Pacific Gas & Electric (PCG)

Review, Approval, and Ratification of Related Person Transactions

At their December 20, 2006 and February 20, 2008 meetings, the Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company each adopted and/or amended the companies' joint Related Party Transaction Policy (Policy). The Policy generally applies to transactions that would require disclosure under Item 404(a) of Regulation S-K under the Securities Exchange Act of 1934, except that the Policy has a lower dollar threshold than Item 404(a).

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Under the Policy, at the first meeting of each year, each company's Audit Committee must review, approve, and/or ratify related party transactions with values exceeding $10,000, between the respective company and (1) a director, nominee for director, or executive officer, (2) holders of greater than 5% of that company's voting securities, or (3) those parties' immediate family members (each, a Related Party). The Policy specifically applies to transactions in which a Related Party has a direct or indirect material interest.

After the annual review and approval of Related Party transactions, if either company wishes to enter into a new Related Party transaction, that transaction must be either pre-approved or ratified by the appropriate Audit Committee. Where it is not practical or desirable to wait until the next committee meeting to obtain committee approval/ratification, the Chair of the Audit Committee may elect to approve a particular Related Party transaction and then report on such approval to the full Audit Committee at the committee's next regularly scheduled meeting. If the Chair of the Audit Committee has an interest in the proposed Related Party transaction, then that transaction may be reviewed and approved by another independent and disinterested member of the applicable Audit Committee. If a transaction is not ratified in accordance with the Policy, management must make all reasonable efforts to cancel or annul that transaction.

As part of the Audit Committees' review of any transaction, the committee considers whether the transaction is on terms comparable to those that could be obtained in arm's-length dealings with an unrelated third party. The Policy also requires that each Audit Committee disclose to the respective Board any material Related Party transactions.

However, as provided in Item 404(a), the following types of transactions are excluded:

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Transactions where the rates or charges are determined by competitive bids,

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Transactions for the rendering of services as a common or contract carrier, or public utility, at rates of charges fixed in conformity with law or governmental authority,

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Transactions for services as a bank depository of funds, transfer agent, registrar, trustee under a trust indenture, or similar services,

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Benefits received on a pro rata basis by holders of company securities,

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Transactions where the individual's interest arises solely from (1) such person's position as a director of another corporation or organization which is a party to the transaction, or (2) the direct or indirect ownership of such person and a specific group (consisting of directors, nominees for director, and executive officers of the corporation, or any member of their immediate families), in the aggregate, of less than a 10% equity interest in another person (other than a partnership) which is a party to the transaction, or (3) from both such position and ownership,

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Transactions where the individual's interest arises solely from the holding of an equity interest (including a limited partnership interest, but excluding a general partnership interest) or a creditor interest in another person that is party to the transaction with PG&E Corporation, Pacific Gas and Electric Company, or any of their subsidiaries or affiliates, and the transaction is not material to such other person,

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Transactions where the individual's interest arises only from such person's position as a limited partner in a partnership in which the group specified above has an interest of less than 10 percent, or

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Compensation approved by the PG&E Corporation Compensation Committee (or its predecessor, the PG&E Corporation Nominating, Compensation, and Governance Committee) and received for services as a director or officer, if that compensation is otherwise reported in executive compensation sections of this Joint Proxy Statement, or would have been reported if the individual had been a named executive officer listed in the Summary Compensation Table.

During 2007, all Related Party transactions involving either company conformed with the policy.