Pacific Gas & Electric (PCG)

Other Annual Compensation

Perquisites

In general, the NEOs receive a limited range of perquisite benefits, typically encompassing a partial subsidy for financial planning services from a third-party financial advisory firm, partial reimbursement of certain health club fees, certain life insurance subsidies, parking reimbursement, and executive health services. Mr. Darbee and Mr. Morrow also receive car transportation services. These perquisites are described more fully in the Summary Compensation Table.

Executive Stock Ownership Program

PG&E Corporation has adopted an executive stock ownership program to encourage senior executive officers to achieve and maintain a minimum investment in PG&E Corporation common stock at levels set by the Committee. Executive stock ownership guidelines have been adopted by most of the companies in the Pay Comparator Group, and are increasingly viewed as an important element of a company's governance policies.

PG&E Corporation's executive stock ownership targets are based on a multiple of base salary. The stock ownership target for the PG&E Corporation CEO is three times base salary. The target ownership level for the Pacific Gas and Electric Company President and CEO and certain other senior executive officers of PG&E Corporation and Pacific Gas and Electric Company is two times base salary. The target ownership level for other senior executive officers is one-and-one-half times base salary. The program is designed to encourage executives to acquire the stock ownership target within five years after becoming subject to the program.

During each of the first three years after an executive becomes subject to the program, PG&E Corporation may award the officer phantom stock called Special Incentive Stock Ownership Premiums (SISOPs) that will be credited to the officer's deferred compensation account in the SRSP to encourage executive officers to meet the stock ownership targets. SISOPs will be awarded only if an executive officer has met or exceeded the "annual milestone" for that year, i.e., 20% of the executive's target. The program specifies how the amount of a SISOP award will be determined. No SISOPs were granted to NEOs in 2007.

SISOPs vest in full on the third anniversary of the grant date, and are subject to forfeiture if the executive fails to maintain the applicable stock ownership target. Upon retirement or termination, the vested SISOPs are distributed in the form of an equivalent number of shares of PG&E Corporation common stock. The vesting of SISOPs can be accelerated under certain circumstances, as specified in the discussion below regarding "Potential Payments Upon Resignation, Retirement, Termination, Change in Control, Death, or Disability."

If at the end of five years, an executive officer fails to meet or maintain the applicable stock ownership target, cash-based awards that the officer would otherwise be entitled to receive (such as a STIP payment) are converted into phantom stock and credited to the officer's account under the SRSP until the stock ownership target is met.

All officers who are currently subject to stock ownership targets under the executive stock ownership program have met or exceeded their targets.

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Stipend in Lieu of Perquisites

The Committee (and with regard to Peter A. Darbee, Thomas B. King, and William T. Morrow, the independent members of the applicable Board) also approved the 2007 lump-sum annual stipend amount for each executive officer, which ranged from $15,000 to $35,000, depending on officer level. This stipend is provided in lieu of providing the NEO with perquisite benefits such as individual authorizations for memberships in clubs and civic organizations. The NEOs have discretion to use this stipend as they see fit.