Hazardous waste remediation costs are rising and are likely to be significant into the foreseeable future. Based on the Utility's past experience, it believes that it can recover most of the future costs that it may incur to remediate hazardous waste through rates and insurance recoveries. The Utility cannot provide assurance, however, that these costs will not be material, or that the Utility will be able to recover its costs in the future.

The Utility's electricity generation plants, natural gas pipeline operations, fleet and fuel storage tanks are subject to numerous air pollution control laws, including the federal Clean Air Act ~~and similar~~as well as state and local statutes. These laws and regulations cover, among other pollutants, those contributing to the formation of ground-level ozone, carbon monoxide, sulfur dioxide, nitrogen oxide and particulate matter. In addition, various laws and regulations addressing climate change are being considered or implemented at the federal and state levels, as discussed below. Fossil fuel-fired ~~electric utility~~ plants and gas compressor stations used in the Utility's pipeline operations are sources of air pollutants and, therefore, are subject to substantial regulation and enforcement oversight by the applicable governmental agencies.

The Utility’s existing and forecast emissions of ~~greenhouse~~climate-changing “greenhouse gases,” or GHGs, are relatively low compared to average emissions by other electric utilities and generators in the ~~country.~~

~~In addition, various laws and regulations addressing climate change are being considered or implemented at~~country, but the Utility anticipates that it will be affected by the increasing attention of the federal and state ~~levels.~~government to the control of GHGs is gaining increasing attention. At the federal level, several legislative initiatives have been introduced recently in Congress aimed at addressing climate change through imposition of nation-wide regulatory limits on the emissions of ~~greenhouse gases.~~GHGs. No such legislation has yet been enacted by Congress, but extensive hearings and discussion isare expected in the coming year.

At the state level, in 2006 California enacted Assembly Bill 32 (“AB 32”), the California Global Warming Solutions Act of 2006, to address climate change. ~~The law~~AB 32 establishes a regulatory program and schedule to gradually reduce ~~greenhouse gas~~GHG emissions in California to 1990 levels by ~~2020. By January 1, 2008, this law requires the CARB to determine what the state-wide greenhouse gas emission level was~~2020 on a schedule beginning in 1990, approve a statewide greenhouse gas emissions limit, and adopt regulations to require significant greenhouse gas emitters, including utilities and other load-serving entities, to submit annual greenhouse gas emissions reports that have been verified or certified by the CARB. Assembly Bill2012. AB 32 also authorizes the ~~CARB~~California Air Resources Board (“CARB”) to monitor and enforce compliance with the ~~greenhouse gas~~GHG reduction program and to consider implementing market-based mechanisms, including trading of ~~greenhouse gas~~GHG emissions allowances. Pursuant to AB 32, on December 6, 2007, the CARB adopted a state-wide GHG 1990 emissions baseline of 427 million metric tons of carbon dioxide (or its equivalent). This 1990 baseline serves as the 2020 emissions reduction target for the state of California. The CARB has not yet determined reduction goals applicable to the utility sector or individual utilities within the utility sector. The CARB also adopted a GHG reporting regulation that will require reporting of 2008 GHG emissions in 2009. The Utility will be required to submit verified GHG emissions reports under CARB’s reporting regulation. AB 32 requires CARB to adopt a Scoping Plan by January 2, 2009 for achieving the maximum technologically feasible and cost-effective GHG reductions to meet the 2020 reduction target.

~~In addition to Assembly Bill 32,~~ California Senate Bill 1368, also enacted in ~~September~~ 2006, prohibits any load-serving entity in California, including investor-owned electric utilities, from entering into a long-term financial commitment for baseload electricity generation unless the generation complies with a ~~greenhouse gas~~GHG emission performance standard. As required by Senate Bill 1368, on January 25, 2007, the CPUC adopted an interim ~~greenhouse gas~~GHG emissions performance standard of 1,100 pounds of carbon dioxide per MWh that applies to new commitments for baseload electricity procured under contracts with a term of five years or longer or generated by the Utility. After ~~an enforceable~~a state-wide ~~greenhouse gas~~GHG emissions limit is established and is in operation, in accordance with ~~Assembly Bill~~AB 32, the CPUC will re-evaluate its interim ~~greenhouse gas~~GHG emissions performance standard and determine whether to continue, modify or rescind it.

The new California legislation, as well as current federal and other state regulatory initiatives relating to emissions of carbon dioxide and other ~~greenhouse gases,~~GHGs, particulates and other pollutants, could cause the Utility's compliance costs and capital expenditures to increase. These laws could require the Utility to replace equipment, install additional pollution controls, purchase various emission allowances or curtail operations. Although associated costs and capital expenditures could be material, the Utility expects that it will recover these costs and capital expenditures in rates consistent with the recovery of other reasonable costs of complying with

environmental laws and regulations.

The CARB also oversees the Periodic Smoke Inspection Program to test and repair heavy-duty diesel vehicles in order to ensure efficient operations and reduce particulate matter emissions. The program applies to approximately 2,000 vehicles owned by the Utility. In July 2006, the CARB requested the Utility's program compliance records. The Utility discovered that its records were incomplete and that some records could not be located. The Utility immediately notified the CARB and began the evaluation and implementation of process improvements to ensure accurate recordkeeping. The CARB is authorized to assess penalties of up to $500 per missing or incomplete record. The Utility continues to work with the CARB and expects to resolve the matter in the first quarter of 2007. The Utility believes that the ultimate outcome of this matter would not result in a material adverse effect on its financial condition or results of operations.

Water Quality

water be protected. The beneficial uses of water in this region include industrial water supply, marine and wildlife habitat, shellfish harvesting, and preservation of rare and endangered species. In January 2000, the Central Coast Board issued a proposed draft cease and desist order alleging that, although the temperature limit has never been exceeded, the Diablo Canyon power plant's discharge was not protective of beneficial uses.

In October 2000, the Utility and the Central Coast Board reached a tentative settlement under which the Central Coast Board agreed to find that the Utility's discharge of cooling water from the Diablo Canyon power plant protects beneficial uses and that the intake technology reflects the best technology available, as defined in the federal Clean Water Act. As part of the tentative settlement, the Utility agreed to take measures to preserve certain acreage north of the plant and to fund approximately $6 million in environmental projects and future environmental monitoring related to coastal resources. On March 21, 2003, the Central Coast Board voted to accept the settlement agreement. On June 17, 2003, the settlement agreement was executed by the Utility, the Central Coast Board and the California Attorney General's Office. A condition to the effectiveness of the settlement agreement is that the Central Coast Board renew Diablo Canyon's NPDES permit.

At its meeting on July 10, 2003, ~~meeting,~~ the Central Coast Board did not renew the NPDES permit and continued the permit renewal hearing indefinitely. Several Central Coast Board members indicated that they no longer supported the settlement agreement, and the Central Coast Board requested a team of independent scientists, as part of a technical working group, to develop additional information on possible mitigation measures for Central Coast Board staff. In January 2005, the Central Coast Board published the scientists' draft report recommending several such mitigation measures. If the Central Coast Board adopts the scientists' recommendations, and if the Utility ultimately is required to implement the projects proposed in the draft report, it could incur costs of up to approximately $30 million. The Utility would seek to recover these costs through rates charged to customers.

In ~~addition, on~~ July 9, 2004, the U.S. Environmental Protection Agency ~~or the EPA,~~(“EPA”) published regulations under Section 316(b) of the Clean Water Act ~~for cooling water intake structures. The regulations affect~~that apply to existing electricity generation facilities ~~using~~that use over 50 million gallons of water per day, which typically ~~including~~include some form of ~~“once-through” cooling.~~"once-through" cooling in which water from natural bodies of water is used to cool a generating facility and the heated water is discharged back into the source. The Utility's Diablo Canyon power plant is among an estimated 539 generation facilities nationwide that are affected by this rulemaking. The ~~Utility permanently closed its Hunters Point power plant in May 2006 and the Humboldt Bay power plant will be re-powered without the use of once-through cooling. The~~ EPA regulations ~~establish a set of performance standards that vary with the type of water body and that~~ are intended to reduce impacts to aquatic ~~organisms. Significant capital investment may be required to achieve the standards. The~~organisms by establishing a set of performance standards for cooling water intake structures. These regulations allow site-specific compliance ~~determinations~~measures if a facility's cost of compliance is significantly greater than either the benefits to be achieved or the compliance costs considered by the EPA. The EPA ~~and~~regulations also allow the use of environmental mitigation or restoration to meet compliance requirements in certain cases. ~~Various parties challenged~~In response to the ~~EPA’s~~EPA regulations, ~~and the cases were consolidated~~ in ~~the U.S. Court of Appeal for the Second Circuit, or Second Circuit.~~

In June 2006, the California State Water Resources Control Board (“Water Board”) published a draft policy for California’s implementation of Section 316(b)~~. If adopted, the draft policy would be substantially more stringent than the 2004 EPA regulations as the state policy would~~ that proposes to eliminate the EPA’s site-specific compliance options, ~~based on cost-benefit assessments and essentially requires~~although the ~~installation of cooling towers at once-through cooled power facilities. The~~ draft state policy ~~provides that nuclear facilities may use~~would permit environmental restoration as a compliance option ~~only~~for nuclear facilities if the installation of ~~technology~~cooling towers would conflict with a nuclear safety requirement. ~~It is uncertain when~~Various parties separately challenged the ~~state’s final policy will be adopted. If~~EPA's regulations in court, and the ~~final policy is adopted without change from the draft policy, the Utility could be required to incur significant capital costs to achieve compliance.~~

~~On January 25, 2007,~~cases were consolidated in U.S. Court of Appeals for the Second Circuit ~~issued its decision on~~(“Second Circuit”). In January 2007, the ~~appeals of the EPA Section 316(b) regulations. The~~ Second Circuit remanded significant provisions of the regulations to the EPA for reconsideration and held that a ~~cost benefit~~cost-benefit test ~~cannot~~could not be used to ~~establish~~comply with performance standards or to ~~grant variances~~obtain a variance from the standards. The Second Circuit also ruled that environmental restoration cannot be used to ~~achieve compliance. The parties may seek either en banc~~comply with the standard. Petitions seeking Supreme Court review byof the Second ~~Circuit or review by the U.S. Supreme Court. Regardless of whether the~~Circuit’s decision ~~is subject to further judicial review,~~are pending, and the EPA ~~will likely require significant time to review and revise the~~has suspended its regulations. It is uncertain ~~how~~when the EPA will issue revised regulations, whether the Supreme Court will accept review of the Second Circuit decision, how judicial developments will affect ~~development~~the EPA’s revised regulations; how judicial developments and EPA’s revised regulations will affect the Water Board’s proposed policy, and when the Water Board will issue its final policy. Depending on the nature of the ~~state’s proposed implementation policy. The regulatory uncertainty~~final regulations that may ultimately be adopted by the EPA or the Water Board, the Utility may incur significant capital expense to comply with the final regulations which the Utility would seek to recover through rates. If either the final regulations adopted by the EPA or the Water Board require the installation of cooling towers at Diablo Canyon, and if installation of such cooling towers is ~~likely~~not technically or economically feasible, the Utility may be forced to ~~continue and the Utility’s cost of compliance, while likely to be significant, will remain uncertain as well.~~cease operations at Diablo Canyon.

measures as well as develop a long-term plan to ensure that the hexavalent chromium does not affect the Colorado River. In 2006, the Utility took interim measures to control the chromium plume by extracting impacted groundwater and spent approximately $17 million on these measures. The Utility plans to continue these activities in 2007 and to work toward the development of a final plan to address the plume in 2007. The Utility currently estimates that it will spend at least $20 million in 2007 for remediation activities at Topock and $22 million in 2007 for remediation activities at Hinkley. Although work at the Topock site poses several technical and regulatory obstacles, the Utility’s remediation costs for Topock are subject to the ratemaking mechanism described above. The Utility does not expect the remediation of the Topock and Hinkley gas compressor sites to have a material adverse effect on its results of operations or financial condition. The Utility does not expect that it will incur any material expenditures related to any remediation at its Kettleman natural gas compressor station.

~~Compressor Station Litigation~~

Compressor Station Litigation

Several lawsuits have been filed against the Utility alleging that exposure to chromium at or near the Utility's natural gas compressor stations caused personal injuries, wrongful deaths or other injuries. During 2006, the Utility entered into a settlement

agreement to resolve most of these claims. Pursuant to the settlement agreement, in April 2006 the Utility released $295 million from escrow for payment to approximately 1,100 plaintiffs. ~~There are three~~Three complaints, filed by approximately 125 plaintiffs who did not participate in the settlement, ~~that~~ are still pending in the Superior Court for the County of Los Angeles. ~~With respect to~~During 2007 some individual plaintiffs’ claims were dismissed based on the ~~unresolved claims,~~applicable statute of limitations. Also, during 2007 the Utility ~~will continue~~agreed to ~~pursue appropriate defenses, including~~settle with the ~~statute~~remaining plaintiffs, subject to execution of ~~limitations, the exclusivity of workers’ compensation laws, lack of exposure to chromium~~final documentation and ~~the inability of chromium to cause certain~~court approval of the ~~illnesses alleged.~~settlement of the minor plaintiffs' claims which is expected to occur during the first half of 2008. PG&E Corporation and the Utility do not expect that the ~~outcome with respect to the remaining unresolved claims~~settlement will have a material adverse effect on their financial condition or results of operations.

Endangered Species

Many of the Utility's facilities and operations are located in, or pass through, areas that are designated as critical habitats for federal or state-listed endangered, threatened or sensitive species. The Utility may be required to incur additional costs or be subjected to additional restrictions on operations if additional threatened or endangered species are listed or additional critical habitats are designated at or near the Utility's facilities or operations. The Utility is seeking to secure “habitat conservation plans” to ensure long-term compliance with ~~the~~ state and federal endangered species acts. The Utility expects that it will be able to recover costs of complying with state and federal endangered species acts through rates.

Hazardous Waste Compliance and Remediation

The Utility's facilities are subject to the requirements issued by the EPA under the Resource Conservation and Recovery Act ~~or RCRA,~~(“RCRA”) and the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ~~or CERCLA,~~(“CERCLA”) as well as other state hazardous waste laws and other environmental requirements. CERCLA and similar state laws impose liability, without regard to fault or the legality of the original conduct, on certain classes of persons that contributed to the release of a hazardous substance into the environment. These persons include the owner or operator of the site where the release occurred and companies that disposed or arranged for the disposal of the hazardous substances found at the ~~site.~~site, and in some cases corporate successors to the operators or arrangers. Under CERCLA, these persons may be subject to joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment, damages to natural resources and the costs of required health studies. In the ordinary course of the Utility's operations, the Utility generates waste that falls within CERCLA's definition of a hazardous ~~substance~~substances and, as a result, has been and may be jointly and severally liable under CERCLA for all or part of the costs required to clean up sites at which these hazardous substances have been released into the environment.

The Utility assesses, on an ongoing basis, measures that may be necessary to comply with federal, state and local laws and regulations related to hazardous materials and hazardous waste compliance and remediation activities. The Utility has a comprehensive program to comply with hazardous waste storage, handling and disposal requirements issued by the EPA under RCRA and CERCLA, state hazardous waste laws and other environmental requirements.

The Utility has been, and may be, required to pay for environmental remediation at sites where the Utility has been, or may be, a potentially responsible party under CERCLA and similar state environmental laws. These sites include former manufactured gas plant sites, power plant sites, gas gathering sites, compressor stations and sites where the Utility stores, recycles and disposes of potentially hazardous materials. Under federal and California laws, the Utility may be responsible for remediation of hazardous substances even if it did not deposit those substances on the site.

Operations at the Utility's current and former generation facilities may have resulted in contaminated soil or groundwater. Although the Utility sold most of its geothermal generation facilities and most of its fossil fuel-fired plants, in many cases the Utility retained pre-closing environmental liability under various environmental laws. The Utility currently is investigating or remediating

several such sites with the oversight of various governmental agencies. Additionally, the Utility’s Hunters Point power plant in San Francisco closed in May 2006 and is in the decommissioning process. Preliminary remedial investigations are underway, with agency approval of a remediation plan expected by second quarter 2009. The Utility estimates that it will spend approximately $16.6 million in 2008 and approximately $22.7 million in 2009 for these activities.

In addition, the federal Toxic Substances Control Act regulates the use, disposal and clean-up of polychlorinated biphenyls, or PCBs, which are used in certain electrical equipment. The Utility has removed from service all of the distribution capacitors and network transformers containing high concentrations of PCBs, representing the vast majority of PCBs ~~existing~~that had existed in the Utility's electricity distribution system.

The Utility is assessing whether and to what extent remedial action may be necessary to mitigate potential hazards posed by certain ~~disposal sites and~~ retired manufactured gas plant sites. During their operation, from the mid-1800s through the early 1900s, manufactured gas plants produced lampblack and tar residues. The residues ~~that~~from these operations, which may remain at some sites, contain chemical compounds that now are classified as hazardous. There are 95 such sites within the Utility’s service territory that are owned by the

Utility or third parties. The Utility ~~owns all or a portion~~has determined that it is liable for the remediation of ~~28 manufactured gas plant~~42 sites, is potentially liable for remediation of an additional 33 sites, and is not liable for remediation at the
remaining 20 sites. The Utility has a program, in cooperation with environmental agencies and third party owners, to evaluate and take appropriate action to mitigate any potential health or environmental hazards at ~~these sites.~~the 42 sites for which the Utility is liable. The Utility spent approximately $3$7 million in ~~2006~~2007 and expects to spend approximately $6$25 million in ~~2007~~2008 on these ~~projects.~~sites. The Utility expects that expenses at these sites will increase as remedial actions related to these sites are approved by regulatory ~~agencies. There~~agencies and claims by third party owners are ~~approximately 67 other manufactured gas plant sites in~~settled. The Utility is implementing a new program to analyze potential liability for remediation at the ~~Utility's service territory that are now owned by others which remain a source of potential claims. It~~33 additional sites. Although it is likely that the Utility will incur remediation costs related to some of these ~~sites. Although~~sites the Utility ~~has been able to~~cannot quantify the potential ~~liability for many of these sites, the amount of potential liability for all of these sites cannot be quantified.~~amount.

Under environmental laws such as CERCLA, the Utility has been or may be required to take remedial action at third-party sites used for the disposal of waste from the Utility's facilities, or to pay for associated clean-up costs or natural resource damages. The Utility is currently aware of ~~eight~~six such sites where investigation or clean-up activities are currently underway. At the Geothermal Incorporated site in Lake County, California, the Utility ~~is in the process of completing a three-year~~substantially completed closure of the disposal facility, which was abandoned by its operator. The Utility was the major responsible party and led ~~this~~the remediation effort on behalf of the responsible parties. ~~In 2006, the Utility completed settlements with the other responsible parties for their share of future costs and assumed ownership of the closed facility. At~~For the Casmalia disposal facility near Santa Maria, California, the Utility and several ~~other generators of~~parties that sent waste ~~sent~~ to the site have entered into a court-approved agreement with the EPA that requires the Utility and the other parties to perform certain site investigation and ~~mitigation~~remediation measures.

In addition, the Utility has been named as a defendant in several civil lawsuits in which plaintiffs allege that the Utility is responsible for performing or paying for remedial action at sites that it no longer owns or never owned. Remedial actions may include investigations, health and ecological assessments, and removal of wastes.

Groundwater at the Utility’s Hinkley and Topock natural gas compressor stations contains hexavalent chromium as a result of the Utility’s past operating practices. The Utility has a comprehensive program to monitor a network of groundwater wells at both the Hinkley and Topock natural gas compressor stations. At Hinkley, the Utility is cooperating with the Regional Water Quality Control Board to evaluate and remediate the chromium groundwater plume. In 2006, the Utility took interim measures to control movement of the Hinkley plume, and evaluated options to remediate the plume. At the Topock gas compressor station, located near Needles, California, hexavalent chromium has been detected in samples taken from groundwater monitoring wells located approximately 65 feet from the Colorado River, which is adjacent to the site. The Utility, in cooperation with the California Department of Toxic Substances Control, other state agencies and appropriate federal agencies, has implemented interim measures including a system of extractions wells and a treatment plant designed to prevent movement of the plume toward the river. In addition the Utility is working with the agencies to develop a long-term plan to ensure that the hexavalent chromium does not affect the Colorado River. In 2007, the Utility spent approximately $23 million on the interim measures and for work on the longer term site solution. The Utility plans to continue these activities in 2008 and to work toward the development of a final plan to address the plume in 2008. The Utility currently estimates that it will spend at least $20 million in 2008 for remediation activities at Topock and $14 million in 2008 for remediation activities at Hinkley. Although work at the Topock site poses several technical and regulatory obstacles, the Utility’s remediation costs for Topock are subject to the ratemaking mechanism described above. The Utility does not expect the remediation of the Topock and Hinkley gas compressor sites to have a material adverse effect on its results of operations or financial condition. The Utility does not expect that it will incur any material expenditures related to any remediation at its Kettleman natural gas compressor station.

The cost of environmental remediation is difficult to estimate. The Utility records an environmental remediation liability when site assessments indicate remediation is probable and it can estimate a range of reasonably likely clean-up costs. The Utility reviews its remediation liability on a quarterly basis for each site where it may be exposed to remediation responsibilities. The liability is an estimate of costs for site investigations, remediation, operations and maintenance, monitoring and site closure using current technology, and considers enacted laws and regulations, experience gained at similar sites, and an assessment of the probable level of involvement and financial condition of other potentially responsible parties. Unless there is a better estimate within this range of possible costs, the Utility records the costs at the lower end of this range. The Utility estimates the upper end of this cost range using reasonably possible outcomes that are least favorable to the Utility. It is reasonably possible that a change in these estimates may occur in the near term due to uncertainty concerning the Utility's responsibility, the complexity of environmental laws and regulations, and the selection of compliance alternatives.

The Utility had an undiscounted environmental remediation liability of approximately $528 million at December 31, 2007 and approximately $511 million at December 31, ~~2006 and approximately $469~~2006. The Utility’s undiscounted future costs could increase to as much as $834 million ~~at December 31, 2005. The increase in the undiscounted environmental~~if necessary remediation reflects an increase of $74 million for remediation at the Utility’s gas compressor stations located near Hinkley, California and Topock, Arizona. The portion of the increased liability of $39 million for remediation at the Hinkley facility is attributable to changes in the California Regional Water Quality Control Board’s imposed remediation levels. Costs incurred at this facility are not recoverable from customers and, as a result, the after-tax impact on income was a reduction of approximately $23 million for 2006. Ninety percent of the estimated remediation costs associated with the Utility’s gas compressor station located near Topock, Arizona will be recoverable in rates in accordance with the hazardous waste ratemaking mechanism which permits the Utility to recover ninety percent of hazardous waste remediation costs from customers without a reasonableness review.greater than anticipated.

For more information about environmental remediation liabilities, see Note 17 of the Notes to the Consolidated Financial Statements in the ~~2006~~2007 Annual Report.

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Nuclear Fuel Disposal

~~Under~~ As part of the Nuclear Waste Policy Act of 1982, ~~the Department of Energy, or~~Congress authorized the DOE ~~is responsible for~~and electric utilities with commercial nuclear power plants to enter into contracts under which the ~~transportation and permanent storage and disposal~~DOE would be required to dispose of the utilities' spent nuclear fuel and high-level radioactive ~~waste. The Utility has contracted~~waste no later than January 31, 1998, in exchange for fees paid by the utilities. In 1983, the DOE entered into a contract with the Utility to dispose of nuclear waste from the Utility’s two nuclear generating units at Diablo Canyon and its retired nuclear facility at Humboldt Bay. The DOE failed to ~~provide for the disposal of these materials from Diablo Canyon. Under the contract, if the DOE completes~~develop a permanent storage ~~facility~~site by ~~2010, the earliest that Diablo Canyon's spent fuel would be accepted for storage or disposal is thought to be 2018. Under current operating procedures, the~~January 31, 1998. The Utility believes that the existing spent fuel pools at Diablo Canyon (which include newly constructed temporary storage racks) have sufficient capacity to enable the Utility to operate Diablo Canyon until approximately 2010 for Unit 1 and 2011 for Unit 2. ~~After receiving~~

Because the DOE failed to develop a permanent storage site, the Utility obtained a permit from the NRC ~~in March 2004, the Utility began building~~to build an on-site dry cask storage facility to store spent fuel through at least 2024. ~~The Utility estimates it could complete the dry cask storage project in 2008. The NRC’s March 2004 decision, however, was appealed by~~After various parties ~~and~~appealed the NRC’s issuance of the permit, the U.S. Court of Appeals for the Ninth Circuit ~~or Ninth Circuit,~~ issued a decision in 2006 ~~that requires~~requiring the NRC to ~~consider~~issue a supplemental environmental assessment report on the potential environmental consequences in the event of a ~~potential~~ terrorist attack at Diablo Canyon, as ~~part~~well as to review other contentions raised by the appealing parties related to potential terrorism threats. In August 2007, the NRC staff issued a final supplemental environmental assessment report concluding there would be no significant environmental impacts from potential terrorist acts directed at the Diablo Canyon storage facility. On January 15, 2008, the NRC decided to hold hearings on whether it provided a complete list of the ~~NRC’s supplemental assessment~~references upon which it relied to find that there would not be a significant environmental impact and whether it sufficiently addressed the impacts on land and the local economy of a potential terrorist attack. It is expected that the NRC will issue a final decision in the third quarter of 2008.

The Utility expects to complete the dry cask storage ~~permit. The Utility may incur significant additional expenditures if the NRC decides that the Utility must change the design~~facility and ~~construction of the dry cask storage facility.~~begin loading spent fuel in 2008. If the Utility is unable to complete the dry cask storage facility, or if ~~construction~~operation of the facility is delayed beyond 2010, ~~and~~or if the Utility is otherwise unable to increase its on-site storage capacity, it is possible that the operation of Diablo Canyon may have to be curtailed or halted as early as 2010 with respect to Unit 1 and 2011 with respect to Unit 2 and continued until such time as additional safe storage for spent fuel ~~can be safely stored.~~is made available.

~~As a result~~The Utility and other nuclear power plant owners have sued the DOE for breach of ~~the DOE’s failure~~contract. The Utility seeks to recover its costs to develop ~~a permanent storage facility, the Utility has been required to incur substantial costs for planning and developing~~ on-site storage ~~options for spent nuclear fuel as described above~~ at Diablo Canyon as well as at the retired nuclear facility at Humboldt Bay, or Humboldt Bay Unit 3. The Utility is seeking to recover these costs from the DOE on the basis that the DOE has breached its contractual obligation to move used nuclear fuel from Diablo Canyon and Humboldt Bay Unit ~~3 to a national repository beginning in 1998. Any amounts recovered from the DOE will be credited to customers.~~3. In October 2006, the U.S. Court of Federal Claims ~~issued a decision awarding~~found the DOE had breached its contract and awarded the Utility approximately $42.8 million of the $92 million incurred by the Utility through 2004. The Utility ~~will seek recovery of costs incurred after 2004 in future lawsuits against the DOE. In January 2007, the Utility filed a notice of appeal of the U.S. Court of Federal Claims’ decision in~~appealed to the U.S. Court of Appeals for the Federal Circuit seeking to increase the amount of the award and ~~challenging~~challenged the ~~court’s~~U.S. Court of Federal Claims’ finding that the Utility would have ~~had to incur~~incurred some of the costs for the ~~onsite~~on-site storage facilities even if the DOE had complied with the contract. A decision on the appeal is expected by the end of 2008. The Utility will seek to recover costs incurred after 2004 in future lawsuits against the DOE. Any amounts recovered from the DOE will be credited to customers through rates.

PG&E Corporation and the Utility are unable to predict the outcome of this appeal or the amount of any additional awards the Utility may receive. If the ~~court’s~~U.S. Court of Federal Claims’ decision is not overturned or modified on appeal, it is likely that the Utility will be unable to recover all of its future costs for ~~onsite~~on-site storage facilities from the DOE. However, reasonably incurred costs related to the ~~onsite~~on-site storage facilities are, in the case of Diablo Canyon, recoverable through rates and, in the case of Humboldt Bay Unit 3, recoverable through its decommissioning trust fund.

~~PG&E Corporation and the Utility are unable to predict the outcome of this appeal or the amount of any additional awards the Utility may receive.~~

Nuclear Decommissioning

The Utility's nuclear power facilities consist of two units at Diablo Canyon and the retired facility at Humboldt Bay Unit 3. Nuclear decommissioning requires the safe removal of nuclear facilities from service and the reduction of residual radioactivity to a level that permits termination of the NRC license and release of the property for unrestricted use. ~~For ratemaking purposes,~~The Utility makes contributions to trusts to provide for the eventual decommissioning of each nuclear unit. In the Utility’s 2005 Nuclear Decommissioning Cost Triennial Proceeding (“NDCTP”), used to determine the level of Utility trust contributions and related revenue requirement, the CPUC assumed that the eventual decommissioning of Diablo Canyon Unit 1 iswould be scheduled to begin in 2024 and to be completed in ~~2044. Decommissioning~~2044; that decommissioning of Diablo Canyon Unit 2 iswould be scheduled to begin in 2025 and to be completed in ~~2041,~~2041; and that decommissioning of Humboldt Bay Unit 3 iswould be scheduled to begin in 2009 and to be completed in 2015. The ~~Utility's revenue requirements for estimated nuclear~~Utility’s decommissioning ~~costs~~cost estimates are ~~recovered from customers through a non-bypassable charge that will continue until those costs are fully recovered.~~based on the 2005 decommissioning cost studies, prepared in accordance with CPUC requirements. The decommissioning cost estimates are based on the plant location and cost characteristics for the Utility's nuclear power plants. Actual decommissioning costs may vary from these estimates as a result of changes in assumptions such as decommissioning dates, regulatory requirements, technology, and costs of labor, materials and equipment. The Utility recovers its revenue requirements for estimated nuclear decommissioning costs from customers through a non-bypassable charge that the Utility expects will continue until those costs are fully recovered. Decommissioning costs recovered in rates are placed in nuclear decommissioning trusts. The funds in the decommissioning trusts, along with accumulated earnings, will be used exclusively for

decommissioning and dismantling the Utility's nuclear facilities.

For more information about nuclear decommissioning, including the estimated decommissioning costs, see Note 13 of the Notes to the Consolidated Financial Statements in the ~~2006~~2007 Annual Report.

Electric and Magnetic Fields

Electric and magnetic fields ~~or EMFs,~~(“EMFs”) naturally result from the generation, transmission, distribution and use of electricity. In November 1993, the CPUC adopted an interim EMF policy for California energy utilities that, among other things, requires California energy utilities to take no-cost and low-cost steps to reduce EMFs from new or upgraded utility facilities. California energy utilities were required to fund an EMF education program and an EMF research program managed by the California Department of Health Services. In October 2002, the California Department of Health Services released its report to the CPUC and the public, based primarily on its review of studies by others, evaluating the possible risks from ~~EMFs, to the CPUC and the public.~~EMFs. The report's conclusions contrast with other

recent reports by authoritative health agencies in that the California Department of Health Services' report has assigned a higher probability to the possibility of a causal connection between EMF exposures and a number of diseases and conditions, including childhood leukemia, adult leukemia, amyotrophic lateral sclerosis and miscarriages.

On January 26, 2006, the CPUC issued a decision which affirms the CPUC’s “low-cost/no-cost, prudent avoidance” policy to reduce EMF exposure for new utility transmission and substation projects. The CPUC ordered the continued use of a 4% of project cost benchmark for EMF reduction measures. The CPUC also reaffirmed that it has exclusive jurisdiction with respect to utility EMF matters.

The Utility currently is not involved in third-party litigation concerning EMFs. In August 1996, the California Supreme Court held that homeowners are barred from suing utilities for alleged property value losses caused by fear of EMFs from power lines. In a case involving allegations of personal injury, a California appeals court held that the CPUC has exclusive jurisdiction over personal injury and wrongful death claims arising from allegations of harmful exposure to EMFs, and barred plaintiffs' personal injury claims. The California Supreme Court declined to hear the plaintiffs’ appeal of this decision.

Item 1A.Risk Factors

A discussion of the significant risks associated with investments in the securities of PG&E Corporation and the Utility is set forth under the heading “Risk Factors” in the MD&A in the ~~2006~~2007 Annual Report, which information is hereby incorporated by reference and filed as part of Exhibit 13 to this report.

Item 1B.Unresolved Staff Comments

Not applicable.

Item 2. Properties

The Utility owns or has obtained the right to occupy and/or use real property comprising the Utility's electricity and natural gas distribution facilities, natural gas gathering facilities and generation facilities, and natural gas and electricity transmission facilities, all of which are described above under “Electric Utility Operations” and “Natural Gas Utility Operations” above. In total, the Utility occupies 9.8 million square feet of real property, including 8.5 million square feet that the Utility owns. Of the 9.8 million square feet of occupied real property, approximately 1.7 million square feet represent the Utility's corporate headquarters located in several buildings in San Francisco, California. The Utility leases approximately 120,000 square feet of the approximate 1.7 million square feet of office space. The Utility occupies or uses real property that it does not own primarily through various leases, easements, rights-of-way, permits or licenses from private landowners or governmental authorities. The Utility currently owns approximately 167,000 acres of land, approximately 140,000 acres of which it will encumber with conservation easements and/or donate to public agencies or non-profit conservation organizations under the Chapter 11 Settlement Agreement. Approximately 75,000 acres of this land may be donated in fee and encumbered with conservation easements. The remaining land contains the Utility's or a joint licensee's hydroelectric generation facilities and will only be encumbered with conservation easements. As contemplated in the Chapter 11 Settlement Agreement, the Utility formed an entity, the Pacific Forest Watershed Lands Stewardship Council ~~or the Council,~~(“Council”) to oversee the development and implementation of a Land Conservation Plan ~~or LCP,~~(“LCP”) that will articulate the long-term management objectives for the 140,000 acres. The Council is governed by an 18-member Board of Directors that ~~represent~~represents a range of diverse interests, including the CPUC, California environmental agencies, organizations representing underserved and minority constituencies, agricultural and business interests, and public officials. The Utility has appointed 1 out of 18 members of the Board of Directors of the Council. ~~While~~In December 2007, the Council ~~originally contemplated adopting and presenting~~adopted the LCP and submitted it to the Utility.

The Utility ~~by April 2007, it currently anticipates approving~~has accepted the LCP ~~in the summer of 2007. The Utility~~and will ~~then~~ seek authorization from the CPUC, the FERC and other approving entities to proceed with the transactions necessary to implement the LCP. If the Council is unable to reach consensus on all or part of the LCP, the Utility will seek regulatory approval of the transactions required to implement its own plan, along with a description of the positions of the disputing board members, before April 2013.

PG&E Corporation also leases approximately 74,000 square feet of office space from a third party in San Francisco, California. This lease expires in 2012.

Item 3. Legal Proceedings

In addition to the following legal proceedings, PG&E Corporation and the Utility are involved in various legal proceedings in the ordinary course of their business.

Diablo Canyon Power Plant

The Utility's Diablo Canyon power plant employs a “once-through” cooling water system that is regulated under a Clean Water Act National Pollutant Discharge Elimination System ~~or NPDES,~~(“NPDES”) permit issued by the Central Coast Regional Water Quality Control Board ~~or the~~ (“Central Coast ~~Board.~~Board”). This permit allows the Diablo Canyon power plant to discharge the cooling water at a temperature no more than 22 degrees above the temperature of the ambient receiving water, and requires that the beneficial uses of the water be protected. The beneficial uses of water in this region include industrial water supply, marine and wildlife habitat, shellfish harvesting, and preservation of rare and endangered species. In January 2000, the Central Coast Board issued a proposed draft cease and desist order alleging that, although the temperature limit has never been exceeded, the Utility's Diablo Canyon power plant's discharge was not protective of beneficial uses.

At its July 10, 2003 meeting, the Central Coast Board did not renew the NPDES permit and continued the permit renewal hearing indefinitely. Several Central Coast Board members indicated that they no longer supported the settlement agreement, and the Central Coast Board requested a team of independent scientists, as part of a technical working group, to develop additional information on possible mitigation measures for Central Coast Board staff. In January 2005, the Central Coast Board published the scientists' draft report recommending several such mitigation measures. If the Central Coast Board adopts the scientists' recommendations, and if the Utility ultimately is required to implement the projects proposed in the draft report, it could incur costs of up to approximately $30 million. The Utility would seek to recover these costs through rates charged to customers. The California State Water Resources Control Board is developing a state policy for the implementation of Section 316(b) of the Clean Water Act, the adoption of which could affect future negotiations between the Central Coast Board and the Utility. For more information about the draft state policy, see “Environmental Matters—Water Quality” in this report.

PG&E Corporation and the Utility believe that the ultimate outcome of this matter will not have a material adverse impact on their Utility's financial condition or results of operations.

Complaints Filed by the California Attorney General and the City and County of San Francisco

On January 10, 2002, the California Attorney General filed a complaint in the Superior Court for the County of San Francisco ~~or the~~ (“Superior ~~Court,~~Court”) against PG&E Corporation and its directors, as well as against directors of the Utility, based on allegations of unfair or fraudulent business acts or practices in violation of California Business and Professions Code Section 17200 or (“Section ~~17200.~~17200”). Among other allegations, the California Attorney General alleged that past transfers of funds from the Utility to PG&E Corporation during the period from 1997 through 2000 (primarily in the form of dividends and stock repurchases), and allegedly from PG&E Corporation to other affiliates of PG&E Corporation, violated various conditions established by the CPUC in decisions approving the holding company formation. The California Attorney General alleged that the defendants violated these conditions when PG&E Corporation allegedly failed to provide adequate financial support to the Utility during the California energy crisis.

The complaint seeks injunctive relief, the appointment of a receiver, restitution in an amount according to proof, civil penalties of $2,500 against each defendant for each violation of Section 17200, a total penalty of not less than $500 million and costs of suit. The California Attorney General's complaint also seeks restitution of assets allegedly wrongfully transferred to PG&E

Corporation from the Utility.

On February 11, 2002, a complaint entitled City and County of San Francisco; People of the State of California v. PG&E Corporation, and Does 1-150, was filed in the Superior Court. The complaint contains some of the same allegations contained in the California Attorney General's complaint, including allegations of unfair competition in violation of Section 17200. In addition, the complaint alleges causes of action for conversion, claiming that PG&E Corporation “took at least $5.2 billion from the Utility,” and for unjust enrichment. The City and County of San Francisco ~~or CCSF,~~(“CCSF”) seeks injunctive relief, the appointment of a receiver, restitution, disgorgement, the imposition of a constructive trust, civil penalties of $2,500 against each defendant for each violation of Section 17200 and costs of suit.

The complaints, which have been consolidated in the Superior Court, were filed after the CPUC issued two decisions in its investigative proceeding commenced in April 2001 into whether the California investor-owned electric utilities, including the Utility, complied with past CPUC decisions, rules and orders authorizing their holding company formations and/or governing affiliate transactions, as well as applicable statutes. The order states that the CPUC would, among other matters, investigate the utilities' transfer of money to their holding companies, including during times when their utility subsidiaries were experiencing financial difficulties, the failure of the holding companies to financially assist the utilities when needed, the transfer by the holding companies of assets to unregulated subsidiaries, and the holding companies' actions to “ringfence” their unregulated subsidiaries. In May 2005, the CPUC closed this investigation without making any findings.

PG&E Corporation believes that the intercompany transactions challenged by the California Attorney General and CCSF were in full compliance with applicable law and CPUC conditions. The challenged transactions forming the bulk of the restitution claims were regular quarterly dividends and stock repurchases. As part of its annual cost of capital proceedings, the Utility advised the CPUC in advance of its forecast stock repurchases and dividends. The CPUC did not challenge or question those payments.

In January 2006, the U.S. Court of Appeals for the Ninth Circuit ~~or the~~ (“Ninth ~~Circuit,~~Circuit”) issued a decision on the parties’ appeals of various rulings by the Bankruptcy Court and the U.S. District Court for the Northern District of California ~~or the District Court,~~ concerning jurisdictional issues. The Ninth Circuit found that the Superior Court had jurisdiction over the California Attorney General’s and CCSF’s restitution claims. (In October 2006, the U.S. Supreme Court declined to grant PG&E Corporation’s request to review the Ninth Circuit’s decision.) The Ninth Circuit did not address the California Attorney General’s and CCSF’s underlying allegations that PG&E Corporation and the other defendants violated Section 17200. The Ninth Circuit also did not decide the issue of who would be entitled to receive the proceeds, if any, of a restitution award, and PG&E Corporation continues to believe that any such proceeds would be the property of the Utility. Pursuant to the Chapter 11 Settlement Agreement, the CPUC released all claims against PG&E Corporation or the Utility arising out of or in any way related to the energy crisis, including the CPUC’s investigation into past PG&E Corporation actions during the California energy crisis. Accordingly, PG&E Corporation believes that any claims for such proceeds by the CPUC would be precluded.

While the Ninth Circuit appeal was pending, the Superior Court held a trial in December 2004 to consider the appropriate standard to determine what constitutes a separate violation of Section 17200 in order to determine the magnitude of potential penalties under Section 17200 (up to $2,500 per separate “violation”). The Superior Court did not address the question of whether any violations occurred. In March 2005, the Superior Court issued a decision rejecting the “per victim” and “per [customer] bill” approaches advocated by the plaintiffs, standards that potentially could have resulted in millions of separate “violations.” The Superior Court found that the appropriate standard was each transfer of money from the Utility to PG&E Corporation that plaintiffs allege violated Section 17200. In July ~~27,~~ 2005, the California Court of Appeal summarily denied a petition filed by the California Attorney General and CCSF seeking to overturn this decision. The ~~California Attorney General and CCSF have resumed discovery in the Superior Court action. The~~ next case management conference in Superior Court is scheduled ~~for April 17, 2007.~~on May 13, 2008.

PG&E Corporation believes that the California Attorney General’s and CCSF’s allegations have no merit and will continue to vigorously respond to and defend against the litigation.PG&E Corporation believes that the ultimate outcome of this matter would not result in a material adverse effect on PG&E Corporation’s financial condition or results of operations.

~~The California Air Resources Board~~Solano County District Attorney’s Office

In a letter dated July 11, 2007, the Solano County District Attorney's Office stated its intention to file a civil complaint against the Utility for record-keeping violations related to an underground storage tank at the Utility’s service center in Vallejo, California. The ~~CARB oversees~~letter attached a copy of the ~~Periodic Smoke Inspection Program~~draft complaint, which detailed a series of alleged California Health and Safety Code record-keeping violations, some of which date back to ~~test~~2004. Alleged violations include failing to complete inspections, testing, and ~~repair heavy-duty diesel vehicles in order~~certifications, and to ~~ensure efficient operations~~make records available to the County. Under the California Health and reduce particulate matter emissions. The program applies to approximately 2,000 vehicles owned by the Utility. In July 2006, the CARB requested the Utility's program compliance records. The Utility discovered that its records were incomplete and that some records could not be located. The Utility immediately notified the CARB and began the evaluation and implementation of process improvements to ensure accurate recordkeeping. The CARB is authorized to assessSafety Code, penalties of up to ~~$500~~$5,000 per ~~missing or incomplete record.~~day for each violation may be assessed. The draft complaint also seeks penalties for unfair and unlawful business practices under California Business and Professions Code Section 17200, under which penalties of up to $2,500 per violation may be assessed. There

are no allegations related to the discharge of any hazardous substances. The Utility ~~continues to work~~is investigating the allegations and has entered into discussions with the ~~CARB and expects to resolve the matter in the first quarter of 2007.~~District Attorney. The Utility believes that the ultimate outcome of this matter would not result in a material adverse effect on its financial condition or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

EXECUTIVE OFFICERS OF THE REGISTRANTS

The names, ages and positions of PG&E Corporation “executive officers,” as defined by Rule 3b-7 of the General Rules and Regulations under the Securities and Exchange Act of 1934 or (“Exchange ~~Act,~~Act”) at February ~~1, 2007,~~20, 2008, are as follows:

Name	Age	Position

Peter A. Darbee	5455	Chairman of the Board, Chief Executive Officer, and President
~~Leslie H. Everett~~	56	~~Senior Vice President, Communications and Public Affairs~~
Kent M. Harvey	4849	Senior Vice President and Chief Risk and Audit Officer
~~Russell M. Jackson~~	49	~~Senior Vice President, Human Resources~~
Christopher P. Johns	4647	Senior Vice President, Chief Financial Officer, and Treasurer
~~Thomas B. King~~Nancy E. McFadden	4549	Senior Vice ~~President;~~President, Public Affairs
William T. Morrow	48	President and Chief Executive Officer, Pacific Gas and Electric Company
Hyun Park	4546	Senior Vice President and General Counsel
Greg S. Pruett	50	Senior Vice President, Corporate Relations
Rand L. Rosenberg	5354	Senior Vice President, Corporate Strategy and Development
John R. Simon	43	Senior Vice President, Human Resources

All officers of PG&E Corporation serve at the pleasure of the Board of Directors. During the past five years through February ~~1, 2007,~~20, 2008, the executive officers of PG&E Corporation had the following business experience. Except as otherwise noted, all positions have been held at PG&E Corporation.

Name	Position	Period Held Office

Peter A. Darbee	Chairman of the Board, Chief Executive Officer, and President	September 19, 2007 to present
	Chairman of the Board and Chief Executive Officer	July 1, 2007 to September 18, 2007
	Chairman of the Board, Chief Executive Officer, and President	January 1, 2006 to ~~present~~June 30, 2007
	Chairman of the Board, Pacific Gas and Electric Company	January 1, 2006 to ~~present~~May 31, 2007
	President and Chief Executive Officer	January 1, 2005 to December 31, 2005
	Senior Vice President and Chief Financial Officer	September 20, 1999 to December 31, ~~2004~~

~~Leslie H. Everett~~	~~Senior Vice President, Communications and Public Affairs~~	~~January 9, 2006 to present~~
	~~Senior Vice President and Assistant to the Chief Executive Officer~~	~~January 1, 2005 to January 8, 2006~~
	~~Senior Vice President and Assistant to the Chairman~~	~~August 2, 2004 to December 31, 2004~~
	~~Vice President and Assistant to the Chairman~~	~~June 1, 2001 to August 1,~~ 2004

Kent M. Harvey	Senior Vice President and Chief Risk and Audit Officer	October 1, 2005 to present
	Senior Vice President, Chief Financial Officer, and Treasurer, Pacific Gas and Electric Company	November 1, 2000 to September 30, 2005

~~Russell M. Jackson~~	~~Senior Vice President, Human Resources, PG&E Corporation and Pacific Gas and Electric Company~~	~~August 2, 2004 to present~~
	~~Vice President, Human Resources, PG&E Corporation~~	~~June 1, 2004 to August 1, 2004~~
	~~Vice President, Human Resources, Pacific Gas and Electric Company~~	~~June 1, 1999 to August 1, 2004~~

Christopher P. Johns	Senior Vice President, Chief Financial Officer, and Treasurer	October 4, 2005 to present
	Senior Vice President and Treasurer, Pacific Gas and Electric Company	June 1, 2007 to present
	Senior Vice President, Chief Financial Officer, and Treasurer, Pacific Gas and Electric Company	October 1, 2005 to ~~present~~May 31, 2007
	Senior Vice President, Chief Financial Officer, and Controller	January 1, 2005 to October 3, 2005
	Senior Vice President and Controller	September 19, 2001 to December 31, 2004

~~Thomas B. King~~Nancy E. McFadden	Senior Vice President, ~~PG&E Corporation~~Public Affairs	~~January~~March 1, ~~2006~~2007 to present
	~~Chief Executive Officer,~~Senior Vice President, Public Affairs, Pacific Gas and Electric Company	~~August 15, 2006~~ June 20, 2007 to present
	Vice President, Governmental Relations, Pacific Gas and Electric Company	September 26, 2005 to February 28, 2007
	Chairperson, California Medical Assistance Commission	November 13, 2003 to November 30, 2005
	Senior Advisor and Deputy Chief of Staff, Office of Governor Gray Davis	May, 2001 to November, 2003


William T. Morrow	President and Chief Executive Officer, Pacific Gas and Electric Company	~~January~~July 1, ~~2006~~2007 to ~~August 14, 2006~~present
	~~Executive Vice~~ President and Chief Operating Officer, Pacific Gas and Electric Company	August 1, 2006 to June 30, 2007
	Chief Executive Officer, Europe, Vodafone Group PLC (a global mobile telecommunications company)	May 1, 2006 to July 31, 2006
	President, Vodafone KK, Japan	April 1, 2005 to ~~December~~April 30, 2006
	Chief Executive Officer, Vodafone UK, Ltd.	February 1, 2004 to March 31, 2005
	~~Executive Vice~~ President, ~~and Chief of Utility Operations, Pacific Gas and Electric Company~~	~~August 2, 2004 to June 30, 2005~~
	~~Senior Vice President and Chief of Utility Operations, Pacific Gas and Electric Company~~	~~November 1, 2003 to August 1, 2004~~
	~~Senior Vice President, PG&E Corporation~~	~~January 1, 1999 to October 31, 2003~~
	~~President, PG&E National Energy Group,~~Japan Telecom Holdings Co., Inc.	~~November 15, 2002~~December 21, 2001 to ~~July 8, 2003~~
	~~President and Chief Operating Officer, PG&E Gas Transmission Corporation~~	~~August 27, 2002 to July 8, 2003~~
	~~President and Chief Operating Officer, Gas Transmission, PG&E National Energy Group, Inc.~~	~~August 9, 2002 to November 14, 2002~~
	~~President and Chief Operating Officer, West Region, PG&E National Energy Group, Inc.~~	~~July 1, 2000 to August 8, 2002~~
	~~President and Chief Operating Officer, PG&E Gas Transmission Corporation~~	~~November 23, 1998 to September 10, 2002~~January 31, 2004

Hyun Park	Senior Vice President and General Counsel	November 13, 2006 to present
	Vice President, General Counsel, and Secretary, Allegheny Energy, Inc. (an investor-owned utility company headquartered in Pennsylvania)	April 5, 2005 to October 17, 2006
	Senior Vice President, General Counsel, and Secretary, Sithe Energies, Inc.	March 2000 to February 2005

Greg S. Pruett	Senior Vice President, Corporate Relations	November 1, 2007 to present
	Vice President, Corporate Relations	March 1, 2007 to October 31, 2007
	Vice President, Communications and Marketing, American Gas Association	April 10, 2006 to February 23, 2007
	Chief Public Affairs Officer, Bechtel National, Inc.	June 12, 2004 to September 12, 2005
	Vice President, Corporate Communications, PG&E Corporation	January 1, 1998 to September 12, 2003

Rand L. Rosenberg	Senior Vice President, Corporate Strategy and Development	November 1, 2005 to present
	Executive Vice President and Chief Financial Officer, Infospace, Inc.	September 2000 to January 20, 2001

John R. Simon	Senior Vice President, Human Resources	April 16, 2007 to present
	Senior Vice President, Human Resources, Pacific Gas and Electric Company	April 16, 2007 to present
	Executive Vice President, Global Human Capital, TeleTech Holdings, Inc.	March 21, 2006 to April 13,2007
	Senior Vice President, Human Capital, TeleTech Holdings, Inc.	July 31, 2001 to March 20, 2006

The names, ages and positions of the Utility's “executive officers,” as defined by Rule 3b-7 of the General Rules and Regulations under the Exchange Act at February ~~1, 2007,~~20, 2008, are as follows:

Name	Age	Position

Peter A. Darbee	5455	Chairman of the Board,
~~Thomas B. King~~	45	Chief Executive Officer, and President, PG&E Corporation
~~William.~~William T. Morrow	4748	President and Chief ~~Operating~~Executive Officer
Thomas E. Bottorff	5354	Senior Vice President, Regulatory Relations
~~Jeffrey D. Butler~~Helen Burt	51	Senior Vice President ~~Energy Delivery~~and Chief Customer Officer
~~Leslie H. Everett~~Christopher P. Johns	5647	Senior Vice President ~~Communications~~ and ~~Public Affairs, PG&E Corporation~~Treasurer
~~Russell~~John S. Keenan	59	Senior Vice President and Chief Operating Officer
Patricia M. ~~Jackson~~Lawicki	47	Senior Vice President and Chief Information Officer
Nancy E. McFadden	49	Senior Vice President, ~~Human Resources~~
~~Christopher P. Johns~~	46	~~Senior Vice President, Chief Financial Officer and Treasurer~~
~~John S. Keenan~~	58	~~Senior Vice President, Generation and Chief Nuclear Officer~~Public Affairs
Hyun Park	4546	Senior Vice President and General Counsel, PG&E Corporation
~~Stewart M. Ramsay~~Greg S. Pruett	4850	Senior Vice President, Corporate Relations, PG&E Corporation
Edward A. Salas	51	Senior Vice President, Engineering and Operations
John R. Simon	43	Senior Vice President, Human Resources
Geisha J. Williams	46	Senior Vice President, Energy Delivery
G. Robert Powell	44	Vice President, ~~Asset Management~~Chief Financial Officer, and ~~Electric Transmission~~Controller
Fong Wan	4546	Vice President, Energy Procurement

All officers of the Utility serve at the pleasure of the Board of Directors. During the past five years through February ~~1, 2007,~~20,

2008, the executive officers of the Utility had the following business experience. Except as otherwise noted, all positions have been held at Pacific Gas and Electric Company.

Name	Position		Period Held Office

Peter A. Darbee	Chairman of the Board, Chief Executive Officer, and President, PG&E Corporation		September 19, 2007 to present
	Chairman of the Board and Chief Executive Officer, PG&E Corporation		January 1, 2006 to September 19, 2007
	Chairman of the Board, Pacific Gas and Electric Company		January 1, 2006 to ~~present~~May 31, 2007
	Chairman of the Board, Chief Executive Officer, and President, PG&E Corporation		January 1, 2006 to ~~present~~June 30, 2006
	President and Chief Executive Officer, PG&E Corporation		January 1, 2005 to December 31, 2005
	Senior Vice President and Chief Financial Officer, PG&E Corporation		July 9, 2001 to December 31, 2004

~~Thomas B. King~~William T. Morrow	~~Chief Executive Officer~~		~~August 15, 2006 to present~~
		President and Chief Executive Officer		~~January~~July 1, ~~2006 to August 14, 2006~~
		~~Senior Vice President, PG&E Corporation~~		~~January 1, 2006~~2007 to present
		~~Executive Vice President and Chief Operating Officer~~		~~July 1, 2005 to December 31, 2005~~
		~~Executive Vice President and Chief of Utility Operations~~		~~August 2, 2004 to June 30, 2005~~
		~~Senior Vice President and Chief of Utility Operations~~		~~November 1, 2003 to August 1, 2004~~
		~~Senior Vice President, PG&E Corporation~~		~~January 1, 1999 to October 31, 2003~~
		~~President, PG&E National Energy Group, Inc.~~		~~November 15, 2002 to July 8, 2003~~
		~~President and Chief Operating Officer, PG&E Gas Transmission Corporation~~		~~August 27, 2002 to July 8, 2003~~
		~~President and Chief Operating Officer, Gas Transmission, PG&E National Energy Group, Inc.~~		~~August 9, 2002 to November 14, 2002~~
		~~President and Chief Operating Officer, West Region, PG&E National Energy Group, Inc.~~		~~July 1, 2000 to August 8, 2002~~
		~~President and Chief Operating Officer, PG&E Gas Transmission Corporation~~		~~November 23, 1998 to September 10, 2002~~

~~William T. Morrow~~	President and Chief Operating Officer		August ~~15,~~1, 2006 ~~to present~~June 30, 2007
	Chief Executive Officer, Europe, Vodafone Group PLC (a global mobile telecommunications company)		May 1, 2006 to July 31, 2006
	President, Vodafone KK, Japan		April 1, 2005 to April 30, 2006
	Chief Executive Officer, Vodafone UK, Ltd.		February 1, 2004 to March 31, 2005
	President, Japan Telecom Holdings Co., Inc.		December 21, 2001 to January 31, 2004

Thomas E. Bottorff	Senior Vice President, Regulatory Relations		October 14, 2005 to present
	Senior Vice President, Customer Service and Revenue		March 1, 2004 to October 13, 2005
	Vice President, Customer Service		June 1, 1999 to February 29, 2004

~~Jeffrey D. Butler~~		~~Senior Vice President, Energy Delivery~~		~~January 9, 2006 to present~~
		~~Senior Vice President, Transmission and Distribution~~		~~March 1, 2004 to January 8, 2006~~
		~~Vice President, Operations, Maintenance and Construction~~		~~June 12, 2000 to February 29, 2004~~

~~Leslie H. Everett~~		~~Senior Vice President, Communications and Public Affairs, PG&E Corporation~~		~~January 9, 2006 to present~~
Helen Burt	Senior Vice President and ~~Assistant to the~~ Chief ~~Executive~~Customer Officer ~~PG&E Corporation~~		~~January 1, 2005 to January 8, 2006~~
		~~Senior Vice President and Assistant to the Chairman, PG&E Corporation~~		~~August 2, 2004 to December 31, 2004~~
		~~Vice President and Assistant to the Chairman, PG&E Corporation~~		~~June 1, 2001 to August 1, 2004~~

~~Russell M. Jackson~~		~~Senior Vice President, Human Resources, Pacific Gas and Electric Company and PG&E Corporation~~		~~August 2, 2004 to present~~
		~~Vice President, Human Resources, PG&E Corporation~~		~~June 1, 2004 to August 1, 2004~~
		~~Vice President, Human Resources~~		~~June 1, 1999 to August 1, 2004~~

~~Christopher P. Johns~~		~~Senior Vice President, Chief Financial Officer and Treasurer~~		~~October 1, 2005 to present~~
		~~Senior Vice President, Chief Financial Officer and Treasurer, PG&E Corporation~~		~~October 4, 2005 to present~~
		~~Senior Vice President, Chief Financial Officer and Controller, PG&E Corporation~~		~~January 1, 2005 to October 3, 2005~~
		~~Senior Vice President and Controller, PG&E Corporation~~		~~September 19, 2001 to December 31, 2004~~

~~John S. Keenan~~		~~Senior Vice President, Generation and Chief Nuclear Officer~~		~~December 19, 2005 to present~~
		~~Vice President, Fossil Generation, Progress Energy~~		~~November 10, 2003 to December 18, 2005~~
		~~Vice President, Brunswick Nuclear Plant, Progress Energy~~		~~May 1, 1998 to November 9, 2003~~

~~Hyun Park~~		~~Senior Vice President and General Counsel, PG&E Corporation~~		~~November 13, 2006 to present~~
		~~Vice President, General Counsel and Secretary, Allegheny Energy, Inc. (an investor-owned utility company headquartered in Pennsylvnia)~~		~~April 5, 2005 to October 17, 2006~~
		~~Senior Vice President, General Counsel and Secretary, Sithe Energies, Inc.~~		~~March 2000 to February 2005~~

~~Stewart M. Ramsay~~		~~Vice President, Asset Management and Electric Transmission~~		January 9, 2006 to present
	Vice President, Electric Transmission		July 1, 2005 to January 8, 2006
	Vice President, Distribution Asset Management, American Electric Power		February 1, 2004 to June 30, 2005
	Senior Vice President, Power and Gas, UMS Group, Inc.		October 1, 2001 to January 31, 2004

Christopher P. Johns	Senior Vice President and Treasurer		June 1, 2007 to present
	Senior Vice President, Chief Financial Officer, and Treasurer, PG&E Corporation		October 4, 2005 to present
	Senior Vice President, Chief Financial Officer, and Treasurer,		October 1, 2005 to May 31, 2007
	Senior Vice President, Chief Financial Officer, and Controller, PG&E Corporation		January 1, 2005 to October 3, 2005
	Senior Vice President and Controller, PG&E Corporation		September 19, 2001 to December 31, 2004

Patricia M. Lawicki	Senior Vice President and Chief Information Officer		November 1, 2007 to present
	Vice President and Chief Information Officer		January 12, 2005 to October 31, 2007
	Vice President, Chief Information Officer, NiSource, Inc.		April 23, 2003 to January 7, 2005

John S. Keenan	Senior Vice President and Chief Operating Officer		January 1, 2008 to present
	Senior Vice President, Generation and Chief Nuclear Officer		December 19, 2005 to December 31, 2007
	Vice President, Fossil Generation, Progress Energy		November 10, 2003 to December 18, 2005
	Vice President, Brunswick Nuclear Plant, Progress Energy		May 1, 1998 to November 9, 2003

Nancy E. McFadden	Senior Vice President, Public Affairs		June 20, 2007 to present
	Senior Vice President, Public Affairs, PG&E Corporation		March 1, 2007 to present
	Vice President, Governmental Relations		September 26, 2005 to February 28, 2007
	Chairperson, California Medical Assistance Commission		November 13, 2003 to November 30, 2005
	Senior Advisor and Deputy Chief of Staff, Office of Governor Gray Davis		May 2001 to November 2003


Hyun Park	Senior Vice President and General Counsel, PG&E Corporation	November 13, 2006 to present
	Vice President, General Counsel, and Secretary, Allegheny Energy, Inc. (an investor-owned utility company headquartered in Pennsylvania)	April 5, 2005 to October 17, 2006
	Senior Vice President, General Counsel, and Secretary, Sithe Energies, Inc.	March 2000 to February 2005

Greg S. Pruett	Senior Vice President, Corporate Relations, PG&E Corporation	November 1, 2007 to present
	Vice President, Corporate Relations, PG&E Corporation	March 1, 2007 to October 31, 2007
	Vice President, Communications and Marketing, American Gas Association	April 10, 2006 to February 23, 2007
	Chief Public Affairs Officer, Bechtel National, Inc.	June 12, 2004 to September 12, 2005
	Vice President, Corporate Communications, PG&E Corporation	January 1, 1998 to September 12, 2003

Edward A. Salas	Senior Vice President, Engineering and Operations	April 11, 2007 to present
	Staff Vice President, Network Planning, Verizon Wireless, Basking Ridge, N.J. Contractor, Verizon Wireless, Local Number Portability Implementation	May 2004 to April 2007 May 2003 to April 2004

John R. Simon	Senior Vice President, Human Resources	April 16, 2007 to present
	Senior Vice President, Human Resources, PG&E Corporation	April 16, 2007 to present
	Executive Vice President, Global Human Capital, TeleTech	March 21, 2006 to April 13, 2007
	Senior Vice President, Human Capital, TeleTech Holdings, Inc.	July 13, 2001 to March 20, 2006

Geisha J. Williams	Senior Vice President, Energy Delivery	December 1, 2007 to present
	Vice President, Power Systems, Distribution, Florida Power and Light Company	July 2003 to July 2007
	Vice President, Distribution Operations, Florida Power and Light Company	February 2002 to July 2003

G. Robert Powell	Vice President, Chief Financial Officer, and Controller	June 1, 2007 to present
	Vice President and Controller	December 21, 2005 to May 31, 2007
	Controller (Interim)	November 9, 2005 to December 20, 2005
	Vice President and Controller, PG&E Corporation	October 4, 2005 to present
	Partner, PricewaterhouseCoopers LLP	July 2002 to September 2005

Fong Wan	Vice President, Energy Procurement	January 9, 2006 to present
	Vice President, Power Contracts and Electric Resource Development	May 1, 2004 to January 8, 2006
	Vice President, Risk Initiatives, PG&E Corporation Support Services, Inc.	November 1, 2000 to April 30, 2004

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

As of February ~~1, 2007,~~19, 2008, there were ~~92,901~~88,752 holders of record of PG&E Corporation common stock. PG&E Corporation common stock is listed on the New York Stock Exchange and the Swiss stock exchanges. The high and low sales prices of PG&E Corporation common stock for each quarter of the two most recent fiscal years are set forth under the heading “Quarterly Consolidated Financial Data (Unaudited)” in the ~~2006~~2007 Annual Report, which information is hereby incorporated by reference and filed as part of Exhibit 13 to this report. The discussion of dividends with respect to PG&E Corporation's common stock ~~is hereby incorporated by reference from~~set forth under the heading “Management's Discussion and Analysis of Financial Condition and Results of ~~Operations -~~ Operations—Liquidity and Financial ~~Resources -~~ Resources—Dividends” in the 2007 Annual Report, which information is hereby incorporated by reference and filed as part of ~~the 2006 Annual Report.~~Exhibit 13 to this report.

3438

~~As previously disclosed, in connection with its entry into certain credit agreements, in June 2002 and October 2002,~~

PG&E Corporation ~~issued warrants to purchase 5,066,931~~did not repurchase any shares of ~~PG&E Corporation~~its common stock at an exercise price of $0.01 per share. During the year ended December 31, 2006, warrant holders exercised, on a net exercise basis, warrants to purchase 51,904 shares, and received 51,890 shares of PG&E Corporation common stock in reliance on the exemption from the registration requirements of the Securities Act of 1933 provided by Section 4(2) of the Act. As of December 31, 2006, warrant holders had exercised, on a net exercise basis, warrants to purchase 5,066,931 shares, and had received 5,065,099 shares of PG&E Corporation common stock since the warrants were issued. There are no more warrants outstanding.

~~Pacific Gas and Electric Company did not make any sales of unregistered equity securities~~ during ~~the quarter ended December 31, 2006.~~

~~Issuer Purchases of Equity Securities~~

~~PG&E Corporation common stock:~~

Period

Total Number of Shares Purchased

Average Price Paid Per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽¹⁾

Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (2)

October 1 through October 31, 2006 - $ - - $ 500,000,000
November 1 through November 30, 2006 - $ - - $ 500,000,000
December 1 through December 31, 2006 - $ - - $ 500,000,000
Total
- $ - - $ 500,000,000

(1) On October 19, 2005, the PG&E Corporation Board of Directors authorized the repurchase of up to $1.6 billion of shares of PG&E Corporation's common stock from time to time, but no later than December 31, 2006. No purchases were made under this authorization during the quarter ended December 31, 2006.
(2) The authority to repurchase shares under this authorization expired on December 31, 2006.

~~During the fourth quarter of 2006, Pacific Gas and Electric Company~~2007. The Utility did not redeem or repurchase any shares of its various series of preferred stock ~~outstanding.~~outstanding during of 2007.

Item 6. Selected Financial Data

A summary of selected financial information, for each of PG&E Corporation and Pacific Gas and Electric Company for each of the last five fiscal years, is set forth under the heading “Selected Financial Data” in the ~~2006~~2007 Annual Report, which information is hereby incorporated by reference and filed as part of Exhibit 13 to this report.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

A discussion of PG&E Corporation's and Pacific Gas and Electric Company's consolidated financial condition and results of operations is set forth under the heading “Management's Discussion and Analysis of Financial Condition and Results of Operations” in the ~~2006~~2007 Annual Report, which discussion is hereby incorporated by reference and filed as part of Exhibit 13 to this report.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Information responding to Item 7A appears in the ~~2006~~2007 Annual Report under the heading “Management's Discussion and Analysis of Financial Condition and Results of ~~Operations -~~ Operations—Risk Management Activities,” and under Notes 2 and 12 of the “Notes to the Consolidated Financial Statements” of the ~~2006~~2007 Annual Report, which information is hereby incorporated by reference and filed as part of Exhibit 13 to this report.

Item 8. Financial Statements and Supplementary Data

Information responding to Item 8 appears in the ~~2006~~2007 Annual Report under the following headings for PG&E Corporation: “Consolidated Statements of Income,” “Consolidated Balance Sheets,” “Consolidated Statements of Cash Flows,” and “Consolidated

Statements of Shareholders' Equity;” under the following headings for Pacific Gas and Electric Company: “Consolidated Statements of Income,” “Consolidated Balance Sheets,” “Consolidated Statements of Cash Flows,” and “Consolidated Statements of Shareholders' Equity;” and under the following headings for PG&E Corporation and Pacific Gas and Electric Company jointly: “Notes to the Consolidated Financial Statements,” “Quarterly Consolidated Financial Data (Unaudited),” and “Report of Independent Registered Public Accounting Firm,” which information is hereby incorporated by reference and filed as part of Exhibit 13 to this report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

Based on an evaluation of PG&E Corporation's and the Utility's disclosure controls and procedures as of December 31, ~~2006,~~2007, PG&E Corporation's and the Utility's respective principal executive officers and principal financial officers have concluded that such controls and procedures are effective to ensure that information required to be disclosed by PG&E Corporation and the Utility in reports that the companies file or submit under the Securities Exchange Act of 1934 ~~or the~~ (“1934 ~~Act,~~Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. In addition, PG&E Corporation's and the Utility's respective principal executive officers and principal financial officers have concluded that such controls and procedures were effective in ensuring that information required to be disclosed by PG&E Corporation and the Utility in the reports that PG&E Corporation and the Utility file or submit under the 1934 Act is accumulated and communicated to PG&E Corporation’s and the Utility’s management, including PG&E Corporation's and the Utility's respective principal executive officers and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in internal control over financial reporting that occurred during the quarter ended December 31, ~~2006~~2007 that have materially affected, or are reasonably likely to materially affect, PG&E Corporation's or the Utility's internal control over financial reporting.

Management of PG&E Corporation and the Utility have prepared an annual report on internal control over financial reporting. Management's report, together with the report of the independent registered public accounting firm, appears in the ~~2006~~2007 Annual Report under the heading “Management's Report on Internal Control Over Financial Reporting” and “Report of Independent Registered Public Accounting Firm,” which information is hereby incorporated by reference and filed as part of Exhibit 13 to this

report.

Item 9B. Other Information

~~Item 9B.~~ ~~Other Information~~

~~Officer Appointments~~Amendment to Bylaws

On February ~~21, 2007,~~20, 2008, the Boards of Directors of PG&E Corporation and the Utility amended the respective company’s Bylaws to decrease the authorized number of directors, effective May 14, 2008, to eliminate the vacancy on the Board of Directors that will result from the retirement of David A. Coulter as a director of each company following the companies’ joint annual meeting of shareholders. Under PG&E Corporation’s Bylaws, the authorized number of directors may not be less than 7 or more than 13, but within that range the Board of Directors may set the exact number of directors by an amendment to the Bylaws. Under the Utility’s Bylaws, the authorized number of directors may not be less than 9 or more than 17, but within that range the Board of Directors may set the exact number of directors by an amendment to the Bylaws. Effective May 14, 2008, PG&E Corporation’s authorized number of directors will decrease from 10 to 9 and the Utility’s authorized number of directors will decrease from 11 to 10. The text of the amendment to PG&E Corporation’s Bylaws is attached to this report as Exhibit 3.4 and the text of the amendment to the Utility’s Bylaws is attached to this report as Exhibit 3.7.

Under PG&E Corporation’s and the Utility’s Corporate Governance Guidelines, at least 75% of its Board is required to be composed of independent directors, generally defined as directors who (1) are neither current nor former officers or employees of, nor consultants to, PG&E Corporation, the Utility, or their consolidated subsidiaries, (2) are neither current nor former officers or employees of any other corporation on whose board of directors any officer of the Utility serves as a member, and (3) otherwise meet the definition of “independence” set forth in the stock exchange rules applicable to PG&E Corporation and the Utility. The composition of PG&E Corporation’s and the Utility’s Board of Directors ~~elected William T. Morrow, 47, as President~~currently meets the Corporate Governance Guidelines and ~~Chief Executive Officer of the Utility, effective July 1, 2007. Mr. Morrow~~ will continue to ~~report to Thomas B. King, currently Chief Executive~~do so after May 14, 2008.

2008 Officer of the Utility, who will become President of PG&E Corporation effective July 1, 2007. Peter A. Darbee, currently Chairman of the Board, Chief Executive Officer, and President of PG&E Corporation, will become Chairman of the Board and Chief Executive Officer of PG&E Corporation effective July 1, 2007. Mr. Darbee will continue to serve as Chairman of the Board of the Utility.Compensation

~~Mr. Morrow has been President and Chief Operating Officer~~On February 20, 2008, the Compensation Committee of the Utility since August 15, 2006. Before joining the Utility, Mr. Morrow held various executive positions in the telecommunications industry. Most recently Mr. Morrow served as Chief Executive Officer, Europe, of Vodafone Group PLC, a position he held from May 2006 to July 2006. From April 2005 to April 2006, Mr. Morrow served as President of Vodafone K.K. in Japan and from February 2004 to March 2005, he was Chief Executive Officer of Vodafone, U.K., Ltd. From December 2001 through January 2004, Mr. Morrow was President of Japan Telecom Holdings Co., Inc. and Japan Telecom Co., Inc. Previously in 2001, Mr. Morrow was Vice President and Country Manager, Japan for Vodafone Group PLC.

Mr. King has served as Chief Executive Officer of the Utility since August 15, 2006. Prior to that date, Mr. King served as President and Chief Executive Officer of the Utility, a position he held from January 1, 2006 to August 14, 2006. He served as Executive Vice President and Chief Operating Officer of the Utility from July 1, 2005 to December 31, 2005, and as Executive Vice President and Chief of Utility Operations from August 2, 2004 to June 30, 2005. From November 1, 2003 to August 1, 2004, he was Senior Vice President and Chief of Utility Operations of the Utility. Prior to November 1, 2003, Mr. King had been a Senior Vice President of PG&E Corporation from January 1, 1999. Since 2000, Mr. King also held various executive positions at PG&E National

Energy Group, Inc., a former subsidiary of PG&E Corporation involved in power generation, natural gas transmission, and wholesale energy marketing and trading. Mr. King focused his activities primarily in the natural gas transmission business. From November 15, 2002 to July 8, 2003, Mr. King served as the President and as a director of PG&E National Energy Group, Inc.

Mr. King and Mr. Morrow are entitled to receive equity awards under the PG&E Corporation 2006 Long-Term Incentive Plan and the PG&E Corporation Executive Stock Ownership Program. They are also eligible to receive annual cash incentive awards under an annual Short-Term Incentive Plan adopted by the PG&E Corporation Board of ~~Directors.~~Directors (“Committee”) approved the specific performance targets for each component of the 2008 Short-Term Incentive Plan (“STIP”). The ~~Utility provides retirement benefits to all~~Committee previously approved the STIP structure and the weighting of ~~its employees, including its officers, under a tax-qualified defined benefit pension plan.~~each component in December 2007. Officers of PG&E Corporation and the Utility are ~~also entitled~~eligible to receive ~~pension benefits~~cash incentives under the ~~PG&E Corporation Supplemental Executive Retirement Plan, a non-tax qualified defined benefit pension plan. Officers~~STIP based on the extent to which the adopted 2008 performance targets are met. The Committee will continue to retain full discretion as to the determination of PG&E Corporation and the Utility may also participate in the PG&E Corporation Retirement Savings Plan, a 401(k) plan available to all eligible employees, and the PG&E Corporation Supplemental Retirement Savings Plan. PG&E Corporation also has adopted an Officer Severance Policy that covers officers of PG&E Corporation and the Utility. These plans, as well as perquisites provided to officers, are described in PG&E Corporation’s and the Utility’s 2006 joint proxy statement filed with the Securities and Exchange Commission. final officer STIP payments.

~~Neither Mr. Morrow nor Mr. King has any relationship or related transaction with PG&E Corporation or~~The 2008 STIP structure for officers focuses the ~~Utility that would require disclosure pursuant to Item 404(a) of Securities and Exchange Commission Regulation S-K.~~

~~2007 Short-Term Incentive Plan~~

As previously disclosed, the Nominating, Compensation and Governance Committee of the PG&E Corporation Board of Directors, or the Committee, has approved the structure of the PG&E Corporation 2007 Short-Term Incentive Plan, or STIP, under which officers of PG&E Corporation and the Utility are provided an opportunity to receive annual incentive ~~cash payments.~~opportunity on returns to shareholders by emphasizing financial objectives such as earnings from operations. The structure also recognizes the equal importance of improving reliability and customer satisfaction, and employee safety and engagement. Corporate financial performance, as measured by corporate earnings from operations, will account for ~~50 percent~~40% of the incentive, ~~20 percent of the incentive will be based on customer satisfaction indices, 20 percent~~20% of the incentive will be based on the Utility’s success in ~~implementing its strategy to achieve operational excellence and improved~~improving reliability, 20% of the incentive will be based on the Utility’s success in improving customer ~~service, 5 percent~~satisfaction, 10% will be based on the results of an employee opinion survey, ~~measuring employee engagement,~~ and the remaining ~~5 percent~~10% will be based on achieving safety standards. ~~At its meeting on February 21, 2007,~~For 2008, the Committee ~~approved the specific performance scale~~has adopted a mechanism stating that ~~will be used to determine the extent to which the~~if corporate financial ~~objective, as measured by~~performance does not exceed 98% of the budgeted earnings from operations, ~~has been met. The Committee used~~ the ~~same methodology~~aggregate operational metric contribution to ~~establish~~ the ~~performance scale for the corporate financial performance portion~~2008 STIP pool will be capped at 100% of the ~~2007~~operational component target award, or 60% of the total target STIP ~~as was used for the 2006 STIP.~~ award pool.

The corporate financial performance measure is based on PG&E Corporation's budgeted earnings from operations that were previously approved by the Board of Directors, consistent with the basis for reporting and guidance to the financial community. As with previous earnings performance scales, unbudgeted items impacting comparability such as changes in accounting methods, workforce restructuring, and one-time occurrences will be excluded.

The Committee also approved the ~~2007~~2008 performance targets for each of the four other measures set forth in the table below. The ~~2006~~2007 performance results for each ~~measure~~of these measures are included for comparative purposes.

~~2007~~2008 STIP Operational Performance Targets(1)

Measure

Relative Weight

2006 Results

2007 Target

Customer Satisfaction (Residential & Business) (2) 20% 100 676
Business Transformation Index (3) 20 % N/A 1.0
Employee Survey (Premier) Index (4) 5 % 64.0 % 66.0 %
Occupational Safety and Health Administration (OSHA) Recordable Injury Rate (5) 5 % 12.9% reduction 15% reduction

Measure	Relative Weight	2007 Results	2008 Target
Customer Satisfaction and Brand Health Index (Residential & Business)(2)	20%	76.00	77.00
Reliable Energy Delivery Index(3)	20%	1.17	1.0
Employee Survey (Premier) Index(4)	10%	64.3%	66.0%
Occupational Safety and Health Administration (OSHA) Recordable Injury Rate(5)	10%	4.097	3.483

~~As explained above, 50%~~

1. As explained above, 40% of the STIP award will be based on achievement of corporate earnings from operations targets.

The Customer Satisfaction and Brand Health Index is the result of a quarterly survey performed by an independent research firm, Research International, and is a combination of a customer satisfaction score, which has a 75% weighting, as well as a brand favorability score (measuring the relative strength of the PG&E brand against a select group of companies), which has a 25% weighting. The customer satisfaction score will measure overall satisfaction with the Utility’s operational performance in delivering its services. The brand favorability score will measure residential, small business and medium business customer perceptions. This index replaces the index used in the 2006 and 2007 STIP structures based on residential and business customer satisfaction indices as reported the J.D. Power Residential Customer Satisfaction Survey and the J.D. Power Business Customer Satisfaction Survey.

2.This measure reflects a weighted composite of the overall customer satisfaction indices of the Utility’s residential and business customers as reported by the J.D. Power Residential Survey and the J.D. Power Business Survey. For 2006, the residential customers’ and business customers’ scores were weighted equally. In an effort to enhance the focus on improving residential customer satisfaction, which has been lower than business customer satisfaction, for the 2007 target the weighting of the residential customers’ score will be increased to 60% and the weighting of the business customers’ score will be lowered to 40%. In addition, for 2007, J.D. Power and Associates has changed the scale used to report results from the J.D. Power Survey from a scale that attempted to center the industry average score at approximately 100 to a 1,000-point scale. By way of comparison, results for 2006 would have been 678 under the new 1000-point scale based on equally weighted scores and results for 2006 would have been 673 based on the revised weightings. The 2007 target may be adjusted to reflect changes in the J.D. Power industry average scores, which are expected by mid-year 2007.

3.The Business Transformation Index is comprised of five measurement points that define success in achieving key Business Transformation operational, financial, and post-implementation objectives. The five measurement points are (1) overall Business Transformation cost performance in comparison to budgeted amounts, (2) overall business transformation benefit performance in comparison to planned/budgeted amounts, (3) new business customer connection performance for cycle time and number of customer commitments met, (4) SmartMeter^TMproject performance for number of meters installed and activated, and (5) the extent to which core business transformation initiatives are implemented compared to planned schedule and scope of initiatives.

The Reliable Energy Delivery Index is a composite index score that measures key drivers of reliability, including outage frequency and duration (System Average Interruption Frequency Index (SAIFI), Customer Average Interruption Duration Index (CAIDI)), Execution of Electric-Based Work Units, and Gas Transmission and Distribution Integrity. This index replaces the Business Transformation Index used in the 2007 STIP structure.

The Premier Survey is the primary tool used to measure employee engagement at PG&E Corporation and the Utility. The employee index is designed around 15 key drivers of employee ~~engagement.~~engagement and organizational health. The average overall employee survey index score provides a comprehensive metric that is derived by adding the percent of favorable responses from all 40 core survey items (all of which fall into one of 15 broader topical areas), and then dividing the total sum by 40.

An “OSHA Recordable” is an occupational (job-related) injury or illness that requires medical treatment beyond first aid, or results in work restrictions, death or loss of consciousness. The “OSHA Recordable Rate” is the number of OSHA Recordables for every 200,000 hours worked, or for approximately 100 employees. This metric measures the percentage reduction in the ~~Utility’s~~Corporation’s OSHA Recordable rate from the prior ~~year.~~year and is used to monitor the effectiveness of the Corporation’s safety programs, which are intended to significantly reduce the number and degree of employee injuries and illnesses.

Cash awards under the STIP may range from 30 percent to 100 percent of base salary depending on officer level, with a maximum payout of 200 percent of base salary, as determined by the Committee.

~~The~~Non-Employee Director Compensation

Also on February 20, 2008, the Boards of Directors of PG&E Corporation and the Utility amended each company’s resolution regarding non-employee director compensation to clarify and restate the application of the compensation program for non-employee directors in light of (1) the division of the PG&E Corporation Nominating, Compensation, and Governance Committee ~~has full discretion as~~into two separate committees (the Nominating and Governance Committee and the Compensation Committee), and (2) recent changes to the ~~determination~~process for selecting the lead director. The amended resolutions do not change the compensation levels previously authorized by the Boards of ~~final officer STIP awards for 2007 performance.~~

~~PART III~~Directors on December 20, 2006. The amended resolutions are effective as of January 1, 2008 and are attached to this report as exhibits.

PART III

Item 10. Directors, Executive Officersand Corporate Governance

Information regarding executive officers of PG&E Corporation and Pacific Gas and Electric Company is included above in a separate item captioned “Executive Officers of the Registrants” at the end of Part I of this report. Other information responding to Item 10 is included under the heading “Item No. 1: Election of Directors of PG&E Corporation and Pacific Gas and Electric Company” and under the heading “Section 16(a) Beneficial Ownership Reporting Compliance” in the Joint Proxy Statement relating to the ~~2007~~2008 Annual Meetings of Shareholders, which information is hereby incorporated by reference.

Website Availability of Code of Ethics, Corporate Governance and Other Documents

The following documents are available both on PG&E Corporation's website www.pgecorp.com~~www.pgecorp.com~~, and Pacific Gas and Electric Company's website, www.pge.com~~www.pge.com~~: (1) the codes of conduct and ethics adopted by PG&E Corporation and Pacific Gas and Electric Company applicable to their respective directors and employees, including their respective Chief Executive Officers, Chief Financial Officers, Controllers and other executive officers, (2) PG&E Corporation's and Pacific Gas and Electric Company's corporate governance guidelines, and (3) key Board Committee charters, including charters for the companies' Audit Committees and the PG&E Corporation Nominating ~~Compensation,~~ and Governance Committee and Compensation Committee. Shareholders also may obtain print copies of these documents by submitting a written request to Linda Y.H. Cheng, Vice President, Corporate Governance and Corporate Secretary of PG&E Corporation and Pacific Gas and Electric Company, One Market, Spear Tower, Suite 2400, San Francisco, California 94105.

If any amendments are made to, or any waivers are granted with respect to, provisions of the codes of conduct and ethics adopted by PG&E Corporation and Pacific Gas and Electric Company that apply to their respective Chief Executive Officers, Chief Financial Officers or Controllers, the company whose code is so affected will disclose the nature of such amendment or waiver on its respective website and any waivers to the code will be disclosed in a Current Report on Form 8-K filed within 4 business days of the waiver.

Procedures for Shareholder Recommendations of Nominees to the Boards of Directors

During ~~2006~~2007 there were no material changes to the procedures described in PG&E Corporation’s and the Utility’s ~~joint proxy statement~~Joint Proxy Statement relating to the ~~2006~~2007 Annual Meetings of Shareholders by which security holders may recommend nominees to PG&E Corporation’s or the Utility’s Boards of Directors.

Audit Committees and Audit Committee Financial Expert

Information regarding the Audit Committees of PG&E Corporation and the Utility and the “audit committee financial expert” as defined by the SEC is included under the heading “Information Regarding the Boards of Directors of PG&E Corporation and Pacific Gas and Electric ~~Company -~~ CompanyBoard ~~Committees-~~ CommitteesAudit Committees” in the Joint Proxy Statement relating to the ~~2007~~2008 Annual Meetings of Shareholders, which information is hereby incorporated by reference.

Item 11. Executive Compensation

Information responding to Item 11, for each of PG&E Corporation and Pacific Gas and Electric Company, is included under

the ~~headings“Compensation~~headings “Compensation Discussion and Analysis,”~~“Compensation~~ “Compensation Committee Report,” “Summary Compensation Table - 2007,” “Grants of Plan-based Awards in ~~2006,~~2007,” “Outstanding Equity Awards at Fiscal Year End - 2007,” “Option Exercises and Stock Vested During ~~2006,~~2007,” “Pension Benefits,” ~~“Nonqualified~~“Non-Qualified Deferred Compensation,” ~~and~~ “Compensation of Directors,” and “Potential Payments Upon Resignation, Retirement, Termination, Change in Control, Death, or Disability” in the Joint Proxy Statement relating to the ~~2007~~2008 Annual Meetings of Shareholders, which information is hereby incorporated by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

Information responding to Item 12, for each of PG&E Corporation and Pacific Gas and Electric Company, is included under the heading “Security Ownership of Management” and under the heading “Principal Shareholders” in the Joint Proxy Statement relating to the ~~2007~~2008 Annual Meetings of Shareholders, which information is hereby incorporated by reference.

Equity Compensation Plan Information

The following table provides information as of December 31, ~~2006~~2007 concerning shares of PG&E Corporation common stock authorized for issuance under PG&E Corporation's existing equity compensation plans.

Plan Category

(a)
Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights

(b)
Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights

(c)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(Excluding Securities
Reflected in Column(a))

Equity compensation plans approved by shareholders 6,477,959(1 ) $ 24.16 11,421,085(2 )
Equity compensation plans not approved by shareholders — $ — —
Total equity compensation plans 6,477,959(1 ) $ 24.16 11,421,085(2 )

Plan Category	(a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	(b) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights	(c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column(a))
Equity compensation plans approved by shareholders	3,970,661(1)	$24.00	10,847,999(2)
Equity compensation plans not approved by shareholders	—	$—	—
Total equity compensation plans	3,970,661(1)	$24.00	10,847,999(2)

~~(1) Includes 79,639~~

(1) Includes 87,989 phantom stock units and restricted stock units. The weighted average exercise price reported in column (b) does not take these awards into account.

(2) Represents the total number of shares available for issuance under the PG&E Corporation's Long-Term Incentive Program (“LTIP”) and the PG&E Corporation 2006 Long-Term Incentive Plan (“2006 LTIP”) as of December 31, 2007. Outstanding stock-based awards granted under the LTIP include stock options, restricted stock and phantom stock payable in an equal number of shares upon termination of employment or service as a director. The LTIP expired on December 31, 2005. The 2006 LTIP, which became effective on January 1, 2006 authorizes up to 12 million shares to be issued pursuant to awards granted under the 2006 LTIP. Outstanding stock-based awards granted under the 2006 LTIP include stock options, restricted stock, restricted stock units and phantom stock payable in an equal number of shares upon termination of employment or service as a director. For a description of the LTIP and the 2006 LTIP, see Note 14 of the Notes to the Consolidated Financial Statements in the 2007 Annual Report.

(2) Represents the total number of shares available for issuance under PG&E Corporation's Long-Term Incentive Program, or LTIP, and the PG&E Corporation 2006 Long-Term Incentive Plan, or 2006 LTIP, as of December 31, 2006. Outstanding stock-based awards granted under the LTIP include stock options, restricted stock and phantom stock payable in an equal number of shares upon termination of employment or service as a director. The LTIP expired on December 31, 2005. The 2006 LTIP, which became effective on January 1, 2006 authorizes up to 12 million shares to be issued pursuant to awards granted under the 2006 LTIP. Outstanding stock-based awards granted under the 2006 LTIP include stock options, restricted stock, restricted stock units and phantom stock payable in an equal number of shares upon termination of employment or service as a director. For a description of the LTIP and the 2006 LTIP, see Note 14 of the Notes to the Consolidated Financial Statements in the 2006 Annual Report.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Information responding to Item 13, for each of PG&E Corporation and Pacific Gas and Electric Company, is included under the headings “Related Person Transactions,” “Review, Approval, and Ratification of Related Person Transactions” and “Information Regarding the Boards of Directors of PG&E Corporation and Pacific Gas and Electric ~~Company -~~ CompanyDirector Independence” in the Joint Proxy Statement relating to the ~~2007~~2008 Annual Meetings of Shareholders, which information is hereby incorporated by reference.

Item 14. Principal Accountant Fees and Services

Information responding to Item 14, for each of PG&E Corporation and Pacific Gas and Electric Company, is included under the heading “Information Regarding the Independent Registered Public Accounting Firm of PG&E Corporation and Pacific Gas and Electric Company” in the Joint Proxy Statement relating to the ~~2007~~2008 Annual Meetings of Shareholders, which information is hereby incorporated by reference.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)The following documents are filed as a part of this report:

1.The following consolidated financial statements, supplemental information and report of independent registered public accounting firm are contained in the ~~2006~~2007 Annual Report and are incorporated by reference in this report:

Consolidated Statements of Income for the Years Ended December 31, 2007, 2006, ~~2005,~~ and ~~2004,~~2005 for each of PG&E Corporation and Pacific Gas and Electric Company.

Consolidated Balance Sheets at December 31, 2007 and 2006 for each of PG&E Corporation and Pacific Gas and Electric Company.

Consolidated Statements of Cash Flows for the Years Ended December 31, 2007, 2006, and 2005 for each of PG&E Corporation and Pacific Gas and Electric Company.

Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2007, 2006, ~~2005,~~ and ~~2004,~~2005 for each of PG&E Corporation and Pacific Gas and Electric Company.

Notes to the Consolidated Financial Statements.

Quarterly Consolidated Financial Data (Unaudited).

Report of Independent Registered Public Accounting Firm (Deloitte & Touche LLP).

2.The following financial statement schedules and report of independent registered public accounting firm are filed as part of this report:

Report of Independent Registered Public Accounting Firm (Deloitte & Touche LLP).

~~I -~~ I—Condensed Financial Information of Parent as of December 31, ~~2006~~2007 and ~~2005~~2006 and for the Years Ended December 31, 2007, 2006, ~~2005,~~ and ~~2004.~~2005.

~~II -~~ II—Consolidated Valuation and Qualifying Accounts for each of PG&E Corporation and Pacific Gas and Electric Company for the Years Ended December 31, 2007, 2006, ~~2005,~~ and ~~2004.~~2005.

Schedules not included are omitted because of the absence of conditions under which they are required or because the required information is provided in the consolidated financial statements, including the notes thereto.

3.Exhibits required by Item 601 of Regulation S-K:

Exhibit Number	Exhibit Description
2.1	Order of the U.S. Bankruptcy Court for the Northern District of California dated December 22, 2003, Confirming Plan of Reorganization of Pacific Gas and Electric Company, including Plan of Reorganization, dated July 31, 2003 as modified by modifications dated November 6, 2003 and December 19, 2003 (Exhibit B to Confirmation Order and Exhibits B and C to the Plan of Reorganization omitted) (incorporated by reference to Pacific Gas and Electric Company's Registration Statement on Form S-3 No. 333-109994, Exhibit 2.1)
2.2	Order of the U.S. Bankruptcy Court for the Northern District of California dated February 27, 2004 Approving Technical Corrections to Plan of Reorganization of Pacific Gas and Electric Company and Supplementing Confirmation Order to Incorporate such Corrections (incorporated by reference to Pacific Gas and Electric Company's Registration Statement on Form S-3 No. 333-109994, Exhibit 2.2)
3.1	Restated Articles of Incorporation of PG&E Corporation effective as of May 29, 2002 (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 1-12609), Exhibit 3.1)
3.2	Certificate of Determination for PG&E Corporation Series A Preferred Stock filed December 22, 2000 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 3.2)
3.3	Bylaws of PG&E Corporation amended as of ~~December 20, 2006~~September 19, 2007 (incorporated by reference to PG&E Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007) (File No. 1-12609), Exhibit 3.1)
3.4	Text of the amendment to the Bylaws of PG&E Corporation effective May 14, 2008
3.5	Restated Articles of Incorporation of Pacific Gas and Electric Company effective as of April 12, 2004 (incorporated by reference to Pacific Gas and Electric Company's Form 8-K filed April 12, 2004 (File No. 1-2348), Exhibit 3)
~~3.5~~3.6	Bylaws of Pacific Gas and Electric Company amended as of ~~December 20, 2006~~ January 1, 2008
3.7	Text of the amendment to the Bylaws of Pacific Gas and Electric Company effective May 14, 2008
4.1	Indenture, dated as of April 22, 2005, supplementing, amending and restating the Indenture of Mortgage, dated as of March 11, 2004, as supplemented by a First Supplemental Indenture, dated as of March 23, 2004, and a Second Supplemental Indenture, dated as of April 12, 2004, between Pacific Gas and Electric Company and The Bank of New York Trust Company, N.A. (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 10-Q filed May 4, 2005 (File No. 1-12609 and File No. 1-2348), Exhibit 4.1)
4.2	First Supplemental Indenture dated as of March 13, 2007 relating to the issuance of $700,000,000 principal amount of 5.80% Senior Notes due March 1, 2037 (incorporated by reference from Pacific Gas and Electric Company’s Current Report on Form 8-K dated March 14, 2007 (File No. 1-2348), Exhibit 4.1)
4.3	Second Supplemental Indenture dated as of December 4, 2007 relating to the issuance of $500,000,000 principal amount of 5.625% Senior Notes due November 30, 2017(incorporated by reference from Pacific Gas and Electric Company’s Current Report on Form 8-K dated March 14, 2007 (file No. 1-2348), Exhibit 4.1)
4.4	Indenture related to PG&E Corporation's 7.5% Convertible Subordinated Notes due June 2007, dated as of June 25, 2002, between PG&E Corporation and U.S. Bank, N.A., as Trustee (incorporated by reference to PG&E Corporation's Form 8-K filed June 26, 2002 (File No. 1-12609), Exhibit 99.1).
~~4.3~~4.5	Supplemental Indenture related to PG&E Corporation's 9.50% Convertible Subordinated Notes due June 2010, dated as of October 18, 2002, between PG&E Corporation and U.S. Bank, N.A., as Trustee (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 (File No. 1-12609), Exhibit 4.1)
~~4.4~~	Warrant Agreement, dated as of October 18, 2002, by and among PG&E Corporation, LB I Group Inc., and each other entity named on the signature pages thereto (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 (File No. 1-12609), Exhibit 4.2)
10.1	Amended and Restated Unsecured Revolving Credit Agreement dated as of April 8, 2005, among Pacific Gas and Electric Company, Citicorp North America, Inc., as administrative agent and a lender, JP Morgan Chase Bank, N.A., as syndication agent and a lender, Barclays Bank PLC, BNP Paribas and Deutsche Bank Securities Inc., as documentation agents and lenders, ABN Amro Bank N.V., Lehman Brothers Bank, FSB, Mellon Bank, N.A., Royal Bank of Canada, The Bank of New York, The Bank of Nova Scotia, UBS Loan Finance LLC, and Union Bank of California, N.A., as senior managing agents, and KBC Bank, NV, Morgan Stanley Bank and William Street Commitment Corporation, as lenders (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 10-Q filed May 4, 2005 (File No. 1-12609 and File No. 1-2348), Exhibit 10.3)
~~10.2~~	~~First Amendment, dated as of November 30, 2005, to the Credit Agreement~~entered into among Pacific Gas and Electric Company, Citicorp North America, Inc., as administrative agent and a lender, JPMorgan ~~Chase Bank, N.A.~~Securities Inc., as syndication agent, ~~and a lender,~~ Barclays Bank ~~PLC~~Plc and BNP Paribas, as documentation agents and lenders, Deutsche Bank Securities Inc., as documentation agent, and ~~the following~~ other lenders: Deutsche Bank AG New York Branch, ABN Amro Bank N.V., Lehman Brothers Bank, FSB, Mellon Bank, N.A., Royal Bank of Canada, The Bank of New York, UBS Loan Finance LLC, Union Bank of California, N.A., KBC Bank, N.V., Morgan Stanley Bank and William Street Commitment Corporation.lenders, dated February 26, 2007 (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form ~~10-K~~10-Q for the ~~year~~quarter ended ~~December~~March 31, ~~2005~~2007 (File No. 1-12609 and File No. 1-2348), Exhibit 10.2)

~~10.3~~10.2	Amended and Restated Unsecured Revolving Credit Agreement dated as of December 10, 2004, among PG&E Corporation, BNP Paribas, as administrative agent and a lender, Deutsche Bank Securities, as syndication agent, ABN Amro Bank, N.V., Goldman Sachs Credit Partners L.P., and Union Bank of California, N.A., as documentation agents and lenders, and the following other lenders: Barclays Bank PLC, Citicorp USA, Inc., Deutsche Bank AG New York Branch, JP Morgan Chase Bank, N.A., Lehman Brothers Bank, FSB, Morgan Stanley Bank, Royal Bank of Canada, The Bank of Nova Scotia, and The Bank of New York (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 8-K filed December 15, 2004 (File No. 1-12609 and File No. 1-2348), Exhibit 99)
~~10.4~~	~~First Amendment, dated as of April 8, 2005, to the Credit Agreement dated as of December 10, 2004,~~entered into among PG&E Corporation, BNP Paribas, as administrative agent and a lender, Deutsche Bank Securities Inc., as syndication agent, ~~and a lender,~~ ABN ~~Amro~~AMRO Bank, N.V., ~~Goldman Sachs Credit Partners L.P.~~Bank of America, N.A., and ~~Union~~Barclays Bank ~~of California, N.A.,~~Plc, as documentation agents and lenders, and ~~the following~~ other lenders: Barclays Bank PLC, Citicorp USA, Inc., Deutsche Bank AG New York Branch, JP Morgan Chase Bank, N.A., Lehman Brothers Bank, FSB, Morgan Stanley Bank, Royal Bank of Canada, The Bank of Nova Scotia, KBC Bank N.V., and The Bank of New Yorklenders, dated February 26, 2007 (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Quarterly Report on Form 10-Q ~~filed May 4, 2005~~for the quarter ended March 31, 2007 (File No. 1-12609 and File No. 1-2348), Exhibit 10.2)
~~10.5~~	Master Confirmation dated November 16, 2005, for accelerated share repurchase arrangements between PG&E Corporation and Goldman, Sachs & Co. (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2005 (File No. 1-12609 and File No. 1-2348), Exhibit 10.5)
~~10.6~~10.3	Settlement Agreement among California Public Utilities Commission, Pacific Gas and Electric Company and PG&E Corporation, dated as of December 19, 2003, together with appendices (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Form 8-K filed December 22, 2003) (File No. 1-12609 and File No. 1-2348), Exhibit 99)
~~10.7~~	Firm Transportation Service Agreement between Pacific Gas and Electric Company and Pacific Gas Transmission Company dated October 26, 1993, Rate Schedule FTS-1, and general terms and conditions (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Form 10-K for the year ended December 31, 2003) (File No. 1-12609 and File No. 1-2348), Exhibit 10.4)
~~10.8~~	Operating Agreement between Pacific Gas and Electric Company and Pacific Gas Transmission Company dated July 9, 1996 (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Form 10-K for the year ended December 31, 2003) (File No. 1-12609 and File No. 1-2348), Exhibit 10.5)
~~10.9~~10.4	Transmission Control Agreement among the California Independent System Operator (CAISO) and the Participating Transmission Owners, including Pacific Gas and Electric Company, effective as of March 31, 1998, as amended (CAISO, FERC Electric Tariff No. 7) (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2004 (File No. 1-12609 and File No. 1-2348), Exhibit 10.8)
~~10.10~~10.5	Operating Agreement, as amended on November 12, 2004, effective as of December 22, 2004, between the State of California Department of Water Resources and Pacific Gas and Electric Company (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2004 (File No. 1-12609 and File No. 1-2348), Exhibit 10.9)
*~~10.11~~10.6	PG&E Corporation Supplemental Retirement Savings Plan amended effective as of September 19, 2001, and frozen after December 31, 2004 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2004) (File No. 1-12609), Exhibit 10.10)
*~~10.12~~10.7	PG&E Corporation Supplemental Retirement Savings Plan effective as of January 1, 2005 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2004) (File No. 1-12609), Exhibit 10.11)
*~~10.13~~10.8	Letter regarding Compensation Arrangement between PG&E Corporation and Peter A. Darbee effective July 1, 2003 (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (File No. 1-12609), Exhibit 10.4)
*~~10.14~~10.9	~~Letter regarding Compensation Arrangement~~Restricted Stock Award Agreement between PG&E Corporation and ~~Thomas B. King~~Peter A. Darbee dated ~~June 18, 2003~~January 3, 2007 (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2003~~March 31, 2007 (File No. ~~1-12609)~~1-12609 and File No. 12348), Exhibit 10.3)
*~~10.15~~10.10	Retention Agreement between PG&E Corporation and Thomas B. King dated August 31, 2006 (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File No. 1-12609), Exhibit 10.2)
*~~10.16~~10.11	Letter regarding Compensation Arrangement between Pacific Gas and Electric Company and William T. Morrow dated June 20, 2006 (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File No. 1-12609), Exhibit ~~10.1~~) 10.1)
*~~10.17~~10.12	Restricted Stock Award Agreement between PG&E Corporation and William T. Morrow dated January 29, 2007 (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (File No. 1-12609), Exhibit 10.4)
*10.13	Performance Share Agreement between PG&E Corporation and William T. Morrow dated November 6, 2007
*10.14	Restricted Stock Award Agreement between PG&E Corporation and William T. Morrow dated November 6, 2007
*10.15	Letter regarding Compensation Arrangement between PG&E Corporation and Rand L. Rosenberg dated October 19, 2005 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2005) (File No. 1-12609), Exhibit 10.18)
*~~10.18~~10.16	Letter regarding Compensation Arrangement between PG&E Corporation and Hyun Park dated October 10, 2006 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2006) (File No. 1-12609), Exhibit 10.18)

*10.17	Letter regarding Compensation Agreement between PG&E Corporation and G. Robert Powell dated August 8, 2005
*~~10.19~~10.18	PG&E Corporation 2005 Deferred Compensation Plan for Non-Employee Directors, effective as of January 1, 2005 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2004) (File No. 1-12609), Exhibit 10.17)
*10.19	Description of Short-Term Incentive Plan for Officers of PG&E Corporation and its subsidiaries, effective January 1, 2008
*10.20	Description of Short-Term Incentive Plan for Officers of PG&E Corporation and its subsidiaries, effective January 1, 2007
*10.21	~~Description of Short-Term Incentive Plan for Officers of PG&E Corporation and its subsidiaries, effective January 1, 2006~~ (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2004 (File No. 1-12609), Exhibit ~~10.23)~~10.20)
*~~10.22~~10.21	Supplemental Executive Retirement Plan of the Pacific Gas and Electric Company amended effective as of December 31, 2004, and frozen as of January 1, 2005 (incorporated by reference to Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2004) (File No. 1-2348), Exhibit 10.20)
*~~10.23~~10.22	Supplemental Executive Retirement Plan of PG&E Corporation as amended effective as of January 1, 2006 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2005) (File No. 1-2348), Exhibit 10.27)
*~~10.24~~	Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and Bruce R. Worthington dated December 20, 2002 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2002 (File No. 1-12609), Exhibit 10.37.2)
*10.25	Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and Bruce R. Worthington dated April 18, 2003 (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (File No. 1-12609), Exhibit 10.2.5)
*10.2610.23	Pacific Gas and Electric Company Relocation Assistance Program for Officers (incorporated by reference to Pacific Gas and Electric Company's Form 10-K for fiscal year 1989 (File No. 1-2348), Exhibit 10.16)
*~~10.27~~10.24	Postretirement Life Insurance Plan of the Pacific Gas and Electric Company (incorporated by reference to Pacific Gas and Electric Company's Form 10-K for fiscal year 1991 (File No. 1-2348), Exhibit 10.16)
*~~10.28~~10.25	PG&E Corporation Non-Employee Director Stock Incentive Plan (a component of the PG&E Corporation Long-Term Incentive Program) as amended effective as of July 1, 2004 (reflecting amendments adopted by the PG&E Corporation Board of Directors on June 16, 2004 set forth in resolutions filed as Exhibit 10.3 to PG&E Corporation's and Pacific Gas and Electric Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004) (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2004 (File No. 1-12609 and File No. 1-2348), Exhibit 10.27)
*~~10.29~~	Resolution of the PG&E Corporation Board of Directors dated June 16, 2004, adopting director compensation arrangement (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 (File No. 1-12609 and File No. 12348), Exhibit 10.1)
*10.30	Resolution of the Pacific Gas and Electric Company Board of Directors dated June 16, 2004, adopting director compensation arrangement (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 (File No. 1-12609 and File No. 12348), Exhibit 10.2)
*10.3110.26	Resolution of the PG&E Corporation Board of Directors dated December 20, 2006, adopting director compensation arrangement effective January 1, 2007 (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Quarterly Report on Form 10-K for the year ended December 31, 2006 (File No. 1-12609 and File No. 12348), Exhibit 10.29)
*~~10.32~~10.27	Resolution of the Pacific Gas and Electric Company Board of Directors dated December 20, 2006, adopting director compensation arrangement effective January 1, 2007 (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Quarterly Report on Form 10-K for the year ended December 31, 2006 (File No. 1-12609 and File No. 12348), Exhibit 10.30)
*~~10.33~~10.28	Resolution of the PG&E Corporation Board of Directors dated February 20, 2008, adopting director compensation arrangement effective January 1, 2008
*10.29	Resolution of the Pacific Gas and Electric Company Board of Directors dated February 20, 2008, adopting director compensation arrangement effective January 1, 2008
*10.30	PG&E Corporation 2006 Long-Term Incentive Plan, as amended on February 15, 2006 (with respect to change in control provisions) and December 20, 2006 and October 17, 2007 (with respect to Section 7 governing nondiscretionary awards to non-employee directors)
*~~10.34~~10.31	PG&E Corporation Long-Term Incentive Program (including the PG&E Corporation Stock Option Plan and Performance Unit Plan), as amended May 16, 2001, (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001 (File No. 1-12609), Exhibit 10)
*~~10.35~~10.32	Form of Restricted Stock Award Agreement for 2003 grants made under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2002 (File No. 1-12609), Exhibit 10.46)

*~~10.36~~10.33	Form of Restricted Stock Award Agreement for 2004 grants made under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2003 (File No. 1-12609), Exhibit 10.37)
*~~10.37~~10.34	Form of Restricted Stock Agreement for 2005 grants under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 8-K filed January 6, 2005 (File No. 12609 and File No. 1-2348), Exhibit 99.3)
*~~10.38~~10.35	Form of Restricted Stock Agreement for 2006 grants under the PG&E Corporation 2006 Long-Term Incentive Plan (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 8-K filed January 9, 2006, Exhibit 99.1)
*~~10.39~~10.36	Form of Restricted Stock Agreement for 2007 grants under the PG&E Corporation 2006 Long-Term Incentive Plan (reflecting amendments to the PG&E Corporation 2006 Long-Term Incentive Plan made on February 15, 2006) (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2006 (File No. 1-12609), Exhibit 10.39)
*~~10.40~~10.37	Form of Non-Qualified Stock Option Agreement under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 8-K filed January 6, 2005 (File No. 12609 and File No. 1-2348), Exhibit 99.1)
*~~10.41~~10.38	Form of Performance Share Award Agreement for 2004 grants under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2003 (File No. 1-12609), Exhibit 10.38)
*~~10.42~~10.39	Form of Performance Share Agreement for 2005 grants under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 8-K filed January 6, 2005 (File No. 12609 and File No. 1-2348), Exhibit 99.2)
*~~10.43~~10.40	Form of Performance Share Agreement for 2006 grants under the PG&E Corporation 2006 Long-Term Incentive Plan (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 8-K filed January 9, 2006, Exhibit 99.2)
*~~10.44~~10.41	Form of Performance Share Agreement for 2007 grants under the PG&E Corporation 2006 Long-Term Incentive Plan (reflecting amendments to the PG&E Corporation 2006 Long-Term Incentive Plan made on February 15, 2006)
*~~10.45~~10.42	PG&E Corporation Executive Stock Ownership Program Guidelines dated as of February 19, 2003 (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 1-12609) Exhibit 10.2)
*~~10.46~~10.43	PG&E Corporation Executive Stock Ownership Program Guidelines as amended February 15, 2006 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2005 (File No. 1-12609), Exhibit 10.46)
*~~10.47~~10.44	PG&E Corporation Officer Severance Policy, as amended effective as of January 1, 2005 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2004 (File No. 1-12609), Exhibit 10.37) (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2006 (File No. 1-12609), Exhibit 10.44)
*~~10.48~~10.45	PG&E Corporation Officer Severance Policy, as amended effective as of February 15, 2006 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2005 (File No. 1-12609), Exhibit 10.48)
*~~10.49~~10.46	PG&E Corporation Golden Parachute Restriction Policy effective as of February 15, 2006 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2005 (File No. 1-12609), Exhibit 10.49)
*~~10.50~~10.47	PG&E Corporation Director Grantor Trust Agreement dated April 1, 1998 (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 (File No. 1-12609), Exhibit 10.1)
*~~10.51~~10.48	PG&E Corporation Officer Grantor Trust Agreement dated April 1, 1998, as updated effective January 1, 2005 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2004 (File No. 1-12609), Exhibit 10.39)

*~~10.52~~10.49	Resolution of the Board of Directors of PG&E Corporation regarding indemnification of officers and directors dated December 18, 1996 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2004 (File No. 1-12609), Exhibit 10.40)
*~~10.53~~10.50	Resolution of the Board of Directors of Pacific Gas and Electric Company regarding indemnification of officers and directors dated July 19, 1995 (incorporated by reference to Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2004 (File No. 1-2348), Exhibit 10.41)
11	Computation of Earnings Per Common Share
12.1	Computation of Ratios of Earnings to Fixed Charges for Pacific Gas and Electric Company
12.2	Computation of Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends for Pacific Gas and Electric Company
13	The following portions of the ~~2006~~2007 Annual Report to Shareholders of PG&E Corporation and Pacific Gas and Electric Company are included: “Selected Financial Data,” “Management's Discussion and Analysis of Financial Condition and Results of Operations,” financial statements of PG&E Corporation entitled “Consolidated Statements of Income,” “Consolidated Balance Sheets,” “Consolidated Statements of Cash Flows,” and “Consolidated Statements of Shareholders' Equity,” financial statements of Pacific Gas and Electric Company entitled “Consolidated Statements of Income,” “Consolidated Balance Sheets,” “Consolidated Statements of Cash Flows,” and “Consolidated Statements of Shareholders' Equity,” “Notes to the Consolidated Financial Statements,” and “Quarterly Consolidated Financial Data (Unaudited),” “Management's Report on Internal Control Over Financial Reporting,” “Report of Independent Registered Public Accounting Firm,” and “Report of Independent Registered Public Accounting Firm.”
21	Subsidiaries of the Registrant
23	Consent of Independent Registered Public Accounting Firm (Deloitte & Touche LLP)
24.1	Resolutions of the Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company authorizing the execution of the Form 10-K
24.2	Powers of Attorney
31.1	Certifications of the Chief Executive Officer and the Chief Financial Officer of PG&E Corporation required by Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certifications of the Chief Executive Officer and the Chief Financial Officer of Pacific Gas and Electric Company required by Section 302 of the Sarbanes-Oxley Act of 2002
**32.1	Certifications of the Chief Executive Officer and the Chief Financial Officer of PG&E Corporation required by Section 906 of the Sarbanes-Oxley Act of 2002
**32.2	Certifications of the Chief Executive Officer and the Chief Financial Officer of Pacific Gas and Electric Company required by Section 906 of the Sarbanes-Oxley Act of 2002

*Management contract or compensatory agreement.

**Pursuant to Item 601(b) (32) of SEC Regulation S-K, these exhibits are furnished rather than filed with this report.

4148

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrants have duly caused this Annual Report on Form 10-K for the year ended December 31, ~~2006~~2007 to be signed on their behalf by the undersigned, thereunto duly authorized.

	PG&E CORPORATION		PACIFIC GAS AND ELECTRIC COMPANY
	(Registrant) ~~HYUN PARK~~*PETER A. DARBEE		(Registrant) ~~HYUN PARK~~*WILLIAM T. MORROW
By:	~~(Hyun Park, Attorney-in-Fact)~~ Peter A. Darbee Chairman of the Board, Chief Executive Officer and President	By:	~~(Hyun Park, Attorney-in-Fact)~~ William T. Morrow President and Chief Executive Officer
Date:	February 22, ~~2007~~2008	Date:	February 22, ~~2007~~2008

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrants and in the capacities and on the dates indicated.

Signature		~~Title~~	Title				Date
A.		Principal Executive Officers
*PETER A. DARBEE			Chairman of the Board, Chief Executive Officer, President and Director (PG&E Corporation)				February 22, 2008
Peter A. Darbee

	*PETER A. DARBEE		~~Chairman of the Board, Chief Executive Officer and President (PG&E Corporation)~~		~~February 22, 2007~~

*WILLIAM T. MORROW		*THOMAS B. KING	President and Chief Executive Officer (Pacific Gas and Electric Company)				February 22, ~~2007~~2008
William T. Morrow

B.		Principal Financial Officers
*CHRISTOPHER P. JOHNS			Senior Vice President, Chief Financial Officer and Treasurer (PG&E Corporation)				February 22, 2008
Christopher P. Johns
*G. ROBERT POWELL			Vice President, Chief Financial Officer and Controller (Pacific Gas and Electric Company)				February 22, 2008
G. Robert Powell
C. Principal Accounting Officer							February 22, 2008
*G. ROBERT POWELL			Vice President and Controller (PG&E Corporation and (Pacific Gas and Electric Company)				February 22, 2008
G. Robert Powell
D. Directors
*DAVID R. ANDREWS			Director				February 22, 2008
David R. Andrews

*LESLIE S. BILLER			*CHRISTOPHER P. JOHNSDirector			~~Senior Vice President, Chief Financial Officer and Treasurer (PG&E Corporation and Pacific Gas and Electric Company )~~	February 22, ~~2007~~2008
		Leslie S. Biller
C. *DAVID A. COULTER		~~Principal Accounting Officer~~		Director				February 22, 2008
David A. Coulter
*C. LEE COX			Director				February 22, 2008
C. Lee Cox
*MARYELLEN C. HERRINGER			Director				February 22, 2008
Maryellen C. Herringer

*RICHARD A. MESERVE			*G. ROBERT POWELLDirector			~~Vice President and Controller (PG&E Corporation and Pacific Gas and Electric Company)~~	February 22, ~~2007~~2008
Richard A. Meserve


*MARY S. METZ			Director	February 22, 2008
Mary S. Metz

D. *WILLIAM T. MORROW		~~Directors~~	Director (Pacific Gas and Electric Company only)	February 22, 2008
William T. Morrow
		DAVID R. ANDREWS LESLIE S. BILLER DAVID A. COULTER C. LEE COX PETER A. DARBEE MARYELLEN C. HERRINGER THOMAS B. KING ~~(Director of Pacific Gas and Electric Company only)~~ RICHARD A. MESERVE *MARY S. METZ
*BARBARA L. RAMBO			Director	February 22, 2008
Barbara L. Rambo

*BARRY LAWSON WILLIAMS		~~Directors of PG&E Corporation and~~ ~~Pacific Gas and Electric Company,~~ ~~except as noted~~	Director	February 22, ~~2007~~2008
Barry Lawson Williams

*ByBy:	HYUN PARK
HYUN PARK, Attorney-in-Fact

~~(Hyun Park, Attorney-in-Fact)~~

4250

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Boards of Directors and Shareholders of

PG&E Corporation and Pacific Gas and Electric Company

We have audited the consolidated financial statements of PG&E Corporation and subsidiaries (the ~~“Company”~~"Company") and Pacific Gas and Electric Company and subsidiaries (the “Utility”) as of December 31, ~~2006~~2007 and ~~2005,~~2006, and for each of the three years in the period ended December 31, ~~2006, management’s assessment of~~2007, and the ~~effectiveness of the Company’s~~Company's and ~~the~~ Utility’s internal control over financial reporting as of December 31, ~~2006, and the effectiveness of the Company’s and the Utility’s internal control over financial reporting as of December 31, 2006,~~2007, and have issued our reports thereon dated February 21, ~~2007;~~2008; such consolidated financial statements and reports are included in your ~~2006~~2007 Annual Report to Shareholders of the Company and the Utility and are incorporated herein by reference. Our audits also included the consolidated financial statement schedules of the Company and ~~the~~ Utility listed in Item ~~15 (a)~~ 15(a)2. These consolidated financial statement schedules are the responsibility of the ~~Company’s~~Company's and the Utility’s management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

DELOITTE & TOUCHE LLP

San Francisco, California

February 21, ~~2007~~2008

4351

PG&E CORPORATION

SCHEDULE I --— CONDENSED FINANCIAL INFORMATION OF PARENT

CONDENSED BALANCE SHEETS

(in millions)

	Balance at December 31,						Balance at December 31,
	2006			2005			2007			2006
ASSETS
Current Assets:
Cash and cash equivalents	$	386		$	250		$	204		$	386
Advances to affiliates		42			38			30			42
Income taxes receivable								46			-
Other current assets		3			3			3			3
Total current assets		431			291			283			431
Equipment		15			15			17			15
Accumulated depreciation		(14	)		(14	)		(15	)		(14	)
Net equipment		1			1			2			1
Investments in subsidiaries		7,959			7,401			8,886			7,959
Other investments		81			71			87			81
Deferred income taxes		132			127			51			132
Other		10			15			9			10
Total Assets	$	8,614		$	7,906		$	9,318		$	8,614
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable—related parties	$	41		$	27
Accounts payable—other		18			17
Current Liabilities:
Accounts payable
Related parties							$	40		$	41
Other								24			18
Long-term debt, classified as current		280			-			-			280
Income taxes payable		122			28			-			122
Other		210			193			174			210
Total current liabilities		671			265			238			671
Noncurrent Liabilities:
Long-term debt		-			280			280			-
Income taxes payable								131			-
Other		133			143			116			133
Total noncurrent liabilities		133			423			527			133
Preferred stock		—			—
Common Shareholders' Equity
Common stock		5,877			5,827			6,110			5,877
Common stock held by subsidiary		(718	)		(718	)		(718	)		(718	)
Unearned compensation		-			(22	)
Reinvested earnings		2,670			2,139			3,151			2,670
Accumulated other comprehensive loss		(19	)		(8	)
Accumulated other comprehensive income (loss)								10			(19	)
Total common shareholders' equity		7,810			7,218			8,553			7,810
Total Liabilities and Shareholders' Equity	$	8,614		$	7,906		$	9,318		$	8,614

4452

PG&E CORPORATION

SCHEDULE I --— CONDENSED FINANCIAL INFORMATION OF PARENT --— (Continued)~~(Continued)~~

CONDENSED STATEMENTS OF INCOME

(in millions, except per share amounts)

	Year Ended December 31,									Year Ended December 31,
	2006			2005			2004			2007			2006			2005
Administrative service revenue	$	110		$	97		$	85		$	102		$	110		$	97
Equity in earnings of subsidiaries		964			918			3,959			1,006			964			918
Operating expenses		(115	)		(97	)		(110	)		(112	)		(115	)		(97	)
Interest income		15			9			15			15			15			9
Interest expense		(30	)		(35	)		(132	)		(31	)		(30	)		(35	)
Other expense		(1	)		(17	)		(91	)		(6	)		(1	)		(17	)
Income before income taxes		943			875			3,726			974			943			875
Income tax benefit		48			29			94			32			48			29
Income from continuing operations		991			904			3,820			1,006			991			904
Gain on disposal of NEGT		—			13			684			--			--			13
Net income before intercompany eliminations	$	991		$	917		$	4,504		$	1,006		$	991		$	917
Weighted average common shares outstanding		346			372			398
Earnings per common share, basic⁽¹⁾	$	2.78		$	2.40		$	10.80
Earnings per common share, diluted⁽¹⁾	$	2.76		$	2.37		$	10.57
Weighted average common shares outstanding, basic											351			346			372
Weighted average common shares outstanding, diluted											353			349			378
Earnings per common share, basic(1)										$	2.79		$	2.78		$	2.40
Earnings per common share, diluted(1)										$	2.78		$	2.76		$	2.37

~~CONDENSED STATEMENTS OF CASH FLOWS~~

~~(in millions)~~

Year Ended December 31,

2006

2005

2004

Cash Flows from Operating Activities:
Net income $ 991 $ 917 $ 4,504
Gain on disposal of NEGT (net of income tax benefit of $13 million in 2005 and income tax
expense of $374 million in 2004)
— (13 ) (684 )
Net income from continuing operations 991 904 3,820
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in earnings of subsidiaries
(964 ) (918 ) (3,959 )
Deferred taxes
2 (23 ) 27
NEGT settlement payment
— — (30 )
Other
130 86 160
Net cash provided by operating activities 159 49 18
Cash Flows From Investing Activities:
Capital expenditures
(1 ) (1 ) —
Investment in subsidiaries
— — (28 )
Stock repurchase by subsidiary — 1,910 —
Dividends received from subsidiaries
460 445 —
Restricted cash
— — 361
Other — (38 ) —
Net cash provided by investing activities 459 2,316 333
Cash Flows From Financing Activities⁽²⁾:

Common stock issued
131 243 162
Common stock repurchased
(114 ) (2,188 ) (350 )
Common stock dividends paid
(456 ) (334 ) —
Long-term debt redeemed
— (2 ) (652 )
Other
(43 ) (17 ) (1 )
Net cash used by financing activities (482 ) (2,298 ) (841 )
Net change in cash and cash equivalents 136 67 (490 )
Cash and cash equivalents at January 1 250 183 673
Cash and cash equivalents at December 31 386 250 183

⁽¹⁾PG&E Corporation adopted the consensus reached by Emerging Issues Task Force, or EITF, in EITF issue No. 03-06, ~~“Participating~~"Participating Securities and the Two-Class Method under FASB Statement No. 128,”" or EITF 03-06, as ratified by the Financial Accounting Standards Board on March 31, 2004.

PG&E Corporation currently has outstanding $280 million principal amount of convertible subordinated 9.50% notes due 2010, or Convertible Notes, that are entitled to receive (non-cumulative) dividend payments without exercising the conversion option. These Convertible Notes, which were issued in June 2002, meet the criteria of a participating security in the calculation of earnings per share using the ~~“two-class”~~"two-class" method.

Accordingly, the basic and diluted earnings per share calculations for each of the years in the three year period ended December 31, ~~2006~~2007 reflect the allocation of earnings between PG&E Corporation common stock and the participating security.

PG&E CORPORATION

SCHEDULE I – CONDENSED FINANCIAL INFORMATION OF PARENT – (Continued)

CONDENSED STATEMENTS OF CASH FLOWS

(in millions)

	Year Ended December 31,
	2007			2006			2005
Cash Flows from Operating Activities:
Net income	$	1,006		$	991		$	917
Gain on disposal of NEGT (net of income tax benefit of $13 million in 2005)		--			--			(13	)
Net income from continuing operations		1,006			991			904
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1			--			--
Equity in earnings of subsidiaries		(1,006	)		(964	)		(918	)
Deferred taxes		47			2			(23	)
Other		(24	) )		130			86
Net cash provided by operating activities		24			159			49
Cash Flows From Investing Activities:
Capital expenditures		(1	)		(1	)		(1	)
Investment in subsidiaries		(405	)		--			--
Stock repurchase by subsidiary		--			--			1,910
Dividends received from subsidiaries		509			460			445
Other		--			--			(38	)
Net cash provided by investing activities		103			459			2,316
Cash Flows From Financing Activities(2):
Common stock issued		175			131			243
Common stock repurchased		--			(114	)		(2,188	)
Common stock dividends paid		(496	)		(456	)		(334	)
Long-term debt redeemed		--			--			(2	)
Other		12			(43	)		(17	)
Net cash used by financing activities		(309	)		(482	)		(2,298	)
Net change in cash and cash equivalents		(182	)		136			67
Cash and cash equivalents at January 1		386			250			183
Cash and cash equivalents at December 31	$	204		$	$386		$	$250

(2) On January 15, 2007, PG&E Corporation paid a quarterly common stock dividend of $0.33 per share. On April 15, July 15, and October 15, 2007, PG&E Corporation paid quarterly common stock dividends of $0.36 per share. Of the total dividend payments made by PG&E Corporation in 2006, approximately $35 million was paid to Elm Power Corporation, a wholly owned subsidiary of PG&E Corporation.

On January 16, April 15, July 15, and October 15, 2006, PG&E Corporation paid a quarterly common stock dividend of $0.33 per share, totaling approximately $489 million. Of the total dividend payments made by PG&E Corporation in 2006, approximately $33 million was paid to Elm Power Corporation, a wholly owned subsidiary of PG&E Corporation.

On April 15, July 15 and October 17, 2005, PG&E Corporation paid a quarterly common stock dividend of $0.30 per share, totaling approximately $356 million. Of the total dividend payments made by PG&E Corporation in 2005, approximately $22 million was paid to Elm Power Corporation, a wholly owned subsidiary of PG&E Corporation. PG&E Corporation did not pay any dividends during 2004.

4654

PG&E ~~CORPORATION~~Corporation

SCHEDULE II —– CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS

For the Years Ended December 31, 2007, 2006, ~~2005~~ and ~~2004~~2005

																Additions
Description														Balance at Beginning of Period		Charged to Costs and Expenses		Charged to Other Accounts		Deductions(3)		Balance at End of Period
(in millions)
Valuation and qualifying accounts deducted from assets:
2007:
Allowance for uncollectible accounts(1)(2)														$	50	$	20	$	-	$	12	$	58
2006:
Allowance for uncollectible accounts(1)(2)														$	77	$	2	$	-	$	29	$	50
2005:
Allowance for uncollectible accounts(1)(2)														$	93	$	21	$	-	$	37	$	77
					Additions

					Charged
			Balance		to						Balance
			at		Costs		Charged				at
			Beginning		and		to Other				End of
Description			of Period		Expenses		Accounts		Deductions⁽³⁾		Period

(in millions)
Valuation and qualifying accounts deducted from assets:
	2006:
		Allowance for uncollectible accounts ^{(1) (2)}	$	77	$	2	$	-	$	29	$	50


	2005:
		Allowance for uncollectible accounts ^{(1) (2)}	$	93	$	21	$	-	$	37	$	77


	2004:
		Allowance for uncollectible accounts ^{(1) (2)}	$	68	$	85	$	-	$	60	$	93

(1) Allowance for uncollectible accounts is deducted from “Accounts receivable Customers, net.”													(1) Allowance for uncollectible accounts is deducted from “Accounts receivable Customers, net.”
(2) Allowance for uncollectible accounts does not include NEGT.													(2) Allowance for uncollectible accounts does not include NEGT.
(3) Deductions consist principally of write-offs, net of collections of receivables previously written off.													(3) Deductions consist principally of write-offs, net of collections of receivables previously written off.



~~(1)~~	~~Allowance for uncollectible accounts is deducted from “Accounts receivable Customers, net.”~~

~~(2)~~	~~Allowance for uncollectible accounts does not include NEGT.~~

~~(3)~~	~~Deductions consist principally of write-offs, net of collections of receivables previously written off.~~

4755

~~PACIFIC GAS AND ELECTRIC COMPANY~~Pacific Gas and Electric Company

SCHEDULE II —– CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS

For the Years Ended December 31, 2007, 2006, ~~2005~~ and ~~2004~~2005

																Additions
Description														Balance at Beginning of Period		Charged to Costs and Expenses		Charged to Other Accounts		Deductions(2)		Balance at End of Period
(in millions)
Valuation and qualifying accounts deducted from assets:
2007:
Allowance for uncollectible accounts(1)														$	50	$	20	$	-	$	12	$	58
2006:
Allowance for uncollectible accounts(1)														$	77	$	2	$	-	$	29	$	50
2005:
Allowance for uncollectible accounts(1)														$	93	$	21	$	-	$	37	$	77
					Additions

					Charged
			Balance		to						Balance
			at		Costs		Charged				at
			Beginning		and		to Other				End of
Description			of Period		Expenses		Accounts		Deductions⁽²⁾		Period

(in millions)
Valuation and qualifying accounts deducted from assets:
	2006:
		Allowance for uncollectible accounts ⁽¹⁾	$	77	$	2	$	-	$	29	$	50


	2005:
		Allowance for uncollectible accounts ⁽¹⁾	$	93	$	21	$	-	$	37	$	77


	2004:
		Allowance for uncollectible accounts ⁽¹⁾	$	68	$	85	$	-	$	60	$	93

(1) Allowance for uncollectible accounts is deducted from “Accounts receivable Customers, net.”													(1) Allowance for uncollectible accounts is deducted from “Accounts receivable Customers, net.”
(2) Deductions consist principally of write-offs, net of collections of receivables previously written off.													(2) Deductions consist principally of write-offs, net of collections of receivables previously written off.

	Exhibit Index

~~(1)~~	~~Allowance for uncollectible accounts is deducted from “Accounts receivable Customers, net.”~~

~~(2)~~	~~Deductions consist principally of write-offs, net of collections of receivables previously written off.~~

~~EXHIBIT INDEX~~

Exhibit

~~Exhibit~~ Number	Exhibit Description
2.1	Order of the U.S. Bankruptcy Court for the Northern District of California dated December 22, 2003, Confirming Plan of Reorganization of Pacific Gas and Electric Company, including Plan of Reorganization, dated July 31, 2003 as modified by modifications dated November 6, 2003 and December 19, 2003 (Exhibit B to Confirmation Order and Exhibits B and C to the Plan of Reorganization omitted) (incorporated by reference to Pacific Gas and Electric Company's Registration Statement on Form S-3 No. 333-109994, Exhibit 2.1)
2.2	Order of the U.S. Bankruptcy Court for the Northern District of California dated February 27, 2004 Approving Technical Corrections to Plan of Reorganization of Pacific Gas and Electric Company and Supplementing Confirmation Order to Incorporate such Corrections (incorporated by reference to Pacific Gas and Electric Company's Registration Statement on Form S-3 No. 333-109994, Exhibit 2.2)
3.1	Restated Articles of Incorporation of PG&E Corporation effective as of May 29, 2002 (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 1-12609), Exhibit 3.1)
3.2	Certificate of Determination for PG&E Corporation Series A Preferred Stock filed December 22, 2000 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 3.2)
3.3	Bylaws of PG&E Corporation amended as of ~~December 20, 2006~~September 19, 2007 (incorporated by reference to PG&E Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007) (File No. 1-12609), Exhibit 3.1)
3.4	Text of the amendment to the Bylaws of PG&E Corporation effective May 14, 2008
3.5	Restated Articles of Incorporation of Pacific Gas and Electric Company effective as of April 12, 2004 (incorporated by reference to Pacific Gas and Electric Company's Form 8-K filed April 12, 2004 (File No. 1-2348), Exhibit 3)
~~3.5~~3.6	Bylaws of Pacific Gas and Electric Company amended as of ~~December 20, 2006~~ January 1, 2008
3.7	Text of the amendment to the Bylaws of Pacific Gas and Electric Company effective May 14, 2008
4.1	Indenture, dated as of April 22, 2005, supplementing, amending and restating the Indenture of Mortgage, dated as of March 11, 2004, as supplemented by a First Supplemental Indenture, dated as of March 23, 2004, and a Second Supplemental Indenture, dated as of April 12, 2004, between Pacific Gas and Electric Company and The Bank of New York Trust Company, N.A. (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 10-Q filed May 4, 2005 (File No. 1-12609 and File No. 1-2348), Exhibit 4.1)
4.2	First Supplemental Indenture dated as of March 13, 2007 relating to the issuance of $700,000,000 principal amount of 5.80% Senior Notes due March 1, 2037 (incorporated by reference from Pacific Gas and Electric Company’s Current Report on Form 8-K dated March 14, 2007 (File No. 1-2348), Exhibit 4.1)
4.3	Second Supplemental Indenture dated as of December 4, 2007 relating to the issuance of $500,000,000 principal amount of 5.625% Senior Notes due November 30, 2017(incorporated by reference from Pacific Gas and Electric Company’s Current Report on Form 8-K dated March 14, 2007 (file No. 1-2348), Exhibit 4.1)
4.4	Indenture related to PG&E Corporation's 7.5% Convertible Subordinated Notes due June 2007, dated as of June 25, 2002, between PG&E Corporation and U.S. Bank, N.A., as Trustee (incorporated by reference to PG&E Corporation's Form 8-K filed June 26, 2002 (File No. 1-12609), Exhibit 99.1).
~~4.3~~4.5	Supplemental Indenture related to PG&E Corporation's 9.50% Convertible Subordinated Notes due June 2010, dated as of October 18, 2002, between PG&E Corporation and U.S. Bank, N.A., as Trustee (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 (File No. 1-12609), Exhibit 4.1)
~~4.4~~	Warrant Agreement, dated as of October 18, 2002, by and among PG&E Corporation, LB I Group Inc., and each other entity named on the signature pages thereto (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 (File No. 1-12609), Exhibit 4.2)
10.1	Amended and Restated Unsecured Revolving Credit Agreement dated as of April 8, 2005, among Pacific Gas and Electric Company, Citicorp North America, Inc., as administrative agent and a lender, JP Morgan Chase Bank, N.A., as syndication agent and a lender, Barclays Bank PLC, BNP Paribas and Deutsche Bank Securities Inc., as documentation agents and lenders, ABN Amro Bank N.V., Lehman Brothers Bank, FSB, Mellon Bank, N.A., Royal Bank of Canada, The Bank of New York, The Bank of Nova Scotia, UBS Loan Finance LLC, and Union Bank of California, N.A., as senior managing agents, and KBC Bank, NV, Morgan Stanley Bank and William Street Commitment Corporation, as lenders (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 10-Q filed May 4, 2005 (File No. 1-12609 and File No. 1-2348), Exhibit 10.3)
~~10.2~~	~~First Amendment, dated as of November 30, 2005, to the Credit Agreement~~entered into among Pacific Gas and Electric Company, Citicorp North America, Inc., as administrative agent and a lender, JPMorgan ~~Chase Bank, N.A.~~Securities Inc., as syndication agent, ~~and a lender,~~ Barclays Bank ~~PLC~~Plc and BNP Paribas, as documentation agents and lenders, Deutsche Bank Securities Inc., as documentation agent, and ~~the following~~ other lenders: Deutsche Bank AG New York Branch, ABN Amro Bank N.V., Lehman Brothers Bank, FSB, Mellon Bank, N.A., Royal Bank of Canada, The Bank of New York, UBS Loan Finance LLC, Union Bank of California, N.A., KBC Bank, N.V., Morgan Stanley Bank and William Street Commitment Corporation.lenders, dated February 26, 2007 (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form ~~10-K~~10-Q for the ~~year~~quarter ended ~~December~~March 31, ~~2005~~2007 (File No. 1-12609 and File No. 1-2348), Exhibit 10.2)
~~10.3~~10.2	Amended and Restated Unsecured Revolving Credit Agreement dated as of December 10, 2004, among PG&E Corporation, BNP Paribas, as administrative agent and a lender, Deutsche Bank Securities, as syndication agent, ABN Amro Bank, N.V., Goldman Sachs Credit Partners L.P., and Union Bank of California, N.A., as documentation agents and lenders, and the following other lenders: Barclays Bank PLC, Citicorp USA, Inc., Deutsche Bank AG New York Branch, JP Morgan Chase Bank, N.A., Lehman Brothers Bank, FSB, Morgan Stanley Bank, Royal Bank of Canada, The Bank of Nova Scotia, and The Bank of New York (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 8-K filed December 15, 2004 (File No. 1-12609 and File No. 1-2348), Exhibit 99)
~~10.4~~	~~First Amendment, dated as of April 8, 2005, to the Credit Agreement dated as of December 10, 2004,~~entered into among PG&E Corporation, BNP Paribas, as administrative agent and a lender, Deutsche Bank Securities Inc., as syndication agent, ~~and a lender,~~ ABN ~~Amro~~AMRO Bank, N.V., ~~Goldman Sachs Credit Partners L.P.~~Bank of America, N.A., and ~~Union~~Barclays Bank ~~of California, N.A.,~~Plc, as documentation agents and lenders, and ~~the following~~ other lenders: Barclays Bank PLC, Citicorp USA, Inc., Deutsche Bank AG New York Branch, JP Morgan Chase Bank, N.A., Lehman Brothers Bank, FSB, Morgan Stanley Bank, Royal Bank of Canada, The Bank of Nova Scotia, KBC Bank N.V., and The Bank of New Yorklenders, dated February 26, 2007 (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Quarterly Report on Form 10-Q ~~filed May 4, 2005~~for the quarter ended March 31, 2007 (File No. 1-12609 and File No. 1-2348), Exhibit 10.2)
~~10.5~~	Master Confirmation dated November 16, 2005, for accelerated share repurchase arrangements between PG&E Corporation and Goldman, Sachs & Co. (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2005 (File No. 1-12609 and File No. 1-2348), Exhibit 10.5)
~~10.6~~10.3	Settlement Agreement among California Public Utilities Commission, Pacific Gas and Electric Company and PG&E Corporation, dated as of December 19, 2003, together with appendices (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Form 8-K filed December 22, 2003) (File No. 1-12609 and File No. 1-2348), Exhibit 99)
~~10.7~~	Firm Transportation Service Agreement between Pacific Gas and Electric Company and Pacific Gas Transmission Company dated October 26, 1993, Rate Schedule FTS-1, and general terms and conditions (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Form 10-K for the year ended December 31, 2003) (File No. 1-12609 and File No. 1-2348), Exhibit 10.4)
~~10.8~~	Operating Agreement between Pacific Gas and Electric Company and Pacific Gas Transmission Company dated July 9, 1996 (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Form 10-K for the year ended December 31, 2003) (File No. 1-12609 and File No. 1-2348), Exhibit 10.5)
~~10.9~~10.4	Transmission Control Agreement among the California Independent System Operator (CAISO) and the Participating Transmission Owners, including Pacific Gas and Electric Company, effective as of March 31, 1998, as amended (CAISO, FERC Electric Tariff No. 7) (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2004 (File No. 1-12609 and File No. 1-2348), Exhibit 10.8)
~~10.10~~10.5	Operating Agreement, as amended on November 12, 2004, effective as of December 22, 2004, between the State of California Department of Water Resources and Pacific Gas and Electric Company (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2004 (File No. 1-12609 and File No. 1-2348), Exhibit 10.9)
*~~10.11~~10.6	PG&E Corporation Supplemental Retirement Savings Plan amended effective as of September 19, 2001, and frozen after December 31, 2004 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2004) (File No. 1-12609), Exhibit 10.10)
*~~10.12~~10.7	PG&E Corporation Supplemental Retirement Savings Plan effective as of January 1, 2005 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2004) (File No. 1-12609), Exhibit 10.11)
*~~10.13~~10.8	Letter regarding Compensation Arrangement between PG&E Corporation and Peter A. Darbee effective July 1, 2003 (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (File No. 1-12609), Exhibit 10.4)
*~~10.14~~10.9	~~Letter regarding Compensation Arrangement~~Restricted Stock Award Agreement between PG&E Corporation and ~~Thomas B. King~~Peter A. Darbee dated ~~June 18, 2003~~January 3, 2007 (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2003~~March 31, 2007 (File No. ~~1-12609)~~1-12609 and File No. 12348), Exhibit 10.3)
*~~10.15~~10.10	Retention Agreement between PG&E Corporation and Thomas B. King dated August 31, 2006 (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File No. 1-12609), Exhibit 10.2)
*~~10.16~~10.11	Letter regarding Compensation Arrangement between Pacific Gas and Electric Company and William T. Morrow dated June 20, 2006 (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File No. 1-12609), Exhibit ~~10.1~~) 10.1)
*~~10.17~~10.12	Restricted Stock Award Agreement between PG&E Corporation and William T. Morrow dated January 29, 2007 (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (File No. 1-12609), Exhibit 10.4)
*10.13	Performance Share Agreement between PG&E Corporation and William T. Morrow dated November 6, 2007
*10.14	Restricted Stock Award Agreement between PG&E Corporation and William T. Morrow dated November 6, 2007

*10.15	Letter regarding Compensation Arrangement between PG&E Corporation and Rand L. Rosenberg dated October 19, 2005 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2005) (File No. 1-12609), Exhibit 10.18)
*~~10.18~~10.16	Letter regarding Compensation Arrangement between PG&E Corporation and Hyun Park dated October 10, 2006 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2006) (File No. 1-12609), Exhibit 10.18)
*~~10.19~~10.17	Letter regarding Compensation Agreement between PG&E Corporation and G. Robert Powell dated August 8, 2005
*10.18	PG&E Corporation 2005 Deferred Compensation Plan for Non-Employee Directors, effective as of January 1, 2005 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2004) (File No. 1-12609), Exhibit 10.17)
*10.19	Description of Short-Term Incentive Plan for Officers of PG&E Corporation and its subsidiaries, effective January 1, 2008
*10.20	Description of Short-Term Incentive Plan for Officers of PG&E Corporation and its subsidiaries, effective January 1, 2007
*10.21	~~Description of Short-Term Incentive Plan for Officers of PG&E Corporation and its subsidiaries, effective January 1, 2006~~ (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2004 (File No. 1-12609), Exhibit ~~10.23)~~10.20)
*~~10.22~~10.21	Supplemental Executive Retirement Plan of the Pacific Gas and Electric Company amended effective as of December 31, 2004, and frozen as of January 1, 2005 (incorporated by reference to Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2004) (File No. 1-2348), Exhibit 10.20)
*~~10.23~~10.22	Supplemental Executive Retirement Plan of PG&E Corporation as amended effective as of January 1, 2006 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2005) (File No. 1-2348), Exhibit 10.27)
*~~10.24~~	Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and Bruce R. Worthington dated December 20, 2002 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2002 (File No. 1-12609), Exhibit 10.37.2)
*10.25	Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and Bruce R. Worthington dated April 18, 2003 (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (File No. 1-12609), Exhibit 10.2.5)
*10.2610.23	Pacific Gas and Electric Company Relocation Assistance Program for Officers (incorporated by reference to Pacific Gas and Electric Company's Form 10-K for fiscal year 1989 (File No. 1-2348), Exhibit 10.16)
*~~10.27~~10.24	Postretirement Life Insurance Plan of the Pacific Gas and Electric Company (incorporated by reference to Pacific Gas and Electric Company's Form 10-K for fiscal year 1991 (File No. 1-2348), Exhibit 10.16)
*~~10.28~~10.25	PG&E Corporation Non-Employee Director Stock Incentive Plan (a component of the PG&E Corporation Long-Term Incentive Program) as amended effective as of July 1, 2004 (reflecting amendments adopted by the PG&E Corporation Board of Directors on June 16, 2004 set forth in resolutions filed as Exhibit 10.3 to PG&E Corporation's and Pacific Gas and Electric Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004) (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2004 (File No. 1-12609 and File No. 1-2348), Exhibit 10.27)
*~~10.29~~	Resolution of the PG&E Corporation Board of Directors dated June 16, 2004, adopting director compensation arrangement (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 (File No. 1-12609 and File No. 12348), Exhibit 10.1)
*10.30	Resolution of the Pacific Gas and Electric Company Board of Directors dated June 16, 2004, adopting director compensation arrangement (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 (File No. 1-12609 and File No. 12348), Exhibit 10.2)
*10.3110.26	Resolution of the PG&E Corporation Board of Directors dated December 20, 2006, adopting director compensation arrangement effective January 1, 2007 (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Quarterly Report on Form 10-K for the year ended December 31, 2006 (File No. 1-12609 and File No. 12348), Exhibit 10.29)
*~~10.32~~10.27	Resolution of the Pacific Gas and Electric Company Board of Directors dated December 20, 2006, adopting director compensation arrangement effective January 1, 2007 (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Quarterly Report on Form 10-K for the year ended December 31, 2006 (File No. 1-12609 and File No. 12348), Exhibit 10.30)
*~~10.33~~10.28	Resolution of the PG&E Corporation Board of Directors dated February 20, 2008, adopting director compensation arrangement effective January 1, 2008
*10.29	Resolution of the Pacific Gas and Electric Company Board of Directors dated February 20, 2008, adopting director compensation arrangement effective January 1, 2008
*10.30	PG&E Corporation 2006 Long-Term Incentive Plan, as amended on February 15, 2006 (with respect to change in control provisions) and December 20, 2006 and October 17, 2007 (with respect to Section 7 governing nondiscretionary awards to non-employee directors)

*~~10.34~~10.31	PG&E Corporation Long-Term Incentive Program (including the PG&E Corporation Stock Option Plan and Performance Unit Plan), as amended May 16, 2001, (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001 (File No. 1-12609), Exhibit 10)
*~~10.35~~10.32	Form of Restricted Stock Award Agreement for 2003 grants made under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2002 (File No. 1-12609), Exhibit 10.46)
*~~10.36~~10.33	Form of Restricted Stock Award Agreement for 2004 grants made under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2003 (File No. 1-12609), Exhibit 10.37)
*~~10.37~~10.34	Form of Restricted Stock Agreement for 2005 grants under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 8-K filed January 6, 2005 (File No. 12609 and File No. 1-2348), Exhibit 99.3)
*~~10.38~~10.35	Form of Restricted Stock Agreement for 2006 grants under the PG&E Corporation 2006 Long-Term Incentive Plan (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 8-K filed January 9, 2006, Exhibit 99.1)
*~~10.39~~10.36	Form of Restricted Stock Agreement for 2007 grants under the PG&E Corporation 2006 Long-Term Incentive Plan (reflecting amendments to the PG&E Corporation 2006 Long-Term Incentive Plan made on February 15, 2006) (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2006 (File No. 1-12609), Exhibit 10.39)
*~~10.40~~10.37	Form of Non-Qualified Stock Option Agreement under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 8-K filed January 6, 2005 (File No. 12609 and File No. 1-2348), Exhibit 99.1)
*~~10.41~~10.38	Form of Performance Share Award Agreement for 2004 grants under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2003 (File No. 1-12609), Exhibit 10.38)
*~~10.42~~10.39	Form of Performance Share Agreement for 2005 grants under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 8-K filed January 6, 2005 (File No. 12609 and File No. 1-2348), Exhibit 99.2)
*~~10.43~~10.40	Form of Performance Share Agreement for 2006 grants under the PG&E Corporation 2006 Long-Term Incentive Plan (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 8-K filed January 9, 2006, Exhibit 99.2)
*~~10.44~~10.41	Form of Performance Share Agreement for 2007 grants under the PG&E Corporation 2006 Long-Term Incentive Plan (reflecting amendments to the PG&E Corporation 2006 Long-Term Incentive Plan made on February 15, 2006) (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2006 (File No. 1-12609), Exhibit 10.44)
*~~10.45~~10.42	PG&E Corporation Executive Stock Ownership Program Guidelines dated as of February 19, 2003 (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 1-12609) Exhibit 10.2)
*~~10.46~~10.43	PG&E Corporation Executive Stock Ownership Program Guidelines as amended February 15, 2006 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2005 (File No. 1-12609), Exhibit 10.46)
*~~10.47~~10.44	PG&E Corporation Officer Severance Policy, as amended effective as of January 1, 2005 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2004 (File No. 1-12609), Exhibit 10.37)
*~~10.48~~10.45	PG&E Corporation Officer Severance Policy, as amended effective as of February 15, 2006 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2005 (File No. 1-12609), Exhibit 10.48)

*~~10.49~~10.46	PG&E Corporation Golden Parachute Restriction Policy effective as of February 15, 2006 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2005 (File No. 1-12609), Exhibit 10.49)
*~~10.50~~10.47	PG&E Corporation Director Grantor Trust Agreement dated April 1, 1998 (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 (File No. 1-12609), Exhibit 10.1)
*~~10.51~~10.48	PG&E Corporation Officer Grantor Trust Agreement dated April 1, 1998, as updated effective January 1, 2005 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2004 (File No. 1-12609), Exhibit 10.39)
*~~10.52~~10.49	Resolution of the Board of Directors of PG&E Corporation regarding indemnification of officers and directors dated December 18, 1996 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2004 (File No. 1-12609), Exhibit 10.40)
*~~10.53~~10.50	Resolution of the Board of Directors of Pacific Gas and Electric Company regarding indemnification of officers and directors dated July 19, 1995 (incorporated by reference to Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2004 (File No. 1-2348), Exhibit 10.41)
11	Computation of Earnings Per Common Share
12.1	Computation of Ratios of Earnings to Fixed Charges for Pacific Gas and Electric Company
12.2	Computation of Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends for Pacific Gas and Electric Company
13	The following portions of the ~~2006~~2007 Annual Report to Shareholders of PG&E Corporation and Pacific Gas and Electric Company are included: “Selected Financial Data,” “Management's Discussion and Analysis of Financial Condition and Results of Operations,” financial statements of PG&E Corporation entitled “Consolidated Statements of Income,” “Consolidated Balance Sheets,” “Consolidated Statements of Cash Flows,” and “Consolidated Statements of Shareholders' Equity,” financial statements of Pacific Gas and Electric Company entitled “Consolidated Statements of Income,” “Consolidated Balance Sheets,” “Consolidated Statements of Cash Flows,” and “Consolidated Statements of Shareholders' Equity,” “Notes to the Consolidated Financial Statements,” and “Quarterly Consolidated Financial Data (Unaudited),” “Management's Report on Internal Control Over Financial Reporting,” “Report of Independent Registered Public Accounting Firm,” and “Report of Independent Registered Public Accounting Firm.”
21	Subsidiaries of the Registrant
23	Consent of Independent Registered Public Accounting Firm (Deloitte & Touche LLP)
24.1	Resolutions of the Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company authorizing the execution of the Form 10-K
24.2	Powers of Attorney
31.1	Certifications of the Chief Executive Officer and the Chief Financial Officer of PG&E Corporation required by Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certifications of the Chief Executive Officer and the Chief Financial Officer of Pacific Gas and Electric Company required by Section 302 of the Sarbanes-Oxley Act of 2002
**32.1	Certifications of the Chief Executive Officer and the Chief Financial Officer of PG&E Corporation required by Section 906 of the Sarbanes-Oxley Act of 2002
**32.2	Certifications of the Chief Executive Officer and the Chief Financial Officer of Pacific Gas and Electric Company required by Section 906 of the Sarbanes-Oxley Act of 2002

*~~Management contract or compensatory agreement.~~

**~~Pursuant to Item 601(b) (32) of SEC Regulation S-K, these exhibits are furnished rather than filed with this report.~~

(Mark One)
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, ~~2006~~ 2007
Or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Title of Each Class		Name of Each Exchange on Which Registered
PG&E Corporation: Common Stock, no par value		New York Stock Exchange
Pacific Gas and Electric Company: First Preferred Stock, cumulative, par value $25 per share:		American Stock Exchange
Redeemable: 5% Series A, 5%, 4.80%, 4.50%, 4.36%
Nonredeemable: 6%, 5.50%, 5%

PG&E Corporation	~~Large accelerated filer~~ x	~~Accelerated filer~~ ¨	~~Non-accelerated filer~~ ¨
Pacific Gas and Electric Company
Large accelerated filer x		Large accelerated filer ¨
Accelerated filer ¨		Accelerated filer ¨
Non-accelerated filer ¨		Non-accelerated filer x
Smaller reporting company ¨		Smaller reporting company ¨

PG&E Corporation Common Stock	$~~13,640~~15,962 million
Pacific Gas and Electric Company Common Stock	Wholly owned by PG&E Corporation
Common Stock outstanding as of February ~~20, 2007:~~ 19, 2008:
PG&E Corporation:	~~350,817,275~~355,749,692 (excluding shares held by a wholly owned subsidiary)
Pacific Gas and Electric Company:	Wholly owned by PG&E Corporation

Designated portions of the combined ~~2006~~2007 Annual Report to Shareholders	Part I (Item ~~1, Item~~ 1.A.), Part II (Items 5, 6, 7, 7A, 8 and 9A)
Designated portions of the Joint Proxy Statement relating to the ~~2007~~2008	Part III (Items 10, 11, 12, 13 and 14)
Annual Meetings of Shareholders

Commission File Number	Exact Name of Registrant as specified in its charter	State or Other Jurisdiction of Incorporation or Organization	IRS Employer Identification Number
1-12609	PG&E CORPORATION	California	94-3234914
1-2348	PACIFIC GAS AND ELECTRIC COMPANY	California	94-0742640

PG&E Corporation	Yes x No o
Pacific Gas and Electric Company	Yes x No ¨

PG&E Corporation	Yes ¨ No x
Pacific Gas and Electric Company	Yes o No x

		Page
	Units of Measurement	iviii
PART I
Item 1.	Business	1
	General	1
	Corporate Structure and Business	1
	Corporate and Other Information	1
	Employees	1
	~~Corporate Structure and Business~~Cautionary Language Regarding Forward Looking Statements	1
	~~Corporate and Other Information~~	1
	~~Employees~~	1
	~~Forward Looking Statements~~	1
	PG&E Corporation's Regulatory Environment	3
	Federal Energy Regulation	3
	State Energy Regulation	3
	The Utility's Regulatory Environment	4
	Federal Energy Regulation	4
	State Energy Regulation	5
	Other Regulation	6
	Competition	7
	Competition in the Electricity Industry	7
	~~Competition in the Electricity Industry~~	7
	Competition in the Natural Gas Industry	98
	Ratemaking Mechanisms	10
	~~Cost-of-Service Ratemaking~~ Overview	10
	Electricity and Natural Gas Distribution and Electricity Generation Operations	10
	General Rate Cases	10
	Attrition Rate Adjustments	11
	Cost of Capital Proceedings	11
	Baseline Allowance	11
	Public Purpose and Other ~~Program~~s Programs	11
	Energy Efficiency Programs	11
	Demand Response Programs	12
	Self-Generation Incentive Program and California Solar Initiative	12
	Low-Income Energy Efficiency Programs and California Alternate Rates for Energy	12
	~~Self-Generation Incentive, California Solar Initiative~~ClimateSmart™ Program	1213
	~~Low-Income Energy Efficiency Programs and~~ ~~California Alternate Rates for Energy~~	12
	~~Climate Protection Tariff~~	12
	Rate Recovery of Costs of New Electricity Generation Resources	1213
	Overview	1213
	Costs Incurred Under New Power Purchase Agreements	13
	Costs of Utility-Owned Generation Resource Projects	1314
	DWR Electricity and DWR Revenue Requirements	14
	Electricity Transmission	14
	Transmission Owner Rate Cases	14
	~~CAISO Transmission Revenues~~ Natural Gas	15
	~~Reliability Service Costs~~ The Gas Accord	15
	~~Transmission Access Charge~~	15
	~~Natural Gas~~	15
	~~The Gas Accord~~	15
	Biennial Cost Allocation Proceeding	16
	Natural Gas Procurement	16
	Interstate and Canadian Natural Gas Transportation and Storage	16
	Electric Utility Operations	17
	Electricity Resources	17
	Owned Generation Facilities	17
	DWR Power Purchases	18
	Third-Party Power Purchase Agreements	19
	Future Long-Term Generation Resources	19
	Electricity Transmission	19
	Electricity Distribution Operations	20
	2007 Electricity Deliveries	21
	Electricity Distribution Operating Statistics	21
	Natural Gas Utility Operations	22
	2007 Natural Gas Deliveries	23
	Natural Gas Operating Statistics	23

	~~Electric Utility Operations~~	17
	~~Electricity Resources~~	17
	~~Owned-Generation Facilities~~	17
	~~DWR Power Purchases~~	18
	~~Third-Party Power Purchase Agreements~~	18
	~~Future Long-Term Generation Resources~~	19
	~~Electricity Transmission~~	20
	~~Electricity Distribution Operations~~	20
	~~2006 Electricity Deliveries~~	21
	~~Electricity Distribution Operating Statistics~~	21
	~~Natural Gas Utility Operations~~	22
	~~2006 Natural Gas Deliveries~~	23
	~~Natural Gas Operating Statistics~~	23
	Natural Gas Supplies	24
	Gas Gathering Facilities	25
	Interstate and Canadian Natural Gas Transportation Services Agreements	25
	Environmental Matters	26
	General	26
	~~General~~	26
	Air Qualityand Climate Change	27
	Water Quality	27
	Compressor Station Litigation	28
	Endangered Species	29
	~~Endangered Species~~ Hazardous Waste Compliance and Remediation	29
	~~Hazardous Waste Compliance and Remediation~~	29
	Nuclear Fuel Disposal	31
	Nuclear Decommissioning	31
	Electric and Magnetic Fields	31
~~Item 1A.~~	~~Risk Factors~~	32
Item ~~1B.~~ 1A.	~~Unresolved Staff Comments~~ Risk Factors	32
Item 1B.	Unresolved Staff Comments	33
Item 2.	Properties	32
Item 3.	Legal Proceedings	32
	~~Diablo Canyon Power Plant~~	33
	Diablo Canyon Power Plant	33
	Complaints Filed by the California Attorney General, City and County of San Francisco	33
	~~The California Air Resources Board~~ Solano County District Attorney’s Office	34
Item 4. 4.	Submission of Matters to a Vote of Security Holders	35
	Executive Officers of the Registrants	35

PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	38
Item 6.	Selected Financial Data	3938
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	39
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 8.	Financial Statements and Supplementary Data	39
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	4039
Item 9A.	Controls and Procedures	4039
Item 9B. 9B.	Other Information	4039

	PART III
~~PART III~~
Item 10.	Directors, Executive Officers and Corporate Governance	41
Item 11.	Executive Compensation	42
~~Item 11.~~	~~Executive Compensation~~	42
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	4342

Item 13.	Certain Relationships and Related Transactions, and Director Independence	43
Item 14.	Principal Accountant Fees and Services	43

PART IV
Item 15.	Exhibits and Financial Statement Schedules	4443
	Signatures	5049
	Report of Independent Registered Public Accounting Firm	51
	Financial Statement Schedules	52

1 Kilowatt (kW)	=	One thousand watts
1 Kilowatt-Hour (kWh)	=	One kilowatt continuously for one hour
1 Megawatt (MW)	=	One thousand kilowatts
1 Megawatt-Hour (MWh)	=	One megawatt continuously for one hour
1 Gigawatt (GW)	=	One million kilowatts
1 Gigawatt-Hour (GWh)	=	One gigawatt continuously for one hour
1 Kilovolt (kV)	=	One thousand volts
1 MVA	=	One megavolt ampere
1 Mcf	=	One thousand cubic feet
1 MMcf	=	One million cubic feet
1 Bcf	=	One billion cubic feet
1 MDth	=	One thousand decatherms


·	the outcome of regulatory proceedings, including pending and future ratemaking proceedings ~~pending~~ at the CPUC and the FERC;


·	the adequacy and price of electricity and natural gas supplies, and the ability of the Utility to manage and respond to the volatility of the electricity and natural gas markets;


·	the effect of weather, storms, earthquakes, fires, floods, disease, other natural disasters, explosions, accidents, mechanical breakdowns, acts of terrorism, and other events or hazards ~~that could affect~~on the Utility’s facilities and operations, its customers, and third parties on which the Utility relies;


·	the potential impacts of climate change on the Utility’s electricity and natural gas ~~operations;~~businesses;


·	changes in customer demand for electricity and natural gas resulting from unanticipated population growth or decline, general economic and financial market conditions, changes in technology, including the development of alternative energy sources, or other reasons;


·	operating performance of the Utility’s Diablo Canyon nuclear generating facilities or (“Diablo ~~Canyon,~~Canyon”), the occurrence of unplanned outages at Diablo Canyon, or the temporary or permanent cessation of operations at Diablo Canyon;


·	~~the ability of~~whether the Utility ~~to recognize benefits~~can maintain the cost efficiencies it has recognized from its completed initiatives to improve its business processes and customer ~~service;~~service, improve its performance following the October 2007 implementation of new work processes and systems, and identify and successfully implement additional cost-saving measures


·	~~the ability of~~whether the Utility incurs substantial unanticipated expense to ~~timely complete~~improve the safety and reliability of its ~~planned capital investment projects;~~electric and natural gas distribution systems;


·	whether the Utility achieves the CPUC’s energy efficiency targets and recognize any incentives the Utility may earn in a timely manner;

·	the impact of changes in federal or state laws, or their interpretation, on energy policy and the regulation of utilities and their holding companies;


·	the impact of changing wholesale electric or gas market rules, including new rules of the California Independent System ~~Operator’s, or the CAISO’s, new rules~~Operator (“CAISO”) to restructure the California wholesale electricity market;


·	how the CPUC administers the conditions imposed on PG&E Corporation when it became the Utility’s holding company;


·	the extent to which PG&E Corporation or the Utility incurs costs and liabilities in connection with ~~pending~~ litigation that are not recoverable through rates, from insurance or from other third ~~parties, or through insurance recoveries;~~parties;


·	the ability of PG&E Corporation and/or the Utility to access capital markets and other sources of ~~credit;~~credit in a timely manner on favorable terms;


·	the impact of environmental laws and regulations and the costs of compliance and remediation; ~~and~~


·	the effect of municipalization, direct access, community choice aggregation, or other forms of ~~bypass.~~bypass; and

	the impact of changes in federal or state tax laws, policies, or regulations.

Owned generation (nuclear, fossil fuel-fired and hydroelectric facilities)	~~40%~~ 32%
DWR	~~24%~~ 25%
Qualifying Facilities/Renewables	20%
Irrigation Districts	6% 3%
Other Power Purchases	~~10%~~ 20%

Generation Type	County Location	Number of Units	Net Operating Capacity (MW)	County Location	Number of Units	Net Operating Capacity (MW)
Nuclear:
Diablo Canyon	San Luis Obispo	2	2,240	San Luis Obispo	2	2,240
Hydroelectric:
Conventional	16 counties in northern and central California	107	2,684	16 counties in northern and central California	107	2,684
Helms pumped storage	Fresno	3	1,212	Fresno	3	1,212
Hydroelectric subtotal		110	3,896		110	3,896
Fossil fuel:
Humboldt Bay(1)	Humboldt	2	105	Humboldt	2	105
Mobile turbines	Humboldt	2	30	Humboldt	2	30
Fossil fuel subtotal		4	135		4	135
Total		116	6,271		116	6,271

	2007	2008	2009	2010	2011	2008	2009	2010	2011	2012
Unit 1
Refueling	April	-	January	October		-	January	October		April
Duration (days)	28	-	74	28		-	76	35		30
Startup	May	-	April	November		-	April	November		May
Unit 2
Refueling	-	February	October	-	April	February	October	-	May
Duration (days)	-	76	28	-	28	76	35	-	30
Startup	-	April	November	-	May	April	November	-	June

Agricultural and Other Customers	5	%7%
Industrial Customers	18	%18%
Residential Customers	37	%36%
Commercial Customers	40	%39%

Subtotal		11,143			10,812			9,718			9,685			10,136
DWR		(2,229	)		(2,119	)		(1,699	)		(1,933	)		(2,243	)
Direct access credits		—			—			—			—			(277	)
Miscellaneous(3)		215			261			235			(248	)		(52	)
Regulatory balancing accounts		352			(202	)		(327	)		363			18
Total electricity operating revenues	$	9,481		$	8,752		$	7,927		$	7,867		$	7,582
Other Data:
Average annual residential usage (kWh)		6,898			7,020			6,834			6,744			6,772
Average billed revenues (cents per kWh):
Residential		14.87			14.48			12.96			12.62			12.65
Commercial		13.19			13.18			12.71			12.95			13.92
Industrial		8.26			8.53			8.25			8.14			9.62
Agricultural		12.29			12.58			11.92			11.41			13.35
Net plant investment per customer	$	3,418		$	3,148		$	2,966		$	2,790		$	2,689

Residential Customers	27	%26%
Transport-only Customers ~~(noncore)~~(non-core)	61	%62%
Commercial Customers	12	%12%

Purchased from suppliers in:
Canada		199,870			202,274			204,884			205,180			196,278
California		(23,065	)		(13,401	)		(18,951	)		(9,108	)		(7,421	)
Other states		101,271			103,658			103,237			103,801			102,941
Total purchased		278,076			292,531			289,170			299,873			291,798
Net (to storage) from storage		(1,120	)		4,359			(3,659	)		(532	)		1,359
Total		276,955			296,890			285,511			299,341			293,157
Utility use, losses, etc. (1)		(12,760	)		(27,610	)		(14,312	)		(19,287	)		(14,307	)
Net gas for sales		264,196			269,280			271,199			280,054			278,850
Bundled gas sales (MMcf):
Residential		196,092			196,092			194,108			201,601			198,580
Commercial		67,293			73,178			77,056			78,080			79,891
Industrial					10			35			373			379
Other gas utilities	___			___				—			—			—
Total		264,196			269,280			271,199			280,054			278,850
Transportation only (MMcf):		605,259			559,270			572,869			597,706			525,353
Revenues (in millions):
Bundled gas sales:
Residential	$	2,378		$	2,452		$	2,336		$	1,944		$	1,836
Commercial		766			859			885			712			697
Industrial														1
Other gas utilities														1
Miscellaneous		88			121			(22	)		(29	)		(31	)
Regulatory balancing accounts		186			40			340			316			68
Bundled gas revenues		3,417			3,472			3,539			2,943			2,572
Transportation service only revenue		340			315			237			270			284
Operating revenues	$	3,757		$	3,787		$	3,776		$	3,213		$	2,856
Selected Statistics:
Average annual residential usage (Mcf)		49			49			49			53			53
Average billed bundled gas sales revenues per Mcf:
Residential	$	12.07		$	12.50		$	12.04		$	9.64		$	9.25
Commercial		11.38			11.73			11.48			9.12			8.73
Industrial					1.03			0.61			(0.56	)		2.48
Average billed transportation only revenue per Mcf		0.56			0.56			0.42			0.45			0.54
Net plant investment per customer	$	1,375		$	1,304		$	1,262		$	1,266		$	1,261

	2006					2005					2004					2003					2002
	MMcf			Avg. Price		MMcf			Avg. Price		MMcf			Avg. Price		MMcf			Avg. Price		MMcf		Avg. Price
Canada		202,274			6.27		204,884		$	7.12		205,180		$	5.37		196,278		$	4.73		210,716	$	2.42
California (1)		(13,401	)		7.04		(18,951	)	$	7.70		(9,108	)	$	4.89		(7,421	)	$	3.39		19,533	$	2.88
Other states (substantially all U.S. southwest)		103,658			6.51		103,237		$	7.10		103,801		$	5.44		102,941		$	4.63		67,878	$	3.04
Total/weighted average		292,531			6.32		289,170		$	7.07		299,873		$	5.41		291,798		$	4.73		298,127	$	2.59