classified as "Restricted funds" in the Condensed Balance Sheets. The Restricted funds balance was approximately $72.2 million at March 31, 2004, and $76.6 million at December 31, 2003.

     PG&E Funding LLC is restricted by its organizational documents from engaging in other activities. As a result, items that impact PG&E Funding LLC's results of operations are limited to income generated from the Transition Property receivable, interest expense on the Notes, incidental investment interest income and servicing and administrative expenses, as further discussed below. Income earned on the Transition Property receivable is expected to offset (1) interest expense on the Notes, (2) amortization of debt issuance expense and the discount on the Notes, and (3) the fees charged by Pacific Gas and Electric Company, as Servicer, for servicing the Transition Property receivable and providing administrative services to PG&E Funding LLC. PG&E Funding LLC's most significant expense is the interest expense on the Notes. Accordingly, the interest rate earned on the Transition Property receivable balance is adjusted periodically as the weighted average interest r ate on the Notes changes.

     In addition, 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 (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 dissolve after the scheduled maturity of the Notes on December 26, 2007.

     PG&E Funding LLC entered into a servicing agreement, or 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.

     On April 6, 2001, Pacific Gas and Electric Company, or the Servicer, filed a voluntary petition for relief under the provisions of Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court of the Northern District of California, or the Bankruptcy Court. Although the Servicer's Chapter 11 proceedings resulted in a Servicer default under Section 7.01(d) of the Servicing Agreement, the Servicer continued to perform all duties as Servicer, including remitting daily to the Trustee all FTA Charges collected. Remittances from the Servicer to the Trustee were not interrupted by the Servicer's Chapter 11 filing. On April 12, 2004, the Servicer's plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code became effective. The implementation of the plan of reorganization did not affect PG&E Funding LLC's payments on the Notes.

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

     PG&E Funding LLC believes that the accompanying condensed financial statements reflect all adjustments that are necessary to present a fair statement of the financial position and results of operations for the interim periods. All material adjustments are of a normal recurring nature unless otherwise disclosed in this Form 10-Q. Results of operations for interim periods are not necessarily indicative of results to be expected for a full year.

Note 2. Summary of Accounting Policies

     PG&E Funding LLC is following the same accounting policies discussed in its 2003 Annual Report on Form 10-K.      

ITEM 2.     

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

     The following analysis of PG&E Funding LLC's financial condition and results of operations is in an abbreviated format pursuant to Instruction H of Form 10-Q. Such analysis should be read in conjunction with the condensed financial statements included herein and PG&E Funding LLC's Annual Report on Form 10-K as of and for the year ended December 31, 2003.

     PG&E Funding LLC is a special purpose, single member limited liability company. PG&E Funding LLC's sole member is Pacific Gas and Electric Company, a provider of electricity and natural gas services in northern and central California. Pacific Gas and Electric Company is a subsidiary of PG&E Corporation. PG&E Funding LLC was organized in July 1997 for the limited purposes of (1) purchasing, holding, and servicing the Transition Property, (2) issuing notes secured primarily 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.

• actual collections and updated assumptions by the Servicer as to future usage of electricity by specified customers;

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

• the rate of delinquencies and write-offs.

     In December 2003, the Servicer filed a routine advice letter advising the CPUC of a decrease to the FTA Charges effective January 1, 2004. The CPUC approved the filing on January 7, 2004. The decrease was necessary due to the reduction in interest payments on the Notes, reflecting the declining principal balance of the Notes and the achievement of the required level of funding in the Subaccounts.

     On April 6, 2001, the Servicer filed a voluntary petition for relief under the provisions of Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court of the Northern District of California, or the Bankruptcy Court. Although the Servicer's Chapter 11 proceedings resulted in a Servicer default under Section 7.01(d) of the Servicing Agreement, the Servicer continued to perform all duties as Servicer, including remitting daily to the Trustee all FTA Charges collected. Remittances from the Servicer to the Trustee were not interrupted by the Servicer's Chapter 11 filing. On April 12, 2004, the Servicer's plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code became effective. The implementation of the plan of reorganization did not affect PG&E Funding LLC's payments on the Notes.

Results of Operations

     Income generated from the Transition Property receivable was approximately $22.2 million for the three months ended March 31, 2004, in comparison to approximately $24.0 million for the three months ended March 31, 2003. The decrease in 2004 reflects the declining Transition Property receivable balance. Income earned on the Transition Property receivable is expected to offset (1) interest expense on the Notes, (2) amortization of debt issuance expense and the discount on the Notes, and (3) the fees charged by Pacific Gas and Electric Company, as Servicer, for servicing the Transition Property receivable and providing administrative services to PG&E Funding LLC. PG&E Funding LLC's most significant expense is the interest expense on the Notes. Accordingly, the interest rate earned on the Transition Property receivable balance is adjusted periodically as the weighted average interest rate on the Notes changes.

     Interest income earned from other investments was approximately $289,000 for the three months ended March 31, 2004, in comparison to approximately $341,000 for the three months ended March 31, 2003. PG&E Funding LLC earns interest income on the Restricted funds balance. The decrease in interest income in 2004 was mainly due to a lower average interest rate on the Restricted funds.

     Interest expense was approximately $18.9 million for the three months ended March 31, 2004, in comparison to approximately $23.6 million for the three months ended March 31, 2003. Interest expense includes interest on the Notes, amortization of the Notes' discount, and amortization of issuance costs. The decrease in interest expense in 2004 was primarily due to the declining balance of the Notes.

     PG&E Funding LLC incurred servicing fees of approximately $725,000 during the three months ended March 31, 2004, and approximately $906,000 during the three months ended March 31, 2003. Servicing fees are calculated as a percentage of the outstanding Note balance. The decrease in servicing fees in 2004 was due to the declining balance of the Notes.

Liquidity and Financial Resources

     PG&E Funding LLC expects that future collections of FTA Charges will be sufficient to make scheduled principal and interest payments on the Notes. As previously discussed, income earned on the Transition Property receivable is expected to offset (1) interest expense on the Notes, (2) amortization of debt issuance expenses and the discount on the Notes, and (3) the fees charged by Pacific Gas and Electric Company, as Servicer, for servicing the Transition Property and providing administrative services to PG&E Funding LLC.

Operating Activities:

     Operating activities provided net cash of approximately $70.6 million for the three months ended March 31, 2004, and approximately $72.4 million for the three months ended March 31, 2003. Cash provided by operating activities represents the excess of FTA Charges and earnings on FTA collections over cash payments for interest, servicing fees and administrative and general expenses. The decrease in net cash provided by the operating activities in 2004 was primarily due to a decrease in FTA Charges collected in 2004 as a result of a reduction in FTA Charge rates that became effective on January 1, 2004.

Investing Activities:

     Investing activities provided net cash of approximately $4.4 million for the three months ended March 31, 2004, and $2.7 million for the three months ended March 31, 2003. The increase in cash provided by investing activities was primarily due to the use of greater amounts of Restricted funds as a result of the decrease in cash provided by operating activities.

Financing Activities:

     Financing activities used net cash of approximately $74.7 million and $74.8 million for the three months ended March 31, 2004, and 2003. Cash used in financing activities in both 2004 and 2003 was entirely related to principal payments on the Notes.

Restricted Funds

     The Restricted funds balance was approximately $72.2 million at March 31, 2004, and approximately $76.6 million at December 31, 2003. The Restricted funds balance includes collected FTA Charges and Subaccounts required by the Indenture.

     As previously discussed, the Servicer collects FTA Charges from residential and small commercial electric customers and remits the amounts collected to the Trustee on a daily basis. 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 Condensed Balance Sheets.

     The Indenture requires PG&E Funding LLC to maintain certain minimum balances in the Subaccounts within the Restricted funds. The balances in the Subaccounts are to be used only in the event of a shortfall in collections of FTA Charges. No default occurs under the Indenture if the minimum balances are not maintained. However, the Servicer is required to take reasonable actions to establish the rate of FTA Charges at a level that is projected to replenish the Subaccounts to their required balances within twelve months of the effective date of any change in FTA Charge rates. The Subaccounts were funded to the levels required under the Indenture as of March 31, 2004.  

Critical Accounting Policies

     The preparation of financial statements in accordance with accounting principles generally accepted in the United States, or GAAP, involves the use of estimates and assumptions that affect the amounts reported in the financial statements. Application of PG&E Funding LLC's significant accounting policies did not result in management needing to make material assumptions about matters that would be considered highly uncertain at the time of estimation. PG&E Funding LLC is following the same accounting principles discussed in its 2003 Annual Report on Form 10-K.

     
     This Quarterly Report on Form 10-Q contains a forward-looking statement that future collections of FTA Charges are expected to be sufficient to cover scheduled principal and interest payments on the Notes and related expenses. This statement involves risks and uncertainties and is 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 3.

ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 6th day of May 2004.

PG&E FUNDING LLC, as Registrant

By /s/ DINYAR B. MISTRY

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Dinyar B. Mistry, Controller

(Duly authorized officer and principal accounting officer)