Pacific Gas & Electric (PCG)

What types of stock-based compensation do non-employee directors receive?

Under the PG&E Corporation 2006 Long-Term Incentive Plan (LTIP), each non-employee director of PG&E Corporation is entitled to receive annual awards of stock-based compensation.

Awards for 2008 were granted on the first business day of March. Such grants had a total aggregate value of $80,000, composed of:

•

Restricted shares of PG&E Corporation common stock valued at $40,000 (based on the closing price of PG&E Corporation common stock on the grant date), and

•

A combination, as elected by the director, of non-qualified stock options and restricted stock units with a total value of $40,000, based on increments valued at $5,000 (or if no election is made, stock options and restricted stock units with a value of $20,000 each).

The per-option value is based on the Black-Scholes stock option valuation method, discounting the resulting value by 20%. The exercise price of stock options is the market value of PG&E Corporation common stock (i.e., the closing price) on the grant date. The value of each restricted stock unit is based on the closing price of PG&E Corporation common stock on the grant date.

Stock options vest over a four-year period following the grant date, with one-third of the grant vesting on each of the second, third, and fourth anniversaries of grant, except that stock options will vest immediately upon mandatory retirement from the Board, or upon a director's death or disability. If a director ceases to be a member of the Board for any other reason, any unvested stock options will be forfeited.

Restricted stock awards vest over the five-year period following the grant date, except that restricted stock will vest immediately upon mandatory retirement from the Board or upon a director's death or disability. If a director ceases to be a member of the Board for any other reason, any unvested shares of restricted stock will be forfeited.

Restricted stock units granted to non-employee directors are payable only in the form of PG&E Corporation common stock following a director's retirement from the Board after five consecutive years of service or upon reaching mandatory retirement age, or upon a director's death or disability. If a director ceases to be a member of the Board for any other reason, all restricted stock units will be forfeited.

A non-employee director's equity-based awards also will vest or accelerate in full if there is a Change in Control as defined in the LTIP.

Effective for grants in 2009, equity-based grants under the LTIP have a total aggregate value of $90,000, composed of:

•

Restricted shares of PG&E Corporation common stock valued at $45,000 (based on the closing price of PG&E Corporation common stock on the grant date), and

•

A combination, as elected by the director, of non-qualified stock options and restricted stock units with a total value of $45,000, based on increments valued at $5,000 (or if no election is made, stock options and restricted stock units with a value of $22,500 each).

27