PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

See accompanying Notes to the Condensed Financial Statements.

See accompanying Notes to the Condensed Financial Statements.

See accompanying Notes to the Condensed Financial Statements.

Notes to the Condensed Financial Statements
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A. Basis of Presentation

     The Quarterly Report on Form 10-Q includes 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 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 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 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 (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 be used only 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 $64,250,000 at March 31, 2003, and $66,951,000 at December 31, 2002.

     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. Remittances from the Servicer to the Trustee have not been interrupted by the Servicer's bankruptcy filing in 2001.

     The Servicer's bankruptcy proceedings resulted in a Servicer default under Section 7.01(d) of the Servicing Agreement. 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. Confirmation hearings on the CPUC's alternative plan began on November 18, 2002. The trial on the Plan began on December 16, 2002. On March 4, 2003, the Bankruptcy Court ordered the Servicer, the CPUC, and other parties involved in the confirmation trial to participate in settlement negotiations. On March 11, 2003, the Bankruptcy Court then issued orders staying nearly all the proceedings in the confirmation trial until May 12, 2003. On April 23, 2003, the Bankruptcy Court extended this stay for an addi tional 30 days. A status conference is scheduled for June 16, 2003. 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 adverse effect on its ability to perform all duties as servicer.

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (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 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.

     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.

     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 CPUC approved the filing on January 15, 2003. The decrease was necessary due to the achievement of the required level of funding in the Subaccounts at the end of 2002.

     Collections of FTA Charges were approximately $96,353,000 for the three months ended March 31, 2003 and $98,269,000 for the three months ended March 31, 2002. The decrease in collections in 2003 was due to a decrease in the applicable FTA Charge rates which became effective on January 1, 2003.

     Interest payments on the Notes were approximately $23,295,000 for the three months ended March 31, 2003 and $27,861,000 for the three months ended March 31, 2002. Payments for servicing fees and other expenses were approximately $967,000 for the three months ended March 31, 2003 and $1,129,000 for the three months ended March 31, 2002. The decrease in payments made during the first quarter of 2003 was primarily due to the declining balance of the Notes.

Investing Activities:

     Investing activities provided net cash of approximately $2,701,000 for the three months ended March 31, 2003 and provided net cash of approximately $5,206,000 for the three months ended March 31, 2002. The decrease in net cash provided by investing activities during the first quarter of 2003 was primarily due to the use of smaller amounts of Restricted funds (reserve subaccounts) as a result of the increase in cash provided by operating activities.

     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 shortfall of approximately $2,363,000 at March 31, 2003.      
     

Forward-looking Information:

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     This Quarterly Report on Form 10-Q 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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Omitted with respect to PG&E Funding LLC pursuant to Instruction H 1(a) and (b) of Form 10-Q. Not applicable to the Trust.

ITEM 4. CONTROLS AND PROCEDURES

     Based on an evaluation of PG&E Funding LLC's disclosure controls and procedures conducted on April 24, 2003, PG&E Funding LLC's principal executive officer and principal financial officer have concluded that such controls and procedures effectively ensure that information required to be disclosed by PG&E Funding LLC in reports that the company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission (SEC) rules and forms.

     There were no significant changes in internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     None.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     Omitted with respect to PG&E Funding LLC pursuant to Instruction H 1(a) and (b) of Form 10-Q. Not applicable to the Trust.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     Omitted with respect to PG&E Funding LLC pursuant to Instruction H 1(a) and (b) of Form 10-Q. Not applicable to the Trust.

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

     Omitted with respect to PG&E Funding LLC pursuant to Instruction H 1(a) and (b) of Form 10-Q. Not applicable to the Trust.

ITEM 5. OTHER INFORMATION

     The Quarterly Servicer's Certificate dated March 25, 2003, attached as Exhibit 99.1 hereto, includes certain additional information regarding collections of FTA Charges.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

SIGNATURES

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 13th day of May, 2003.

PG&E FUNDING LLC, as Registrant

By /s/ DINYAR B. MISTRY

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Dinyar B. Mistry, Controller

INDEX TO EXHIBITS