<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                   FORM 10-Q

(Mark One)

[X]            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
               For the quarterly period ended September 30, 1999
                                      OR
[_]            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF  THE SECURITIES EXCHANGE ACT OF 1934
         For the transition period _______________ to ________________

                          COMMISSION FILE NO. 0-25842
                 PG&E Gas Transmission, Northwest Corporation
            (Exact name of registrant as specified in its charter)

              California                                 94-1512922
    (State or other jurisdiction of         (I.R.S. Employer Identification No.)
     incorporation or organization)
  2100 SW River Parkway, Portland, OR                       97201
(Address of principal executive offices)                 (Zip code)

      Registrant's telephone number, including area code: (503) 833-4000


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 twelve 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.  Yes  X     No
                                    -------------

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of November 10, 1999.

1,000 shares of common stock no par value. (All shares are owned by PG&E Gas
Transmission Corporation.)

Registrant meets the conditions set forth in General Instruction (H) (1) (a) and
   (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced
                              disclosure format.
<PAGE>

TABLE OF CONTENTS
-----------------

<TABLE>
<CAPTION>
PART I.  Financial Information
------------------------------
                                                                         Page
<S>                                                                      <C>
Item 1.    Consolidated Financial Statements

              Statements of Consolidated Income                            1

              Consolidated Balance Sheets                                  2

              Statements of Consolidated Common Stock Equity               4

              Statements of Consolidated Cash Flows                        5

              Notes to Consolidated Financial Statements                   6

                     Note 1.  Basis of Presentation                        6

                     Note 2.  Contingencies                                6

Item 2.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations                                       7

PART II.  Other Information
---------------------------

Item 6.    Exhibits and Reports on Form 8-K                                13

Signatures                                                                 14
</TABLE>
<PAGE>

  PART I:  FINANCIAL INFORMATION
  ------   ---------------------

  ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS
           ---------------------------------

--------------------------------------------------------------------------------

                       Statements of Consolidated Income
                                  (Unaudited)

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                           Three Months Ended              Nine Months Ended
                                                              September 30,                   September 30,
-----------------------------------------------------------------------------------------------------------------------
(In Thousands)                                             1999             1998            1999              1998
-----------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>             <C>                <C>
OPERATING REVENUES:
Gas transportation                                    $    42,279     $    45,471     $    125,869       $    138,048
Gas transportation for affiliates                          13,291          12,712           38,658             37,924
Other                                                         139             220              420                539
-----------------------------------------------------------------------------------------------------------------------
     Total operating revenues                              55,709          58,403          164,947            176,511
-----------------------------------------------------------------------------------------------------------------------

OPERATING EXPENSES:
Administrative and general                                  8,165           8,621           21,178             22,679
Operations and maintenance                                  4,403           3,881           14,139             11,527
Depreciation and amortization                              10,346           9,741           30,739             29,355
Property and other taxes                                    2,844           2,825            8,494              8,759
-----------------------------------------------------------------------------------------------------------------------
     Total operating expenses                              25,758          25,068           74,550             72,320
-----------------------------------------------------------------------------------------------------------------------
OPERATING INCOME                                           29,951          33,335           90,397            104,191
-----------------------------------------------------------------------------------------------------------------------

OTHER INCOME AND (INCOME DEDUCTIONS):
Allowance for equity funds used during construction           235             417              927                730
Interest income                                                59              43              140                180
Other - net                                                 6,170           1,065            5,750                866
-----------------------------------------------------------------------------------------------------------------------
     Total other income and (income deductions)             6,464           1,525            6,817              1,776
-----------------------------------------------------------------------------------------------------------------------

INTEREST EXPENSE:
Interest on long-term debt                                 10,447          10,704           30,979             31,907
Allowance for borrowed funds used during construction        (240)           (432)            (942)              (753)
Other interest charges                                        326             346            1,019              1,079
-----------------------------------------------------------------------------------------------------------------------
     Net interest expense                                  10,533          10,618           31,056             32,233
-----------------------------------------------------------------------------------------------------------------------
INCOME  BEFORE INCOME TAXES                                25,882          24,242           66,158             73,734

INCOME TAX EXPENSE                                          9,940           8,511           25,337             27,805

-----------------------------------------------------------------------------------------------------------------------
NET INCOME                                                 15,942          15,731           40,821             45,929
-----------------------------------------------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME, NET OF TAX:

-----------------------------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME                                  $    15,942     $    15,731     $     40,821       $     45,929
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

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

                                       1
<PAGE>

--------------------------------------------------------------------------------

                          Consolidated Balance Sheets
                                  (Unaudited)


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                    ASSETS
--------------------------------------------------------------------------------
                                                   September 30,     December 31,
(In Thousands)                                        1999              1998
----------------------------------------------------------------------------------
<S>                                               <C>               <C>
PROPERTY, PLANT, and EQUIPMENT:
Property, plant and equipment in service          $  1,528,441       $ 1,500,085
Accumulated depreciation                              (507,065)         (479,824)
----------------------------------------------------------------------------------
  Net plant in service                               1,021,376         1,020,261
Construction work in progress                           27,232            37,772
----------------------------------------------------------------------------------
     Total property, plant & equipment - net         1,048,608         1,058,033
----------------------------------------------------------------------------------

CURRENT ASSETS:
Cash and cash equivalents                                2,457             1,080
Accounts receivable - gas transportation                20,320            15,480
Accounts receivable - fuel balancing and other           9,814            10,647
Inventories (at average cost)                            8,703             7,950
Prepayments and other current assets                       539             3,545
----------------------------------------------------------------------------------
     Total current assets                               41,833            38,702
----------------------------------------------------------------------------------

DEFERRED CHARGES:
Income tax related                                      25,471            25,400
Deferred charge on reacquired debt                      11,546            12,449
Unamortized debt expense                                 3,334             3,625
Other regulatory assets                                  5,385             5,744
Other                                                    1,148             1,105
----------------------------------------------------------------------------------
     Total deferred charges                             46,884            48,323
----------------------------------------------------------------------------------

TOTAL ASSETS                                      $  1,137,325       $ 1,145,058
----------------------------------------------------------------------------------
</TABLE>

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

                                       2
<PAGE>

--------------------------------------------------------------------------------

                          Consolidated Balance Sheets
                                  (Unaudited)

--------------------------------------------------------------------------------
                        CAPITALIZATION AND LIABILITIES
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                            September 30,     December 31,
(In Thousands)                                                  1999              1998
---------------------------------------------------------------------------------------------
<S>                                                      <C>                <C>
CAPITALIZATION:
Common stock - no par value, 1,000 shares authorized,
     issued and outstanding                              $     85,474       $       85,474
Additional paid-in capital                                    192,717              192,717
Reinvested earnings                                            64,639               68,818
---------------------------------------------------------------------------------------------
     Total common stock equity                                342,830              347,009
Long-term debt                                                569,350              587,979
---------------------------------------------------------------------------------------------
     Total capitalization                                     912,180              934,988
---------------------------------------------------------------------------------------------

CURRENT LIABILITIES:
Long-term debt - current portion                                  486                  456
Accounts payable                                               11,907               18,016
Accounts payable - affiliated companies                         5,746                3,187
Accrued interest                                               10,211                4,095
Accrued liabilities                                             8,207                9,466
Accrued taxes                                                   3,191                  779
---------------------------------------------------------------------------------------------
     Total current liabilities                                 39,748               35,999
---------------------------------------------------------------------------------------------

DEFERRED CREDITS:
Deferred income taxes                                         175,116              163,846
Other                                                          10,281               10,225
---------------------------------------------------------------------------------------------
     Total deferred credits                                   185,397              174,071
---------------------------------------------------------------------------------------------

CONTINGENCIES (see Note 2)                                          -                    -
---------------------------------------------------------------------------------------------

TOTAL CAPITALIZATION AND LIABILITIES                     $  1,137,325       $    1,145,058
---------------------------------------------------------------------------------------------
</TABLE>

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

                                       3
<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------

                                         Statements of Consolidated Common Stock Equity
                                                          (Unaudited)

---------------------------------------------------------------------------------------------------------------------
                                                                                              Nine Months Ended
                                                                                                September 30,
---------------------------------------------------------------------------------------------------------------------
(In Thousands)                                                                            1999              1998
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>               <C>
BALANCE AT BEGINNING OF PERIOD                                                            $ 347,009         $ 431,727
  Comprehensive income
     Net income                                                                              40,821            45,929
     Other comprehensive income                                                                   -                 -
---------------------------------------------------------------------------------------------------------------------
  Dividend paid to parent company                                                           (45,000)         (130,000)
---------------------------------------------------------------------------------------------------------------------
BALANCE AT END OF PERIOD                                                                  $ 342,830         $ 347,656
---------------------------------------------------------------------------------------------------------------------
</TABLE>

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

                                       4
<PAGE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------

                                              Statements of Consolidated Cash Flows
                                                            (Unaudited)

-------------------------------------------------------------------------------------------------------------------------
                                                                                                Nine Months Ended
                                                                                                  September 30,
------------------------------------------------------------------------------------------------------------------------
(In Thousands)                                                                                  1999           1998
------------------------------------------------------------------------------------------------------------------------
<S>                                                                                             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                                                               $  40,821      $  45,929
Adjustments to reconcile net income to net cash provided by
  operating activities:
        Depreciation and amortization                                                              33,409         31,662
        Deferred income taxes                                                                      11,270         12,278
        Allowance for equity funds used during construction                                          (927)          (730)
Changes in operating assets and liabilities:
        Accounts receivable                                                                        (4,840)         1,490
        Accounts receivable/payable - affiliated companies                                          2,559            266
        Accounts receivable - fuel balancing and other                                                833         (2,840)
        Accounts payable and other accrued liabilities                                             (1,252)           574
        Accrued taxes                                                                               2,412          2,534
        Other working capital                                                                       2,253          3,756
Other - net                                                                                           302           (677)
------------------------------------------------------------------------------------------------------------------------
          Net cash provided by operating activities                                                86,840         94,242
------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures                                                                         (21,042)       (32,870)
Allowance for borrowed funds used during construction                                                (942)          (753)
------------------------------------------------------------------------------------------------------------------------
          Net cash used in investing activities                                                   (21,984)       (33,623)
------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net Issuance (Repayment) of long-term debt                                                        (18,479)        23,946
Dividend paid to parent                                                                           (45,000)      (130,000)
------------------------------------------------------------------------------------------------------------------------
          Net cash used in financing activities                                                   (63,479)      (106,054)
------------------------------------------------------------------------------------------------------------------------

NET CHANGE IN CASH AND CASH EQUIVALENTS                                                             1,377        (45,435)

CASH AND CASH EQUIVALENTS AT JANUARY 1                                                              1,080         48,249

------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30                                                       $   2,457      $   2,814
------------------------------------------------------------------------------------------------------------------------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
   INFORMATION:
Cash paid for (received from):
          Interest                                                                              $  23,646      $  24,578
          Income taxes                                                                          $   9,881      $  17,513
------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

                                       5
<PAGE>

Notes to Consolidated Financial Statements (Unaudited)
------------------------------------------------------


Note 1:  Basis of Presentation
------------------------------

     PG&E Gas Transmission, Northwest Corporation (PG&E GT-NW), incorporated in
California in 1957, is affiliated with, but is not the same company as, Pacific
Gas and Electric Company, the gas and electric company serving Northern and
Central California.  PG&E Corporation is the ultimate corporate parent for both
PG&E GT-NW and Pacific Gas and Electric Company.

     The accompanying unaudited consolidated financial statements, which have
been prepared in accordance with interim period reporting requirements, reflect
the results for PG&E GT-NW and its wholly owned subsidiaries.

     PG&E GT-NW and its subsidiaries are collectively referred to herein as the
"Company."  This information should be read in conjunction with the Consolidated
Financial Statements and Notes to Consolidated Financial Statements included in
Item 8, Financial Statements and Supplementary Data, in the Company's Form 10-K
for the fiscal year ended December 31, 1998.

     In the opinion of management, the accompanying statements reflect all
adjustments 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.
Subsidiary intercompany accounts and transactions have been eliminated.  Prior
year's amounts in the consolidated financial statements have been reclassified
where necessary to conform to the 1999 presentation.  Results of operations for
interim periods are not necessarily indicative of results to be expected for a
full year.

Note 2:  Contingencies
----------------------

     1994 Rate Case - In September 1996, the Federal Energy Regulatory
Commission (FERC) approved, without modification, the proposed settlement of
PG&E GT-NW's rate case. The rate case was initially filed on February 28, 1994,
while the proposed settlement was filed with the FERC on March 21, 1996. In
March and June 1998, the FERC denied requests by several shippers for rehearing
and reaffirmed its approval of the settlement. In May 1998, three shippers
petitioned for judicial review of the FERC Orders by the United States Court of
Appeals for the District of Columbia Circuit. In the event the settlement were
to be modified as a result of an appeal, PG&E GT-NW would be required to
implement the results as ordered by the court or to seek review at the United
States Supreme Court.

                                       6
<PAGE>

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
            -------------------------------------------------
            CONDITION AND RESULTS OF OPERATIONS
            -----------------------------------


GENERAL
-------

     The unaudited consolidated financial statements include PG&E Gas
Transmission, Northwest Corporation (PG&E GT-NW) and its wholly owned
subsidiaries.

     PG&E GT-NW and its subsidiaries are collectively referred to herein as the
"Company."  This information should be read in conjunction with the Consolidated
Financial Statements and Notes to Consolidated Financial Statements included in
Item 8, Financial Statements and Supplementary Data in the Company's Form 10-K
for the fiscal year ended December 31, 1998.

     The following discussion includes forward-looking statements that involve a
number of risks, uncertainties, and assumptions.  When used in Management's
Discussion and Analysis of Financial Condition and Results of Operations, words
such as "estimates," "expects," "intends," "anticipates," "plans," and similar
expressions identify those statements which are forward-looking.  Actual results
may differ materially from those expressed in the forward-looking statements.
The important factors that could cause actual results to differ materially from
those expressed in the forward-looking statements include, but are not limited
to, the ongoing restructuring of the gas industry, changes in future rate-
making, and the ability of the Company to expand its core pipeline business.

     PG&E GT-NW's transportation system provides access to natural gas from
producing fields in western Canada and extends from the British Columbia-Idaho
border to the Oregon-California border.  PG&E GT-NW's transportation system also
provides service to various delivery points in Idaho, Washington, and Oregon.
PG&E GT-NW's natural gas transportation services are regulated by the Federal
Energy Regulatory Commission (FERC or the Commission).  Various safety issues
are subject to the jurisdiction of the United States Department of
Transportation.

CHANGING REGULATORY ENVIRONMENT
-------------------------------

     During 1997 and 1998, the FERC issued several orders to standardize
communications and practices of pipelines.  In April 1998, the FERC issued Order
587-G which sets standards for electronic communication, nomination, and
imbalance procedures.  Pipeline companies need to develop connections using
internet tools, directory services and communication protocols to provide non-
discriminatory access to all electronic information.  In September 1998, the
Commission issued an order on rehearing clarifying certain aspects of Order 587-
G and deferring the date for processing transactions over the Internet from June
1999 to June 2000.

                                       7
<PAGE>

     In July 1998, the FERC issued a Notice of Proposed Rulemaking (NOPR) to
promote competition in the short-term market and a Notice of Inquiry (NOI) on
long-term rates to mitigate pipeline market power. Features of the NOPR include
removal of the price cap for short-term services, auctions and negotiated terms
and conditions of service. The NOI maintains the cost cap on long-term services
and evaluates indexing and performance based rates. The Commission subsequently
has received numerous industry comments and has held hearings, including
regional hearings on gas demand, but has not taken further action. FERC also
issued a Statement of Policy in September 1999 addressing certification of new
interstate natural gas facilities. Among other things, this Statement of Policy
has modified on a prospective basis the Commission's guidelines for evaluating
the market need and pricing of new pipeline capacity.

     These regulatory initiatives are not expected to have a material impact on
PG&E GT-NW's financial position, liquidity or results of operations in the
foreseeable future.

ACCOUNTING FOR THE EFFECTS OF REGULATION
----------------------------------------

     PG&E GT-NW currently accounts for the economic effects of regulation in
accordance with the provisions of Statement of Financial Accounting Standards
(SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation."  As
a result of applying the provisions of SFAS No. 71, PG&E GT-NW has accumulated
approximately $44.0 million of regulatory assets net of related reserves as of
September 30, 1999.


RESULTS OF OPERATIONS
---------------------

  Selected operating results and other data are as follows:

<TABLE>
<CAPTION>
                                                                Three Months Ended              Nine Months Ended
                                                                  September 30,                   September 30,
                                                               1999             1998          1999            1998
                                                            ----------      -----------    ----------     -----------
                                                                  (In Millions)                   (In Millions)
<S>                                                         <C>             <C>            <C>            <C>
Operating revenues                                          $    55.7       $      58.4    $    164.9     $     176.5
Operating expenses                                               25.8              25.1          74.5            72.4
                                                            ---------       -----------    ----------     -----------
   Operating income                                              29.9              33.3          90.4           104.1
Other income and (income deductions)                              6.5               1.5           6.8             1.8
Net interest expense                                             10.5              10.6          31.1            32.2
                                                            ---------       -----------    ----------     -----------
   Income before taxes                                           25.9              24.2          66.1            73.7
Income tax expense                                                9.9               8.5          25.3            27.8
                                                            ---------       -----------    ----------     -----------
   Net Income                                                    16.0              15.7          40.8            45.9
                                                            =========       ===========    ==========     ===========
</TABLE>


     Net Income - Income for the three and nine-month periods ended September
30, 1999, increased $0.3 million and decreased $5.1 million, respectively,
compared to the same periods in 1998. The decrease in the nine-month period was
primarily the result of lower Operating Revenues and higher Operating Expenses
reflecting severance costs partially offset by higher Other Income.

     Operating Revenues - Operating revenues for the three and nine-month
periods ended September 30, 1999 decreased $2.7 million and $11.6 million,
respectively, compared to the same periods in 1998. The decreases were primarily
due to lower short-term firm and interruptible service revenues, partially
offset by revenues generated from the 1998 expansion, which went into service on
November 1, 1998. Additionally, for the nine months ended

                                       8
<PAGE>

September 30, 1999, the decrease reflected lower Gas Research Institute (GRI)
surcharges collected from transportation customers under FERC-approved tariffs
and a refund of $3.9 million of GRI surcharges to customers as ordered by the
FERC in May 1999. This decrease was offset by a corresponding decrease in
Administrative and General Expenses for GRI costs.

     Operating Expenses - The components of total operating expenses are as
follows:

<TABLE>
<CAPTION>
                                                                Three Months Ended              Nine Months Ended
                                                                  September 30,                   September 30,
                                                              1999             1998            1999           1998
                                                           -----------     ------------    -------------   -----------
                                                                  (In Millions)                   (In Millions)
<S>                                                        <C>             <C>             <C>             <C>
Administrative and general                                 $       8.2     $        8.6    $      21.2     $      22.7
Operations and maintenance                                         4.5              3.9           14.1            11.5
Depreciation and amortization                                     10.3              9.8           30.7            29.4
Property and other taxes                                           2.8              2.8            8.5             8.8
                                                           -----------     ------------    -----------     -----------
    Total operating expenses                               $      25.8     $       25.1    $      74.5     $      72.4
                                                           ===========     ============    ===========     ===========
</TABLE>


     For the three and nine-month periods ended September 30, 1999, compared
with the same periods in 1998, operating expenses increased $0.7 million and
$2.1 million, respectively. The increase in the three-month period reflects
increased year 2000 related costs, decreased capitalized labor costs and
increased depreciation expense. The increase in the nine-month period reflects
severance costs and higher maintenance costs of compressor units, partially
offset by a decrease in GRI costs for which there is a corresponding decrease in
transportation revenue.

     Other Income and (Income Deductions) - Other income and income deductions
increased by $5.0 million for the three and nine-month periods. The increases
are primarily the result of favorable negotiations regarding a transportation
contract and other related issues completed in the third quarter.

     Interest Expense - Interest expense for the three and nine-month periods
ended September 30, 1999, decreased $0.1 million and $1.1 million, respectively,
compared to the same periods in 1998.  For the three months ended September 30,
1999 and 1998, the average interest rate was approximately 7.3 percent and 7.3
percent, respectively, while the average balance of long-term debt (excluding
capital lease obligations) outstanding was $570 million and $578 million,
respectively. For the nine months ended September 30, 1999 and 1998, the average
interest rate was approximately 7.2 percent and 7.3 percent, respectively, while
the average balance of long-term debt (excluding capital lease obligations)
outstanding was $574 million and $583 million, respectively.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

     Sources of Capital - The Company's capital requirements are funded from
cash provided by operations and, to the extent necessary, external financing and
capital contributions from its parent company. PG&E GT-NW pays dividends as part
of a balanced approach to managing its capital structure, funding its operations
and capital expenditures, and maintaining appropriate cash balances.

     Net Cash Provided by Operating Activities - For the nine months ended
September 30, 1999, net cash provided by operating activities was $86.8 million,
compared with $94.2 million for the same period in 1998.  The $7.4 million
decrease was primarily due to the decrease in net income.

                                       9
<PAGE>

     Net Cash Used in Investing Activities - For the nine months ended September
30, 1999 compared to the same period in 1998, net cash used in investing
activities decreased by $11.6 million.  The decrease primarily reflects lower
construction expenditures in 1999.

     Net Cash Used in Financing Activities - For the nine months ended September
30, 1999, cash used in financing activities was $63.5 million including $45.0
million in dividends paid, and an $18.5 million net decrease in long-term debt.
For the nine months ended September 30, 1998, cash used in financing activities
was $106.1 million including a $130 million dividend payment offset by a net
increase in debt of $23.9 million.

YEAR 2000 READINESS
-------------------

     The Year 2000 issue exists because many computer programs use only two
digits to refer to a year, and were developed without considering the impact of
the upcoming change in the century. If PG&E GT-NW's computer systems fail or
function incorrectly due to not being made Year 2000 ready, they could directly
and adversely affect the Company's ability to generate or deliver its products
and services or could otherwise affect revenues, safety, or reliability for such
a period of time as to lead to unrecoverable consequences.

     PG&E GT-NW's plan to address the Year 2000 issues focuses primarily on
mission-critical systems whose components are categorized as in-house software,
vendor software, embedded systems, and computer hardware. The four primary
phases of the Company's plan to address these systems are inventory and
assessment, remediation, testing and certification. Certification occurs when
mission-critical systems are formally determined to be Year 2000 ready.  Year
2000 ready means that a system is suitable for continued use into the year 2000.

     As reflected in the table below, the Company's mission-critical items have
been certified as Year 2000 ready with very few exceptions.  These exceptions
will be resolved in November by  the replacement of non Y2K-ready systems at a
compressor station.  Contingency plans are in place to address any unlikely
delays or problems.

Year 2000 Readiness of Mission-Critical Items as of November 2, 1999

<TABLE>
<CAPTION>
                                                   Remediation         Testing        Certification
                                                    Completed         Completed         Completed
          -------------------------------------------------------------------------------------------
          <S>                                      <C>                <C>             <C>
          In-house software                           100%               100%              100%

          Vendor software                             100%               100%              100%

          Embedded systems                             99%                99%               99%

          Computer hardware                           100%               100%              100%
</TABLE>

     "Clean management" practices have been implemented to prevent systems from
becoming compromised.  Even after systems are certified, the Company is
continuing various types of validation and quality assurance efforts, and may do
so into the year 2000 to minimize the risk of any significant disruption.

     In addition to internal systems, PG&E GT-NW also depends upon external
parties, including customers, suppliers, business partners, gas and electric
system operators, government agencies, and financial institutions to support the
functioning of its business. To the extent that any of these parties are
considered mission-critical to the Company's business, and experience Year 2000
problems in their systems, the Company's mission-critical business functions may
be adversely affected. To address this vulnerability, PG&E GT-NW has a four
phased approach for dealing with external parties: (1) inventory, (2) action
planning, (3) risk assessment, and (4)

                                       10
<PAGE>

contingency planning. The contingency planning process also addresses exposures
that could result from failures in the Company's own essential business systems.

     The Company's contingency plans have been incorporated into its emergency
plans and  include measures such as emergency back-up and recovery procedures,
augmenting automated applications with manual processes, and identification of
alternate suppliers.  The plans were tested in various drills throughout 1999,
and were updated as necessary.

     As of September 30, 1999, PG&E GT-NW estimates total costs to address Year
2000 problems to be $16.0 million.  Included are systems replaced or enhanced
for general business purposes and whose implementation schedules are critical to
the Company's Year 2000 readiness.

     Through September 1999, PG&E GT-NW spent approximately $14.2 million, of
which $9.7 million was capitalized. Future costs to address Year 2000 issues are
expected to be $1.8 million, of which $1.0 million will be capitalized. The
Company does not believe that the projected cost of addressing Year 2000 issues
will have a material impact on its financial position or results of operations.

     Although PG&E GT-NW expects its efforts and those of its external parties
to be successful, the Company recognizes that with the complex interaction of
today's computing and communications systems, it cannot be certain it will be
completely successful. Accordingly, the Company has considered the most
reasonably likely worst case Year 2000 scenarios that could affect the Company,
and believes that they mainly involve localized telephone problems due to
congestion, interruption of electric power supply from the smaller utilities
along the pipeline, and small isolated malfunctions in the Company's computer
systems that would be immediately repaired. None of these reasonably likely
scenarios are expected to have a material adverse impact on the Company's
financial position, results of operations or cash flow. Nevertheless, if the
Company, or third parties with whom it has significant business relationships,
fail to achieve Year 2000 readiness of mission-critical systems, there could be
a material adverse impact on the Company's financial position, results of
operations and cash flows.

                                       11
<PAGE>

NEW ACCOUNTING STANDARD
-----------------------

     In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133 "Accounting for Derivative Instruments and Hedging
Activities."  In June 1999, the FASB issued Statement No. 137 "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133", which postponed the implementation of Statement No.
133.  Statement No. 137 is required to be adopted in years beginning after June
15, 2000 but permits early adoption as of the beginning of any fiscal quarter.
PG&E GT-NW expects to adopt the new Statement no later than January 1, 2001.
The statement will require the recognition of all derivatives, as defined in the
Statement, on the balance sheet at fair value.  Derivatives, or any portion
thereof, that are not effective hedges must be adjusted to fair value through
income.  If the derivative is an effective hedge, depending on the nature of the
hedge, changes in the fair value of derivatives either will be offset against
the change in fair value of the hedged assets, liabilities, or firm commitments
through earnings or will be recognized in other comprehensive income until the
hedged item is recognized in earnings.

     PG&E GT-NW is currently evaluating the potential impact of Statement 133.

                                       12
<PAGE>

    PART II:  OTHER INFORMATION
    ---------------------------


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
         --------------------------------

  (a)  Exhibits:

               Exhibit 10.1 - Sublease between PG&E Gas Transmission, Northwest
  Corporation and Enron Communications, Inc., dated as of August 11, 1999, to
  the Lease Agreement dated as of April 15, 1994, between Pacific Gas
  Transmission Company (now PG&E Gas Transmission, Northwest Corporation) and
  GIC Development 94-I, L.L.C.

               Exhibit 10.2 - Amended and Restated Credit Agreement dated as of
  May 24, 1999, among PG&E Gas Transmission, Northwest Corporation and certain
  commercial institutions.

               Exhibit 10.3 - 364-Day Credit Agreement dated as of May 24, 1999,
  among PG&E Gas Transmission, Northwest Corporation and certain commercial
  institutions.

               Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges.

               Exhibit 27 - Financial Data Schedule for the nine months ended
  September 30, 1999.

  (b)  No reports on Form 8-K were issued during the quarter ended September 30,
       1999 and through the date hereof.

                                       13
<PAGE>

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.



                 PG&E GAS TRANSMISSION, NORTHWEST CORPORATION
                 ---------------------------------------------
                                 (Registrant)


November 12, 1999    By:     /s/ STANLEY C. KARCZEWSKI
                            --------------------------------
                     Name:  Stanley C. Karczewski
                     Title: Vice President and Controller

                                       14
<PAGE>

                                 EXHIBIT INDEX


Exhibit No.:      Description of Exhibit

10.1   Sublease between PG&E Gas Transmission, Northwest Corporation and Enron
       Communications, Inc., dated as of August 11, 1999, to the Lease Agreement
       dated as of April 15, 1994, between Pacific Gas Transmission Company (now
       PG&E Gas Transmission, Northwest Corporation) and GIC Development 94-I,
       L.L.C.

10.2   Amended and Restated Credit Agreement dated as of May 24, 1999, among
       PG&E Gas Transmission, Northwest Corporation and certain commercial
       institutions

10.3   364-Day Credit Agreement dated as of May 24, 1999, among PG&E Gas
       Transmission, Northwest Corporation and certain commercial institutions

12     Computation of Ratio of Earnings to Fixed Charges

27     Financial Data Schedule for the nine months ended September 30, 1999.

                                       15