Pacific Gas & Electric (PCG)

Performance Shares and Performance Units

Starting in 2004, PG&E Corporation awarded 498,910 performance shares, or phantom stock, to certain officers and employees of PG&E Corporation and its subsidiaries of which 342,180 were awarded to Utility employees. The performance shares, subject to the achievement of certain performance targets, vest on the third year anniversary following the date of the grant. The number of performance shares that were outstanding at December 31, 2004 was 486,010 of which 330,832 were related to Utility employees. The amount of compensation expense recognized in 2004 in connection with the issuance of performance shares was approximately $3 million, of which $2 million was recognized by the Utility. On January 3, 2005, PG&E Corporation awarded 328,340 performance shares, of which 241,240 were awarded to Utility employees.

PG&E Corporation has granted performance units to certain officers and employees of PG&E Corporation and its subsidiaries. The performance units, subject to achievement of certain performance targets, vest one-third per year and are settled in cash annually as vesting occurs in each of the three years following the year of grant. As a result of achieving performance criteria, at December 31, 2004, all remaining units vested and PG&E Corporation recognized compensation expense totaling approximately $5 million in 2004, of which $2 million related to the Utility. These amounts were paid in January 2005 to the participating individuals.

Performance Shares and Performance Units

        Starting in 2004, PG&E Corporation awarded 498,910 performance shares, or phantom stock, to certain officers and employees of PG&E Corporation and its subsidiaries of which 342,180 were awarded to Utility employees. The performance shares, subject to the achievement of certain performance targets, vest on the third year anniversary following the date of the grant. The number of

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performance shares that were outstanding at December 31, 2004 was 486,010 of which 330,832 were related to Utility employees. The amount of compensation expense recognized in 2004 in connection with the issuance of performance shares was approximately $3 million, of which $2 million was recognized by the Utility. On January 3, 2005, PG&E Corporation awarded 328,340 performance shares, of which 241,240 were awarded to Utility employees.

        PG&E Corporation has granted performance units to certain officers and employees of PG&E Corporation and its subsidiaries. The performance units, subject to achievement of certain performance targets, vest one-third per year and are settled in cash annually as vesting occurs in each of the three years following the year of grant. As a result of achieving performance criteria, at December 31, 2004, all remaining units vested and PG&E Corporation recognized compensation expense totaling approximately $5 million in 2004, of which $2 million related to the Utility. These amounts were paid in January 2005 to the participating individuals.