Pacific Gas & Electric (PCG)

What types of payments are triggered for officers named in the Summary Compensation Table upon a change in control?

PG&E Corporation Officer Severance Policy. The PG&E Corporation Officer Severance Policy provides covered officers with alternative benefits that apply upon a "double trigger," i.e., after (1) actual or constructive termination of the covered officer (2) following a change in control or potential change in control. Constructive termination includes certain changes to a covered officer's responsibilities, compensation, or place of employment.

In the event of an officer's termination following a change in control or potential change in control, the

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policy provides for a lump sum payment equal to the total of:

1.

Unpaid base salary earned through the termination date,

2.

Short-Term Incentive Plan target calculated for the fiscal year in which termination occurs (Target Bonus),

3.

Any accrued but unpaid vacation pay, and

4.

Three times the sum of Target Bonus and the officer's annual base salary in effect immediately before either the date of termination or the change in control, whichever base salary is greater.

Change in control termination benefits also include reimbursement of excise taxes levied upon the severance benefit under Internal Revenue Code Section 4999. In addition, benefits conditioned upon continued future employment will accelerate in full.

Benefits provided under the Officer Severance Policy also are subject to the Golden Parachute Restriction Policy, which is discussed below.

PG&E Corporation Golden Parachute Restriction Policy. On February 15, 2006, the PG&E Corporation Board of Directors adopted a policy requiring shareholder approval of executive severance payments provided in connection with a change in control of PG&E Corporation, to the extent that those payments exceed 2.99 times the sum of a covered officer's base salary and target annual bonus. This policy responds to a shareholder proposal that was approved by shareholders at the PG&E Corporation 2005 annual meeting.

The Golden Parachute Restriction Policy would apply to the value of cash, special benefits, or perquisites that are due to the executive following both (1) a change in control, and (2) the termination or constructive termination of an officer covered by the Officer Severance Policy. It would not apply to the value of benefits that would be triggered by a change in control without severance, or to the value of benefits that would be triggered by severance in the absence of a change in control. The proposed Golden Parachute Restriction Policy also would not apply to certain enumerated payments, including, among others, compensation for services rendered prior to termination, tax restoration payments, and accelerated vesting or settlement of equity awards.

The Golden Parachute Restriction Policy became effective upon adoption on February 15, 2006, subject to existing contractual obligations in the Officer Severance Policy. The Officer Severance Policy provides that if the Policy is amended in a manner that creates an aggregate negative impact on officers covered by the Policy, those amendments do not become effective until three years after those covered officers receive notice of the change. For officers who were subject to the Officer Severance Policy on February 15, 2006, benefits provided under the Officer Severance Policy will not be subject to the Golden Parachute Restitution Policy until sometime during 2009.

The PG&E Corporation Long-Term Incentive Program and PG&E Corporation 2006 Long-Term Incentive Plan. Effective January 1, 2006, the prior PG&E Corporation Long-Term Incentive Program (PG&E LTIP) was replaced by the PG&E Corporation 2006 Long-Term Incentive Plan (2006 LTIP). For awards granted under the PG&E LTIP and awards granted in 2006 under the 2006 LTIP, upon a change in control:

1.

Any time periods relating to the exercise or realization of any stock-based incentive (including performance shares, stock options, performance units, and common stock equivalents granted under the Executive Stock Ownership Program) will be accelerated so that such incentive may be exercised or realized in full immediately upon the change in control,

2.

All shares of restricted stock will immediately cease to be forfeitable, and

3.

All conditions relating to the realization of any stock-based incentive will terminate immediately.

Starting with grants made for 2007 under the 2006 LTIP, such acceleration and automatic vesting upon a change in control will occur only if either (1) the successor company fails to continue previously granted awards in a manner that preserves the value of those awards, or (2) the award recipient is terminated during a set period of time before and after the change in control.