Pacific Gas & Electric (PCG)

Background

        At its meeting on December 15, 2004, the Nominating, Compensation, and Governance Committee reviewed and approved the 2005 Short-Term Incentive Plan (STIP) structure for officers of PG&E Corporation and Pacific Gas and Electric Company. The structure (Attachment A) establishes the weighting of corporate earnings from operations, subsidiary earnings from operations, and other performance factors for officers.

ATTACHMENT A

2005 Officer Short-Term Incentive Plan Structure¹

¹

As with past STIP structures, the Chief Executive Officer of PG&E Corporation (CEO) will continue to have the discretion to modify the 2005 STIP structure for officers in circumstances where there is a need during the year to focus a particular officer on a key business-specific objective. Such discretion would be limited to shifting the performance measure weight proportionately such that no more than 25 percent would be assigned to the ancillary business-specific objective. In addition, the CEO will recommend to the Committee a performance rating for all qualitative award components (i.e., Utility Operations Transformation) based on his assessment of the performance for that award component. The Committee will continue to retain full discretion as to the determination of final officer STIP awards.

2

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Exhibit 10.18

ATTACHMENT A