Committee considers diversity, age, skills, and such other factors as it deems appropriate given the current needs of the Board and the Corporation.

6.     Selection of the Chairman of the Board and the Chief Executive Officer

The Chairman of the Board and the Chief Executive Officer are elected by the Board.

Based on the circumstances existing at a time that there is a vacancy in the office of either the Chairman of the Board or the Chief Executive Officer, the Board will consider whether the role of Chief Executive Officer should be separate from that of Chairman of the Board, and, if the roles are separate, whether the Chairman should be selected from the independent directors or should be an employee of the Corporation.

7.     Assessing the Board's and Committees' Performance

The Nominating, Compensation, and Governance Committee oversees the process for evaluating and assessing the performance of the Board, including Board committees. The Board conducts a self-evaluation at least annually to determine whether it and its committees are functioning effectively. The Board evaluation includes an assessment of the Board's contribution as a whole and specific areas in which the Board and/or management believes a better contribution could be made. The purpose of the review is to increase the effectiveness of the Board as a whole, not to discuss the performance of individual directors. The Audit Committee and the Nominating, Compensation, and Governance Committee conduct annual self-evaluations, and any other permanent Board committee that meets on a regular basis conducts periodic self-evaluations. The Board committees provide the results of any self-evaluation to the Nominating, Compensation, and Governance Committee, which will review those results and provide them to the Board for consideration in the Board's self-evaluation.

8.     Size of the Board

As provided in paragraph I of Article Third of the Corporation's Articles of Incorporation, the Board is composed of no less than 7 and no more than 13 members. The exact number of directors is determined by the Board based on its current composition and requirements, and is specified in Article II, Section 1 of the Corporation's Bylaws.

9.     Advisory Directors

The Board may designate future directors as advisory directors in advance of their formal election to the Board. Advisory directors attend Board and committee meetings, and receive the same compensation as regular directors. They do not, however, vote on matters before the Board. In this manner, they become familiar with the Corporation's business before assuming the responsibility of serving as a regular director.

10.  Directors Who Change Responsibilities

Directors shall offer their resignations when they change employment or the major responsibilities they held when they joined the Board. This does not mean that such directors should leave the Board. However, the Board, via the Nominating, Compensation, and Governance Committee, should have the opportunity to review the appropriateness of such directors' nomination for re-election to the Board under these circumstances.

Directors who are officers of the Corporation also shall offer their resignations upon retirement or other termination of active PG&E Corporation employment.

11.  Retirement Age

The Board may not designate any person as a candidate for election or re-election as a director after such person has reached the age of 70.

12.  Compensation of Directors

The Board sets the level of compensation for directors, based on the recommendation of the Nominating, Compensation, and Governance Committee, and taking into account the impact of compensation on director independence. Directors who are also current employees of the Corporation receive no additional compensation for service as directors.

The Nominating, Compensation, and Governance Committee reviews periodically the amount and form of compensation paid to directors, taking into account the compensation paid to directors of other comparable U.S. companies. The Committee conducts its review with the assistance of outside experts in the field of executive compensation.

13.  Meetings of the Board

As provided in Article II, Section 4 of the Corporation's Bylaws, the Board meets regularly on previously determined dates. Board meetings shall be held at least quarterly. As provided in Article II, Section 5 of the Bylaws, the Chairman of the Board, the President, the Chair of the Executive Committee, or any five directors may call a special meeting of the Board at any time.

Each Board member is expected to regularly attend Board meetings and meetings of the committees on which the director serves (either in person or by telephone or other similar communication equipment), and to attend annual meetings of the Corporation's shareholders. Pursuant to proxy disclosure rules, the Corporation's proxy statement identifies each director who during the last fiscal year attended fewer than 75 percent of the aggregate of the total number of meetings of the Board and each Board committee on which the director served.

14.  Lead Director

The Chair of the Nominating, Compensation, and Governance Committee shall be the lead director, and shall be selected by the independent directors. The lead director shall act as a liaison between the Chairman of the Board and the independent directors, and shall preside at all meetings at which the Chairman is not present. The lead director approves the agendas and schedules for meetings of the Board, and approves information sent to the members of the Board. The lead director has authority to call special meetings of the independent directors.

15.  Meetings of Independent Directors

The independent directors meet at each regularly scheduled Board meeting in executive session. These executive session meetings are chaired by the lead director. Each such meeting includes a subsequent discussion with the Chairman of the Board (if the Chairman is not an independent director) and the Chief Executive Officer (if the Chairman is not the CEO).

The Chair of the Nominating, Compensation, and Governance Committee, as lead director, establishes the agenda for each executive session meeting of independent directors, and also determines which, if any, other individuals, including members of management and independent advisors, should attend each such meeting.

16.  Board Agenda Items

The Chairman of the Board, in consultation with the Chief Executive Officer (if the Chairman is not the CEO), establishes the agenda for each meeting.

Board members are encouraged to suggest the inclusion of items on the agenda.

17.  Board Materials and Presentations

The agenda for each meeting is provided in advance of the meeting, together with written materials on matters to be presented for consideration, for the directors' review prior to the meeting. As a general rule, written materials are provided in advance on all matters requiring Board action. Written materials are concise summaries of the relevant information, designed to provide a foundation for the Board's discussion of key issues and make the most efficient use of the Board's meeting time. Directors may request from the Chairman of the Board and the Chief Executive Officer (if the Chairman is not the CEO) any additional information they believe to be necessary to perform their duties.

18.  Regular Attendance of Non-Directors at Board Meetings

Members of management, as designated by the Chairman of the Board and the Chief Executive Officer (if the Chairman is not the CEO), attend each meeting of the Board.

19.  Board Committees

The Board establishes committees to assist the Board in overseeing the affairs of the Corporation.

Currently, there are five committees. The Executive Committee exercises all powers of the Board (subject to the provisions of law and limits imposed by the Board) and meets only at such times as it is infeasible to convene a meeting of the full Board. The Audit Committee, the Finance Committee, the Nominating, Compensation, and Governance Committee, and the Public Policy Committee are each responsible for defined areas delegated by the Board.

20.  Membership of Board Committees

All permanent Board committees, other than the Executive Committee, are chaired by independent directors. Each independent committee chair shall act as a liaison between the Chairman of the Board and the respective committee, and shall preside at all meetings of that committee. Each independent committee chair approves the agendas and schedules for meetings of the respective committee, and approves information sent to the committee members. Each independent committee chair has authority to call special meetings of the respective committee.

The Audit Committee, the Finance Committee, the Nominating, Compensation, and Governance Committee, and the Public Policy Committee are composed entirely of independent directors, as defined in Section 3 of these guidelines.

Members of the Audit Committee also must satisfy the audit committee independence and qualification requirements established by the Securities and Exchange Commission, the New York Stock Exchange, the American Stock Exchange, the Pacific Exchange, and any other stock exchange on which securities of the Corporation or Pacific Gas and Electric Company are listed. If an Audit Committee member simultaneously serves on the audit committees of three or more public companies other than the Corporation and its subsidiaries, that Committee member must inform the Corporation's Board of Directors and, in order for that member to continue serving on the Corporation's Audit Committee, the Board of Directors must affirmatively determine that such simultaneous service does not impair the ability of that member to serve effectively on the Corporation's Audit Committee.

21.  Appointment of Committee Members

The composition of each committee is determined by the Board of Directors.

The Nominating, Compensation, and Governance Committee, after consultation with the Chairman of the Board and the Chief Executive Officer (if the Chairman is not the CEO) and with consideration of the wishes of the individual directors, recommends to the full Board the chairmanship and membership of each committee.

22.  Committee Agenda Items

The chair of each committee, in consultation with the appropriate members of management, establishes the agenda for each meeting.

At the beginning of the year, each committee issues a work plan of subjects to be discussed during the year, to the extent such subjects can be foreseen. Copies of these annual work plans are provided to all directors.

23.  Committee Materials and Presentations

The agenda for each committee meeting is provided in advance of the meeting, together with written materials on matters to be presented for consideration, for the committee members' review prior to the meeting. As a general rule, written materials are provided in advance on all matters to be presented for committee action.

24.  Attendance at Committee Meetings

The chair of each committee, after consultation with the Chairman of the Board and the Chief Executive Officer (if the Chairman is not the CEO), determines the appropriate members of management to attend each meeting of the Committee.

Any director or advisory director may attend any meeting of any committee with the concurrence of the committee chair.

25.  Formal Evaluation of the Chief Executive Officer

The independent directors annually review and evaluate the performance of the Chief Executive Officer. The review is based upon objective criteria, including the performance of the business and accomplishment of objectives previously established in consultation with the Chief Executive Officer.

The results of the review and evaluation are communicated to the Chief Executive Officer by the Chair of the Nominating, Compensation, and Governance Committee, and are used by that Committee and the Board when considering the compensation of the CEO.

26.  Management Development and Succession Planning

The Chief Executive Officer reports annually to the Board on management development and succession planning. This report includes the

CEO's recommendation for a successor should the CEO become unexpectedly disabled.

27.  Communications with External Entities

The Chief Executive Officer is responsible for all communications with the media, the financial community, or other external entities pertaining to the affairs of the Corporation. Directors refer any inquiries from such entities to the CEO for handling.

28.  Access to Independent Advisors

The Board of Directors and its committees have the right to retain independent outside financial, legal, or other advisors, as necessary and appropriate. The Corporation shall bear the costs of retaining such advisors.

29.  Director Orientation and Continuing Education

The Corporation provides information to new directors on subjects that would assist them in discharging their duties, and periodically provides briefing sessions or materials for all directors on such subjects.

30.  Communications with Shareholders

The Chair of the Nominating, Compensation, and Governance Committee shall be designated as the director who receives written communications from the Corporation's shareholders, in care of the Corporate Secretary. The Corporate Secretary shall forward to the Chair of the Nominating, Compensation, and Governance Committee any shareholder communications addressed to the Board of Directors as a body or to all the directors in their entirety, and such other communications as the Corporate Secretary, in his or her discretion, determines is appropriate.

31.  Legal Compliance and Business Ethics

The Board of Directors is responsible for exercising reasonable oversight with respect to the implementation and effectiveness of the Corporation's legal compliance and ethics program. In that role, the Board of Directors shall be knowledgeable about the content and operation of the Corporation's compliance and ethics program, but may delegate more detailed oversight to a committee of the Board of Directors.

Exhibit A

PG&E Corporation
Corporate Governance Guidelines

•

If a director is a consultant to the Corporation.

•

If a director or his or her immediate family member receives, or during the past three years received, more than $100,000 per year or rolling 12-month period in direct compensation from the Corporation. "Direct compensation" does not include director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service) or compensation received by a director's immediate family member for service as an employee (unless the immediate family member received compensation for services as a Section 16 Officer, in which case the director has a material relationship with the Corporation).

11

	continued service) or compensation received by a director’s immediate family member for service as an employee (unless the immediate family member received compensation for services as a Section 16 Officer, in which case the director has a material relationship with the Corporation).

•

If a director is a current Section 16 Officer or employee, or his or her immediate family member is a current Section 16 Officer, of a company (which does not include charitable, non-profit, or tax-exempt entities) that makes payments to, or receives payments from, the Corporation for property or services in an amount which, in any single fiscal year, exceeds the greater of $1 million or 2 percent of such other company’s consolidated gross revenues, during any of the past three years. The director is not “independent” until three years after falling below such threshold. (Both the payments and the consolidated gross revenues to be measured shall be those reported in the last completed fiscal year. The look-back provision for this test applies solely to the financial relationship between the Corporation and the director’s or immediate family member’s current employer; the Corporation need not consider former employment of the director or immediate family member.)

Charitable Relationships

•

If the director (or a relative) is a trustee, director, or employee of a charitable or non-profit organization that receives grants or endowments from the Corporation or its affiliates exceeding the greater of $200,000 or 2 percent of the recipient's gross revenues during the Corporation's or the recipient's most recent completed fiscal year.

•	If the director (or a relative) is a trustee, director, or employee of a charitable or non-profit organization that receives grants or endowments from the Corporation or its affiliates exceeding the greater of $200,000 or 2 percent of the recipient’s gross revenues during the Corporation’s or the recipient’s most recent completed fiscal year.

Notes

•	“Immediate family member” includes a person’s spouse, parents, children, siblings, mothers- andfathers-in-law, sons- anddaughters-in-law, brothers-andsisters-in-law, and anyone (other than domestic employees) who shares such person’s home, or is financially dependent on such person.
•	“Corporation” includes any consolidated subsidiaries or parent companies.
•	“Section 16 Officer” means “officer” as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, and includes the president, the principal financial officer, the principal accounting officer, any vice president in charge of a principal business unit, division, or function (such as sales, administration, or finance), any other officer who performs a policymaking function, or any other person who performs similar policymaking functions for that company.

•

During the first year after adoption of these standards, only a one-year look-back applies. The three-year look-back will apply thereafter.

•

"Immediate family member" includes a person's spouse, parents, children, siblings, mothers-and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law, and anyone (other than domestic employees) who shares such person's home, or is financially dependent on such person.

•

"Corporation" includes any consolidated subsidiaries or parent companies.

•

"Section 16 Officer" means "officer" as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, and includes the president, the principal financial officer, the principal accounting officer, any vice president in charge of a principal business unit, division, or function (such as sales, administration, or finance), any other officer who performs a policymaking function, or any other person who performs similar policymaking functions for that company.

12

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Item No. 1:

Election of Directors of PG&E Corporation and

Pacific Gas and Electric Company

Shareholders are being asked to elect 910 directors to serve on the Board of Directors of PG&E Corporation and 1011 directors to serve on the Board of Directors of Pacific Gas and Electric Company. If elected as director, those individuals will hold office until the next annual meetings or until their successors shall be elected and qualified, except in the case of death, resignation, or removal of a director.

The 910 nominees for director of PG&E Corporation and the 1011 nominees for director of Pacific Gas and Electric Company whom the respective Boards propose for election are the same, except for Thomas B. King, who is a nominee for the Pacific Gas and Electric Company Board only.

The composition of the PG&E Corporation and Pacific Gas and Electric Company slates of director nominees are consistent with the policy set forth in each company'scompany’s Corporate Governance Guidelines that at least 75 percent of the Board shall be composed of "independent"“independent” directors, as defined in the Corporate Governance Guidelines, and as set forth on pages 7 through 1312 of this Joint Proxy Statement.

Information is provided on the following pages about the nominees for director, including their principal occupations for the past five years, certain other directorships, age, and length of service as a director of PG&E Corporation andand/or Pacific Gas and Electric Company. Membership on Board committees, attendance at Board and committee meetings, and ownership of stock of PG&E Corporation and Pacific Gas and Electric Company are provided in separate sections following the biographical information on the nominees.

All of the nominees have agreed to serve if elected. If any of the nominees become unavailable at the time of the annual meetings to accept nomination or election as a director, the proxyholders named on the enclosed PG&E Corporation or Pacific Gas and Electric Company proxy card will vote for substitute nominees at their discretion.

The Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company Unanimously Recommend the Election of the Nominees for Director Presented in This Joint Proxy Statement.

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Nominees for Directors of PG&E Corporation and

Pacific Gas and Electric Company

Biographical Information

		David R. Andrews Mr. Andrews currently serves as a Senior Fellow for Corporate Governance at the National Chamber Foundation, U.S. Chamber of Commerce. Heis retired from PepsiCo, Inc. (food and beverage businesses) in February 2005, where he served as Senior Vice President, Government Affairs, General Counsel, and Secretary of PepsiCo, Inc. (food and beverage businesses). He held that position from February 2002 to November 2004. Prior to joining PepsiCo, Inc., Mr. Andrews was a partner in the law firm of McCutchen, Doyle, Brown & Enersen, LLP from May 2000 to January 2002 and from 1981 to July 1997. From August 1997 to April 2000, he served as the legal advisor to the U.S. Department of State. Mr. Andrews, 64,65, has been a director of PG&E Corporation and Pacific Gas and Electric Company since 2000. He also is a director of the James Campbell Company LLC and UnionBanCal Corporation.
		Leslie S. Biller Mr. Biller is retired Vice Chairman and Chief Operating Officer of Wells Fargo & Company (financial services and retail banking). Mr. Biller held that position from November 1998 until his retirement in October 2002. Mr. Biller, 57,58, was an advisory director of PG&E Corporation and Pacific Gas and Electric Company from January 2003 to February 2004, and has been a director of PG&E Corporation and Pacific Gas and Electric Company since February 2004. He also is a director of Ecolab Inc., Knowledge Schools Inc., and Knowledge Universe Education.
		David A. Coulter Mr. Coulter is Managing Director and Senior Advisor of Warburg Pincus LLC (global private equity firm) and has held that position since November 2005. Prior to joining Warburg Pincus LLC, Mr. Coulter was Vice Chairman of JPMorgan Chase & Co. (financial services and retail banking) from January 2001 until his retirement in September 2005. Prior to the merger with J.P. Morgan & Co. Incorporated, he was Vice Chairman of The Chase Manhattan Corporation (bank holding company) from August 2000 to December 2000. He was a partner in the Beacon Group, L.P. (investment banking firm) from January 2000 to July 2000, and was Chairman and Chief Executive Officer of BankAmerica Corporation and Bank of America NT&SA from May 1996 to October 1998. Mr. Coulter, 58,59, has been a director of PG&E Corporation and Pacific Gas and Electric Company since 1996. He also is a director of First Data Corporation and Strayer Education, Inc.
		C. Lee Cox Mr. Cox is retired Vice Chairman of AirTouch Communications, Inc. and retired President and Chief Executive Officer of AirTouch Cellular (cellular telephone and paging services). He was an executive officer of AirTouch Communications, Inc. and its predecessor, PacTel Corporation, from 1987 until his retirement in April 1997. Mr. Cox, 64,65, has been a director of PG&E Corporation and Pacific Gas and Electric Company since 1996.
		Peter A. Darbee Mr. Darbee is Chairman of the Board, Chief Executive Officer, and President of PG&E Corporation and Chairman of the Board of Pacific Gas and Electric Company and has held those positions since January 2006. He was President and Chief Executive Officer of PG&E Corporation from January 2005 to December 2005 and Senior Vice President and Chief Financial Officer of PG&E Corporation from September 1999 to December 2004. Mr. Darbee, 53,54, has been a director of PG&E Corporation and Pacific Gas and Electric Company since January 2005.

14

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		Maryellen C. Herringer Ms. Herringer is an attorney-at-law. She held various executive positions at APL Limited (intermodal shipping and rail transportation company) from 1991 until it was acquired by Neptune Orient Lines in December 1997, most recently serving as Executive Vice President, General Counsel, and Secretary. Prior to joining APL Limited, Ms. Herringer was a partner in the law firm of Morrison & Foerster. Ms. Herringer, 62,63, has been a director of PG&E Corporation and Pacific Gas and Electric Company since October 2005. She also is a director of Golden West Financial Corporation, its subsidiary World Savings and Loan Association, and ABM Industries Incorporated.Incorporated and Wachovia Corporation.
		Thomas B. King* Mr. King is President and Chief Executive Officer of Pacific Gas and Electric Company and a Senior Vice President of PG&E Corporation, and has held that positionthose positions since January 1, 2006. He held various executive positions at Pacific Gas and Electric Company from November 2003 to December 2005, most recently serving as Executive Vice President and Chief OperatingExecutive Officer. Prior to joining Pacific Gas and Electric Company, he was a Senior Vice President of PG&E Corporation from January 1999 to October 2003. From July 2000 to July 2003, he also held various executive positions at PG&E National Energy Group, Inc., a former subsidiary of PG&E Corporation. Mr. King, 44,45, has been a director of Pacific Gas and Electric Company since January 2006.
		Richard A. Meserve Dr. Meserve is President of the Carnegie Institution of Washington (scientific research institution) and has held that position since April 2003. He also has served as Senior Of Counsel to the law firm of Covington & Burling LLP since April 2004 and was a partner in that firm from 1984 through 1999. Prior to joining the Carnegie Institution of Washington, Dr. Meserve was Chairman of the U.S. Nuclear Regulatory Commission from October 1999 to March 2003. Dr. Meserve, 62, has been a director of PG&E Corporation and Pacific Gas and Electric Company since December 2006.
		Mary S. Metz Dr. Metz is retired President of S. H. Cowell Foundation and held that position from January 1999 to March 2005. She is Dean Emerita of University Extension of the University of California, Berkeley, and President Emerita of Mills College. Dr. Metz, 68,69, has been a director of Pacific Gas and Electric Company since 1986 and a director of PG&E Corporation since 1996. She also is a director of AT&T Inc., Longs Drug Stores Corporation, and UnionBanCal Corporation.
		Barbara L. Rambo Ms. Rambo is Chief Executive OfficerVice Chairman of Nietech Corporation (payments technology company), and has held that position since October 2006. Ms. Rambo joined Nietech in November 2002.2002 as President and Chief Executive Officer. Prior to joining Nietech, Ms. Rambo was a directorshe served as Chairman and Chief Executive Officer of OpenClose Technologies (financial services company) from January 2000 through March 2002. She served as Chairman of the Board of OpenClose Technologies from July 2001 to December 2001 and as President and Chief Executive Officer of that company from January 2000 to June 2001.2001, respectively. Ms. Rambo 53,served as Group Executive Vice President of Bank of America from 1993 to 1998 and held various positions of responsibility with the Bank since 1974. Ms. Rambo, 54, has been a director of PG&E Corporation and Pacific Gas and Electric Company since January 2005. She also is a director of The Gymboree Corporation.

*	Thomas B. King is a nominee for director of Pacific Gas and Electric Company only.

15

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		Barry Lawson Williams Mr. Williams is President of Williams Pacific Ventures, Inc. (business investment and consulting), and has held that position since 1987. He also served as interim President and Chief Executive Officer of the American Management Association (management development organization) from November 2000 to June 2001. Mr. Williams, 61,62, has been a director of Pacific Gas and Electric Company since 1990 and a director of PG&E Corporation since 1996. He also is a director of CH2M Hill Companies, Ltd., The Northwestern Mutual Life Insurance Company, R.H. Donnelley Corporation, The Simpson Manufacturing Company Inc., and SLM Corporation.
		* Thomas B. King is a nominee for director of Pacific Gas and Electric Company only.

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Information Regarding the

Boards of Directors of PG&E Corporation and

Pacific Gas and Electric Company

The following section describes (1) the composition of the Boards of Directors and key Board committees of PG&E Corporation and Pacific Gas and Electric Company, (2) the functioning of the Boards and key Board committees, (3) qualifications and compensation of directors, and (4) other information regarding the director nominees.

Director Independence

What independence guidelines apply to the Boards of Directors?

The PG&E Corporation Corporate Governance Guidelines set forth a policy that 75 percent of the directors should be independent, as defined in the Guidelines. The Board of Directors of PG&E Corporation also is subject to New York Stock Exchange and Pacific Exchange rules, which require that a majority of the directors be independent, as defined in the specific stock exchange'sexchange’s rules, and that independent directors meet regularly.

The Pacific Gas and Electric Company Corporate Governance Guidelines also set forth a policy that 75 percent of the directors should be independent, as defined in the Guidelines.

The In addition, the Board of Directors of Pacific Gas and Electric Company is subject to American Stock Exchange rules requiring that the independent directors meet regularly. The Pacific Gas and Electric Company Board is not subject to American Stock Exchange and Pacific Exchange rules requiring that at least a majority of the directors meet the specific stock exchange'sexchange’s definition of "independent“independent director."” Pacific Gas and Electric Company is exempt from these requirements because PG&E Corporation and a subsidiary hold approximately 96 percent of the voting power in Pacific Gas and Electric Company, and Pacific Gas and Electric Company is a "controlled“controlled subsidiary."

”

Are the directors independent?

The Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company each have affirmatively determined that the following directors are independent: David R. Andrews, Leslie S. Biller, David A. Coulter, C. Lee Cox, Maryellen C. Herringer, Richard A. Meserve, Mary S. Metz, Barbara L. Rambo, and Barry Lawson Williams. These independent directors:

•

Do not have any material relationship with either PG&E Corporation or Pacific Gas and Electric Company that would interfere with the exercise of independent judgment,

•

Are "independent" as defined by applicable New York Stock Exchange, American Stock Exchange, and Pacific Exchange rules, and

•

Satisfy each of the categorical standards adopted by the Boards for determining whether a specific relationship is "material" and a director is independent. Those categorical standards are set forth on pages 12 and 13 of this Joint Proxy Statement.

•	Do not have any material relationship with either PG&E Corporation or Pacific Gas and Electric Company that would interfere with the exercise of independent judgment,
•	Are “independent” as defined by applicable New York Stock Exchange and American Stock Exchange rules, and
•	Satisfy each of the categorical standards adopted by the Boards for determining whether a specific relationship is “material” and a director is independent. Those categorical standards are set forth as Exhibit A to the Corporate Governance Guidelines, which can be found on pages 11 and 12 of this Joint Proxy Statement and in the Corporate Governance section of PG&E Corporation’s website,www.pgecorp.com, or Pacific Gas and Electric Company’s website,www.pge.com.

Only independent directors may serve on PG&E Corporation'sCorporation’s Audit Committee, Finance Committee, Nominating, Compensation, and Governance Committee, and Public Policy Committee, and on Pacific Gas and Electric Company'sCompany’s Audit Committee. Independent directors also must serve as chairs of any key committees of the PG&E Corporation or Pacific Gas and Electric Company BoardsBoard of Directors, with the exception of the Executive Committees.

In assessing the independence of individual directors, the Boards of Directors considered transactions for legal and related services provided by the law firm of Covington & Burling LLP to either PG&E Corporation or Pacific Gas and Electric Company. Dr. Richard A. Meserve is employed by Covington & Burling LLP on a part-time basis as Senior Of Counsel. Each of these transactions with Covington & Burling LLP involved services that were initiated prior to Dr. Meserve’s election to the Boards of Directors. The Boards of Directors also considered amounts owed by the Carnegie Institution of Washington to Pacific Gas and Electric Company for departing load charges related to operations in Palo Alto, California. Dr. Meserve is the President of the Carnegie Institution of Washington. This relationship does not require disclosure in the “Related Person Transactions” section on pages 27 and 28 of this Joint Proxy Statement because such charges are fixed in conformity with law or governmental authority.

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Do the Boards of Directors have an independent lead director?

PG&E Corporation and Pacific Gas and Electric Company have each had an independent lead director since 2003. The lead director is selected by the independent directors of the applicable company. Currently, the Chair of the PG&E Corporation Nominating, Compensation, and Governance Committee serves as independent lead director of both PG&E Corporation and Pacific Gas and Electric Company. The lead director acts as a liaison between the Chairman of the Board and the independent directors. Among other things, the lead director approves the agendas and schedules for meetings of the Board, and also determines which, if any, other individuals, including members of management and independent advisors, should attend each executive session meeting (see below). The lead director currently is C. Lee Cox.

Do the independent directors meet without the other directors?

The independent directors of PG&E Corporation and Pacific Gas and Electric Company meet in executive session without the other directors at each regularly scheduled Board meeting. The Chairindependent lead director establishes the agenda for each executive session meeting of the PG&E Corporation Nominating, Compensation,independent directors, and Governance Committee, who is the lead director, presides over these executive session meetings. At the end of each executive session meeting, the independent directors meetlead director has a discussion with the PG&E Corporation Chairman of the Board or the Pacific Gas and Electric Company Chairman of the Board, as applicable, and the PG&E Corporation Chief Executive Officer.

The Chair ofOfficer regarding the Nominating, Compensation, and Governance Committee, as lead director, establishes the agenda for each executive session meeting of independent directors. The lead director currently is C. Lee Cox. The lead director also determines which, if any, other individuals, including members of management and independent advisors, should attend each executive session meeting.

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Board Committees

What are the key committees of the PG&E Corporation and Pacific Gas and Electric Company Boards of Directors?

The key committees of the PG&E Corporation Board of Directors are the Executive Committee, the Audit Committee, the Finance Committee, the Nominating, Compensation, and Governance Committee, and the Public Policy Committee.

The Pacific Gas and Electric Company Board of Directors has two key committees, the Executive Committee and the Audit Committee.

All committee members are directors of PG&E Corporation or Pacific Gas and Electric Company, as appropriate. To ensure that all committee members can perform their duties in a fully informed manner, committee members and other directors have access to all of PG&E Corporation'sCorporation’s and Pacific Gas and Electric Company'sCompany’s books, records, and other documents. The current membership and duties of these committees are described below.

		Executive Committees		Audit Committees		Finance Committee		Nominating, Compensation, and Governance Committee		Public Policy Committee
Non-Employee Directors:
D. R. Andrews				X						X
L. S. Biller				X		X
D. A. Coulter		X				X	*	X
C. L. Cox		X				X		X	*(1)
M. C. Herringer				X	(2)					X	(2)
M. S. Metz		X		X						X	*
B. L. Rambo						X		X
B. L. Williams		X		X	*(3)	X		X
Employee Directors:
P. A. Darbee		X	*
T. B. King		X	(2)(4)
Number of Meetings in 2005 (PG&E Corporation/Pacific Gas and Electric Company where applicable)		0/0		4/4		6		6		4

*

Committee Chair

⁽¹⁾

Lead director

⁽²⁾

Beginning January 1, 2006

⁽³⁾

Audit Committee financial expert as defined by the Securities and Exchange Commission

⁽⁴⁾

Member of the Pacific Gas and Electric Company Executive Committee only

Nominating,

Compensation,

Public

Executive

Audit

Finance

and Governance

Policy

Committees

��

Committees

Committee

Committee

Committee

Non-Employee Directors:

D. R. Andrews

X

X

L. S. Biller

X

X

D. A. Coulter

X

X

*

X

C. L. Cox

X

X

X

*(1)

M. C. Herringer

X

X

R. A. Meserve

X

M. S. Metz

X

X

X

*

B. L. Rambo

X

X

B. L. Williams

X

X

*(2)

X

X

Employee Directors:

P. A. Darbee

X

*

T. B. King

X

(3)

Number of Meetings in 2006 (PG&E Corporation/ Pacific Gas and Electric Company where applicable)

0/0

4/4

5

5

3

*	Committee Chair

(1)	Lead director
(2)	Audit Committee financial expert as defined by the Securities and Exchange Commission
(3)	Member of the Pacific Gas and Electric Company Executive Committee only

Committee Charters

Each company'scompany’s Board of Directors has adopted a formal charter for each of the above Board committees. A copy of the charter for each of the listed PG&E Corporation Board Committees can be found in the Corporate Governance section of the corporation'scorporation’s website, atwww.pgecorp.com. www.pgecorp.com. A copy of the charter for each of the listed Pacific Gas and Electric Company Board Committees can be found through the Corporate Governance section of the company'scompany’s website, atwww.pge.com. www.pge.com. Shareholders also may obtain a print copy of any committee'scommittee’s charter by sending a written request to the appropriate company'scompany’s Corporate Secretary.

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Executive Committees

What are the Executive Committees'Committees’ responsibilities?

Each Executive Committee may exercise any of the powers and perform any of the duties of the PG&E Corporation Board or the Pacific Gas and Electric Company Board (as the case may be). This authority is subject to provisions of law and certain limits imposed by the PG&E Corporation Board or the Pacific Gas and Electric Company Board (as the case may be). The Executive Committees meet as needed.

Each company'scompany’s Chairman of the Board serves as the Chair of that company'scompany’s Executive Committee.

Audit Committees

What are the Audit Committees'Committees’ responsibilities?

The Audit Committees of PG&E Corporation and Pacific Gas and Electric Company advise and assist the appropriate Board of Directors in fulfilling its responsibilities in connection with financial and accounting practices, internal controls, external and internal auditing programs, business ethics, and compliance with laws, regulations, and policies that may have a material impact on the consolidated financial statements of PG&E Corporation, Pacific Gas and Electric Company, and their respective subsidiaries.

The Audit Committees'Committees’ responsibilities are set forth in each Committee'sCommittee’s charter. Among other things, the Audit Committees:

•

Are responsible for the selection, appointment, compensation, and oversight of the work of the independent registered public accounting firm that PG&E Corporation and Pacific Gas and Electric Company, as applicable, employ to prepare or issue audit reports or perform related work,

•

Satisfy themselves as to the independence and competence of the appropriate company's independent registered public accounting firm,

•

Pre-approve all auditing and non-auditing services that the independent registered public accounting firm provides to PG&E Corporation and Pacific Gas and Electric Company, as applicable,

•

Review and discuss with the independent registered public accounting firm, and with the appropriate company's officers and internal auditors, the scope and results of the independent registered public accounting firm's audit work, consolidated quarterly and annual financial statements, the quality and effectiveness of internal controls, and compliance with laws, regulations, policies, and programs, and

•

Make further inquiries as they deem necessary or desirable to inform themselves of the affairs of the companies and their subsidiaries.

•	Are responsible for the selection, appointment, compensation, and oversight of the work of the independent registered public accounting firm that PG&E Corporation and Pacific Gas and Electric Company, as applicable, employ to prepare or issue audit reports or perform related work,
•	Satisfy themselves as to the independence and competence of the appropriate company’s independent registered public accounting firm,
•	Pre-approve all auditing and non-auditing services that the independent registered public accounting firm provides to PG&E Corporation and Pacific Gas and Electric Company, as applicable,
•	Review and discuss with the independent registered public accounting firm, and with the appropriate company’s officers and internal auditors, the scope and results of the independent registered public accounting firm’s audit work, consolidated quarterly and annual financial statements, the quality and effectiveness of internal controls, and compliance with laws, regulations, policies, and programs, and
•	Make further inquiries as they deem necessary or desirable to inform themselves of the affairs of the companies and their subsidiaries.

One member of each Audit Committee is appointed by the appropriate Board of Directors as the Committee'sCommittee’s Chair.

Do special requirements apply to members of the Audit Committees?

Independence. Each member of the PG&E Corporation and Pacific Gas and Electric Company Audit Committees must be independent, as defined in the Corporate Governance Guidelines, in Securities and Exchange Commission rules regarding audit committee independence, and as defined in applicable New York Stock Exchange and American Stock Exchange and Pacific Exchange rules.

Each Board of Directors has determined that all members of each company'scompany’s Audit Committee are independent under applicable regulations.

Financial literacy and expertise. Each member of the PG&E Corporation and Pacific Gas and Electric Company Audit Committees must be financially literate, as defined in the applicable New York Stock Exchange and American Stock Exchange, and Pacific Exchange rules. All members of the Audit Committees are financially literate.

One member of each Audit Committee also must be an "audit“audit committee financial expert"expert” or otherwise have accounting or related financial management expertise. The Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company each have determined that Barry Lawson Williams, the independent chair of each company'scompany’s Audit Committee, is an "audit“audit committee financial expert,"” as defined by the Securities and Exchange Commission.

Service on other audit committees. Each company'scompany’s Corporate Governance Guidelines set forth a policy regarding how manythe number of other public company audit committees on which thean Audit Committee membersmember may serve. If an Audit Committee member simultaneously serves on the audit committees of three or more public companies other than PG&E Corporation, Pacific Gas and Electric Company, and their subsidiaries, that Committee member must inform the appropriate company'scompany’s Board of Directors. In order for that member to continue serving on the Audit Committee, the Board of Directors must affirmatively determine that the simultaneous service does not impair that committee member'smember’s ability to serve effectively on the Audit Committee.

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No member of the Audit Committees currently serves on three or more additional public company audit committees.

Finance Committee

What are the Finance Committee'sCommittee’s responsibilities?

The Finance Committee of PG&E Corporation advises and assists the Board with respect to the financial and capital investment policies and objectives of PG&E Corporation and its subsidiaries, including specific actions required to achieve those objectives. The Finance Committee'sCommittee’s responsibilities are set forth in the Committee'sCommittee’s charter. Among other things, the Committee reviews:

•

Long-term financial and investment plans and strategies,

•

Annual financial plans,

•

Dividend policy,

•

Short-term and long-term financing plans,

•

Proposed capital expenditures,

•

Proposed divestitures,

•

Major commercial banking, investment banking, financial consulting, and other financial relations of PG&E Corporation or its subsidiaries, and

•

Risk management activities.

•	Long-term financial and investment plans and strategies,
•	Annual financial plans,
•	Dividend policy,
•	Short-term and long-term financing plans,
•	Proposed capital projects,
•	Proposed divestitures,
•	Strategic plans and initiatives,
•	Major commercial banking, investment banking, financial consulting, and other financial relationships of PG&E Corporation or its subsidiaries, and
•	Risk management activities.

Each year the Finance Committee also presents for the Board of Directors'Directors’ review and approval (1) a five-year financial plan for PG&E Corporation and its subsidiaries that incorporates, among other things, the Corporation'sCorporation’s business strategy goals, and (2) an annual budget that reflects elements of the approved five-year plan. Members of the Board of Directors receive a monthly report that compares the Corporation'sCorporation’s performance to the budget and provides other information about financial performance.

One member of the Committee is appointed by the Board of Directors as the Committee'sCommittee’s Chair.

Do special requirements apply to members of the Finance Committee?

The Finance Committee must be composed entirely of independent directors, as defined in the Corporate Governance Guidelines and in the New York Stock Exchange and Pacific Exchange rules. All Committee members meet these independence requirements.

Nominating, Compensation, and Governance Committee

What are the Nominating, Compensation, and Governance Committee'sCommittee’s responsibilities?

The Nominating, Compensation, and Governance Committee of PG&E Corporation advises and assists the Boards of PG&E Corporation and Pacific Gas and Electric Company with respect to:

•

•	The selection and compensation of directors,
•	Employment, compensation, and benefits policies and practices,
•	The development, selection, and compensation of policy-making officers, and
•	Corporate governance matters, including the performance and effectiveness of the Boards and the companies’ governance principles and practices.

The selectionPG&E Corporation Board of Directors has delegated its authority to administer the PG&E Corporation 2006 Long-Term Incentive Plan (LTIP), under which equity-based awards are made, to the Nominating, Compensation, and compensationGovernance Committee. The Board of directors,

•

Employment, compensation,Directors also has delegated to the Chief Executive Officer of PG&E Corporation the authority to make LTIP awards to certain eligible participants within the guidelines adopted by the Nominating, Compensation, and benefits policies and practices,

•

The development, selection, and compensation of policy-making officers, and

•

Corporate governance matters, including the performance and effectiveness of the Boards and the companies' governance principles and practices.

Governance Committee. The Nominating, Compensation, and Governance Committee'sCommittee may delegate its authority with respect to ministerial matters under the LTIP to the Chief Executive Officer or the Senior Vice President of Human Resources. The Nominating, Compensation, and Governance Committee also oversees other employee benefit plans.

The Nominating, Compensation, and Governance Committee’s responsibilities are set forth in the Committee'sCommittee’s charter. Among other things, the Committee:

•	Reviews and acts upon the compensation of officers of PG&E Corporation and its subsidiaries, although the Committee has delegated to the PG&E Corporation Chief Executive Officer the authority to approve compensation for certain officers,
•	Recommends to the independent members of the appropriate Board of Directors the compensation of the Chief Executive Officers of PG&E Corporation and Pacific Gas and Electric Company,
•	Reviews long-range planning for executive development and succession,

•

Reviews and acts upon the compensation of officers of PG&E Corporation and its subsidiaries, although the Committee has delegated to the PG&E Corporation Chief Executive Officer the authority to approve compensation for certain officers,

•

Recommends to the independent members of the appropriate Board of Directors the compensation of the Chief Executive Officers of PG&E Corporation and Pacific Gas and Electric Company,

•

Reviews long-range planning for executive development and succession,

•

Reviews the composition and performance of the Boards of PG&E Corporation and Pacific Gas and Electric Company, and

•

Reviews the Corporate Governance Guidelines of PG&E Corporation and Pacific Gas and Electric Company.

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•	Reviews the composition and performance of the Boards of PG&E Corporation and Pacific Gas and Electric Company, and
•	Reviews the Corporate Governance Guidelines of PG&E Corporation and Pacific Gas and Electric Company.

One member of the Committee is appointed by the independent members of the Board of Directors as the Committee'sCommittee’s Chair. The Chair of the Nominating, Compensation, and Governance Committee is the lead director of PG&E Corporation and Pacific Gas and Electric Company, and chairs executive session meetings of the independent directors of both companies.

Do special requirements apply to members of the Nominating, Compensation, and Governance Committee?

The Nominating, Compensation, and Governance Committee must be composed entirely of independent directors, as defined in the Corporate Governance Guidelines and in the New York Stock Exchange and Pacific Exchange rules. All Committee members meet these independence requirements.

Because PG&E Corporation and a subsidiary hold approximately 96 percent of the voting power in Pacific Gas and Electric Company, that company is a "controlled subsidiary"“controlled subsidiary” of PG&E Corporation and will not be subject to certain American Stock Exchange rules that otherwise would require that all members of the Committee meet the American Stock Exchange definition of "independent director"“independent director” and would impose requirements on Pacific Gas and Electric Company'sCompany’s director nomination process and methods for determining executive compensation.

What is the compensation setting process?

The PG&E Corporation Nominating, Compensation, and Governance Committee (Committee) is responsible for overseeing and establishing officer compensation policies for PG&E Corporation and its subsidiaries, including Pacific Gas and Electric Company. The Committee also administers the LTIP under which equity-based awards are made, and oversees other employee benefit plans.

The Board of Directors of PG&E Corporation or Pacific Gas and Electric Company (as the case may be) is responsible for approving compensation for the Chief Executive Officers of PG&E Corporation and Pacific Gas and Electric Company based on the Committee’s recommendations.

The Committee retains an independent consulting firm, Hewitt Associates (Hewitt), to help evaluate PG&E Corporation’s compensation policies, to provide information about industry compensation practices and competitive compensation levels at companies within selected comparator groups, and to recommend compensation alternatives that are consistent with PG&E Corporation’s compensation policies.

Each year, the Committee (and with respect to the Chief Executive Officers of PG&E Corporation and Pacific Gas Electric Company, the independent members of the applicable Board of Directors based on the Committee’s recommendation) approves the amounts of total target compensation for executive officers, based on a review of comparative data as well as management’s recommendations (and Hewitt’s recommendations with respect to Chief Executive Officer compensation only). In addition, the Committee uses comparative data throughout the year to set the total target compensation of new executive officers, whether they are promoted internally or new hires.

In determining specific compensation amounts for individual officers, the Committee (or the independent members of the applicable Board of Directors, in the case of the Chief Executive Officers of PG&E Corporation and Pacific Gas and Electric Company) considers such factors as (1) the officer’s experience, (2) individual performance, (3) the officer’s role in achieving corporate objectives established at the beginning of the year, (4) the officer’s compensation compared to individuals in similar positions in the comparator group of companies used for purposes of setting officer compensation, as well as compared to other officers internally, and (5) when appropriate, other relevant factors.

Public Policy Committee

What are the Public Policy Committee'sCommittee’s responsibilities?

The Public Policy Committee of PG&E Corporation advises and assists the Board of Directors with respect to public policy issues that could affect significantly the interests of the customers, shareholders, or employees of PG&E Corporation, Pacific Gas and Electric Company, and their respective subsidiaries.

The Public Policy Committee'sCommittee’s responsibilities are set forth in the Committee'sCommittee’s charter. Among other things, the Committee reviews the policies and practices of PG&E Corporation and its subsidiaries with respect to:

•	Protection and improvement of the quality of the environment,
•	Charitable and community service organizations and activities,

•

Protection and improvement of the quality of the environment,

•

Charitable and community service organizations and activities,

•

Equal opportunity in hiring and promoting employees, and

•

Development of minority-owned and women-owned businesses as suppliers to PG&E Corporation, Pacific Gas and Electric Company, and their subsidiaries.

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•	Political contributions,
•	Equal opportunity in hiring and promoting employees, and
•	Development of minority-owned and women-owned businesses as suppliers to PG&E Corporation, Pacific Gas and Electric Company, and their subsidiaries.

One member of the Committee is appointed by the Board of Directors as the Committee'sCommittee’s Chair.

Do special requirements apply to members of the Public Policy Committee?

The Public Policy Committee must be composed entirely of independent directors, as defined in the Corporate Governance Guidelines and in the New York Stock Exchange and Pacific Exchange rules. All Committee members meet these independence requirements.

Attendance at Board and Committee Meetings and at the 20052006 Annual Meetings of Shareholders

How many Board and committee meetings did the directors attend during 2005?

2006?

During 2005,2006, there were 76 meetings of the PG&E Corporation Board of Directors and 2017 meetings of the PG&E Corporation Board committees. Overall attendance of incumbent directors at those meetings was 10098 percent. Each PG&E Corporation director attended 100at least 87 percent of the total number of Board and Board committee meetings held during the period of their service on the Board and Board committees during 2005.

2006.

During 2005,2006, there were 7 meetings of the Pacific Gas and Electric Company Board of Directors and 4 meetings of the Pacific Gas and Electric Company Board committees. Overall attendance of incumbent directors at those meetings was 10098 percent. EachFor Pacific Gas and Electric Company, directorall directors except David A. Coulter attended 100at least 75 percent of the total number of Board and Board committee meetings held during the period of their service on the Board and Board committees during 2005.

2006.

How many directors attended the 20052006 annual meetings?

Each member of the Board of Directors of PG&E Corporation or Pacific Gas and Electric Company is expected to attend that company'scompany’s annual meeting of shareholders.

Nine

Eight directors attended PG&E Corporation's 2005Corporation’s 2006 annual meeting of shareholders.

Ten

Nine directors attended Pacific Gas and Electric Company's 2005Company’s 2006 annual meeting of shareholders.

Compensation of Directors

The Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company each establish the level of compensation for that company’s directors, based on the recommendation of the PG&E Corporation Nominating, Compensation, and Governance Committee (Committee), and taking into account the impact of compensation on director independence. Directors who are also current employees of either company receive no additional compensation for service as directors.

The Committee periodically reviews the amount and form of compensation paid to directors of PG&E Corporation and Pacific Gas and Electric Company, taking into account the compensation paid to directors of other comparable U.S. companies. The Committee conducts its review with the assistance of outside experts in the field of executive compensation.

In February 2003, the Committee approved the following approach for determining Board of Directors compensation levels:

•	Target total compensation (i.e., retainer, meeting fees, chairperson retainer, and equity) should be equal to the average of the comparator group;
•	Director compensation should be set for two-year periods, to achieve the preceding objective at the midpoint of each period; and
•	Target total compensation for the Audit Committees and their Chair should reflect a premium to account for their growing responsibility and accountability due to new stock exchange requirements and legislation.

In addition, in June 2004, the Committee and the PG&E Corporation and Pacific Gas and Electric Company Boards agreed that target total compensation for the Chair of the Nominating, Compensation, and Governance Committee, who also serves as lead director, should reflect the same premium as the Chair of the Audit Committees.

The following provides additional information regarding compensation paid to the non-employee directors of PG&E Corporation and Pacific Gas and Electric Company during the past year.

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2006 Director Compensation

This table summarizes the principal components of compensation paid or granted during 2006, or the compensation cost of equity-based grants for 2006, to the non-employee directors of PG&E Corporation and Pacific Gas and Electric Company.

		Fees Earned or				Stock				Option				All Other
		Paid in Cash				Awards				Awards				Compensation				Total
Name		($)(1)				($)(2)				($)(3)				($)(4)				($)
D. R. Andrews		$	73,500			$	18,000			$	51,849			$	95			$	143,444
L. S. Biller		$	78,750			$	38,000			$	27,090			$	95			$	143,935
D. A. Coulter		$	78,750			$	48,000			$	0			$	95			$	126,845
C. L. Cox		$	126,500			$	48,000			$	0			$	95			$	174,595
M. C. Herringer		$	73,500			$	9,750			$	5,077			$	95			$	88,422
R. A Meserve(5)		$	3,217			$	0			$	0			$	3			$	3,220
M. S. Metz		$	81,000			$	48,000			$	0			$	2,555			$	131,555
B. L. Rambo		$	76,500			$	30,000			$	0			$	95			$	106,595
B. L. Williams		$	137,500			$	18,000			$	51,849			$	2,595			$	209,944

(1)	Each non-employee director received $45,000 in annual retainers, except that Dr. Meserve (who was elected as a director on December 20, 2006) received a pro-rated retainer of $1,467. The Chairs of the Finance Committee (Mr. Coulter) and the Public Policy Committee (Dr. Metz) each received an additional $7,500 in annual retainers. The Chair of the Audit Committees (Mr. Williams) and the Chair of the Nominating, Compensation, and Governance Committee, who is the lead director (Mr. Cox), each received an additional $50,000 in annual retainers. Non-employee directors also received a fee of $1,750 for each Board or Board committee meeting attended, except that members of the Audit Committees received a fee of $2,750 for each Audit Committee meeting attended. Total meeting fees were: Mr. Andrews $28,500, Mr. Biller $33,750, Mr. Coulter $26,250, Mr. Cox $31,500, Ms. Herringer $28,500, Dr. Meserve $1,750, Dr. Metz $28,500, Ms. Rambo $31,500, and Mr. Williams $42,500.
(2)	Represents the 2006 compensation cost of restricted stock, phantom stock, and restricted stock units granted in 2006 and prior years, measured in accordance with Statement of Financial Accounting Standards (SFAS) No. 123R, without taking into account an estimate of forfeitures related to service conditions. In 2006, each non-employee director except Dr. Meserve (who was elected as a director on December 20, 2006) received 800 shares of restricted stock with a grant date value of $29,976. Mr. Biller, Mr. Coulter, Mr. Cox, Dr. Metz, and Ms. Rambo each received 801 restricted stock units with a grant date value of $30,000. Ms. Herringer received 400 restricted stock units with a grant date value of $15,000. The aggregate number of stock awards outstanding for each non-employee director at December 31, 2006 was: Mr. Andrews 2,926, Mr. Biller 3,617, Mr. Coulter 11,007, Mr. Cox 6,132, Ms. Herringer 1,210, Dr. Meserve 0, Dr. Metz 8,530, Ms. Rambo 3,309, and Mr. Williams 3,421.
(3)	Represents the 2006 compensation cost of stock options granted in 2006 and prior years, measured in accordance with SFAS No. 123R, without taking into account an estimate of forfeitures related to service conditions. Assumptions used in determining the grant date fair value are set forth in the Stock Options section of Note 14 to the Consolidated Financial Statements in the 2005 and 2006 Annual Reports to Shareholders of PG&E Corporation and Pacific Gas and Electric Company. In 2006, Mr. Andrews and Mr. Williams each received 4,983 stock options with a grant date value of $40,626 and Ms. Herringer received 2,491 stock options with a grant date value of $20,309. The exercise price of the stock options, $37.47, is the closing price of PG&E Corporation common stock on the January 3, 2006 grant date. The aggregate number of option awards outstanding for each non-employee director at December 31, 2006 was: Mr. Andrews 24,167, Mr. Biller 9,290, Mr. Coulter 0, Mr. Cox 26,971, Ms. Herringer 2,491, Dr. Meserve 0, Dr. Metz 15,626, Ms. Rambo 0, and Mr. Williams 38,802.
(4)	Represents (i) premiums paid for accidental death and dismemberment insurance, and (ii) matching gifts to qualified educational and environmental nonprofit organizations pursuant to the PG&E Corporation Matching Gifts Program, which each year establishes a set fund for matching eligible gifts made by employees and directors on a dollar-for-dollar basis, up to a total of $2,500 per calendar year per individual (Dr. Metz $2,460 and Mr. Williams $2,500).
(5)	Dr. Meserve was elected as a director of PG&E Corporation and Pacific Gas and Electric Company on December 20, 2006.

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What retainers and fees do directors receive as compensation?

Each

During 2006, each director who is not an officer or employee of PG&E Corporation or Pacific Gas and Electric Company receivesreceived a quarterly retainer of $11,250.$11,250 (or a pro-rated amount if the individual did not serve as a non-employee director during the entire quarter). Effective January 1, 2007, that quarterly retainer was increased to $12,500. The non-employee directors who chair the Finance Committee and the Public Policy Committee each receive an additional quarterly retainer of $1,875. The non-employee director who chairs the Audit Committees and the non-employee director who chairs the Nominating, Compensation, and Governance Committee (who is the lead director) each receive an additional quarterly retainer of $12,500.

Non-employee directors also receive a fee of $1,750 for each Board or Board committee meeting attended, except that members of the Audit Committees receive a fee of $2,750 for each Audit Committee meeting attended.

Do directors receive stock-based compensation?

Under the PG&E Corporation 2006 Long-Term Incentive Plan, each year on the first business day of January, each non-employee director of PG&E Corporation is entitled to receive stock-based grants. During 2006, such grants withhad a total aggregate equity value of $60,000, composed of:

•

Restricted shares of PG&E Corporation common stock valued at $30,000 (based on the closing price of PG&E Corporation common stock on the first business day of the year), and

•

A combination, as elected by the director, of non-qualified stock options and restricted stock units with a total value of $30,000, based on increments valued at $5,000.

•	Restricted shares of PG&E Corporation common stock valued at $30,000 (based on the closing price of PG&E Corporation common stock on the first business day of the year), and
•	A combination, as elected by the director, of non-qualified stock options and restricted stock units with a total value of $30,000, based on increments valued at $5,000.

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

Restricted stock and stock options vest over the five-year period following the date of grant, except that restricted stock and stock options will vest immediately upon mandatory retirement from the Board, upon a director'sdirector’s death or disability, or in the event of termination related to a change in control. If a director ceases to be a member of the Board for any other reason, any unvested restricted stock and unvested stock options will be forfeited.

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

A non-employee director'sdirector’s awards also will vest or accelerate in full if there is a change in control and the successor company fails to continue those previously granted awards in a manner that preserves the value of the awards.

Effective January 1, 2007, the total aggregate value of such stock-based grants was increased to $80,000, consisting of $40,000 in restricted stock and the remaining $40,000 in a combination of stock options or restricted stock units, in $5,000 increments at the director’s election.

The increase in total director compensation (retainers, fees, and equity grants) that became effective on January 1, 2007 reflected an increase in target total compensation of approximately 16 percent. This increase is expected to place total compensation for non-employee directors at the average of the comparator group over the next two-year period during which the current compensation levels will apply. This is consistent with the approach adopted by the Committee for determining director compensation levels.

How much stock-based compensation did directors receive during 2005?2006?

During 2005,2006, non-employee directors received the following stock-based compensation under the PG&E Corporation Long-Term Incentive Program, which expired on December 31, 2005, and was replaced by its successor, the PG&E Corporation 2006 Long-Term Incentive Plan. On January 3, 2005,2006, each non-employee director received 908800 restricted shares of PG&E Corporation common stock. In addition, directors who were granted stock options received options to purchase 814831 shares of PG&E Corporation common stock for each $5,000 increment of value (subject to a $30,000 limit) at an exercise price of $33.02$37.47 per share, and directors who were granted commonrestricted stock equivalentsunits received 151 common133 restricted stock equivalent units for each $5,000 increment of value (subject to a $30,000 limit).

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Are directors paid for attending meetings of both PG&E Corporation and Pacific Gas and Electric Company?

Directors who serve on both the PG&E Corporation and Pacific Gas and Electric Company Boards and corresponding committees do not receive additional compensation for concurrent service on Pacific Gas and Electric Company'sCompany’s Board or its committees. However, separate meeting fees are paid for each meeting of the Pacific Gas and Electric Company Board, or a Pacific Gas and Electric Company Board committee, that is not held concurrently or sequentially with a meeting of the PG&E Corporation Board or a corresponding PG&E Corporation Board committee. It is the usual practice of PG&E Corporation and Pacific Gas and Electric Company that meetings of the companies'companies’ Boards and corresponding committees are

held concurrently and, therefore, that a single meeting fee is paid to each director for each set of meetings.

May directors defer receiving retainers and fees?

Under the 2005 Deferred Compensation Plan for Non-Employee Directors, directors of PG&E Corporation or Pacific Gas and Electric Company may elect to defer all or part of their retainers and fees. Directors who participate in the Deferred Compensation Plan may elect either to (1) convert their deferred compensation into common stock equivalents, the value of which is tied to the market value of PG&E Corporation common stock, or (2) have their deferred compensation be invested in the Utility Bond Fund.

Are the directors reimbursed for travel and other expenses?

Directors of PG&E Corporation or Pacific Gas and Electric Company are reimbursed for reasonable expenses incurred for participating in Board meetings, committee meetings, or other activities undertaken on behalf of PG&E Corporation or Pacific Gas and Electric Company.

Do directors receive retirement benefits from PG&E Corporation or Pacific Gas and Electric Company?

The PG&E Corporation Retirement Plan for Non-Employee Directors was terminated effective January 1, 1998. Directors who had accrued benefits under the Plan were given a one-time option of either (1) receiving the benefit accrued through 1997, upon their retirement, or (2) converting the present value of their accrued benefit into a PG&E Corporation common stock equivalent investment held in the Deferred Compensation Plan for Non-Employee Directors. The payment of accrued retirement benefits, or distributions from the Deferred Compensation Plan relating to the conversion of retirement benefits, cannot be made until the later of age 65 or retirement from the Board.

Legal Proceedings

California Attorney General Complaint

On January 10, 2002, the California Attorney General filed a complaint in the Superior Court for the County of San Francisco (Superior Court) against PG&E Corporation and its directors, the directors of Pacific Gas and Electric Company, and other parties, alleging unfair or fraudulent business acts or practices in violation of California Business and Professions Code Section 17200. The claims are based on alleged violations of conditions established in the California Public Utilities Commission'sCommission’s (CPUC) holding company decisions, caused by PG&E Corporation'sCorporation’s alleged failure to provide adequate financial support to Pacific Gas and Electric Company during the California energy crisis.

The complaint seeks injunctive relief, the appointment of a receiver, restitution, 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 complaint also seeks restitution of assets allegedly wrongfully transferred to PG&E Corporation from Pacific Gas and Electric Company.

The complaint was filed after the CPUC issued two decisions in its investigative proceeding commenced in April 2001 into whether the California investor-owned electric utilities, including Pacific Gas and Electric Company, complied with past CPUC decisions, rules, and orders regarding holding company formations, affiliate transactions, and applicable statutes.

The CPUC order states that the CPUC would, among other matters, investigate the utilities'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 holding companies'companies’ transfer of assets to unregulated subsidiaries, and the holding companies'companies’ actions to "ringfence"“ringfence” their unregulated subsidiaries. In May 2005, the CPUC closed this investigation without making any findings. Under the December 19, 2003 Settlement Agreement to resolve Pacific Gas and Electric Company's proceeding under Chapter 11 of the U.S. Bankruptcy Code, the CPUC agreed to dismiss with prejudice PG&E Corporation and Pacific Gas and Electric Company from the CPUC's investigation as to past practices.

PG&E Corporation believes that the intercompany transactions challenged by the Attorney General fully complied 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, Pacific Gas and Electric Company advised the CPUC in advance of its forecast stock

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repurchases and dividends. The CPUC did not challenge or question those payments.

In February and March 2002, PG&E Corporation filedJanuary 2006, the U.S. Court of Appeals for the Ninth Circuit (Ninth Circuit) issued a noticedecision on the parties’ appeals of removal withvarious rulings by the U.S. Bankruptcy Court for the Northern District of California (Bankrupty Court) to transfer the complaint to the Bankruptcy Court. Subsequently, the Attorney General filed to remand the action to state court. In June 2002, the Bankruptcy Court held that federal law preempted the Attorney General's allegations concerning PG&E Corporation's

participation in Pacific Gas and Electric Company's Chapter 11 proceedings. The Bankruptcy Court directed the Attorney General to file an amended complaint omitting certain of his Section 17200 allegations and remanded the amended complaint to the Superior Court. In August 2002, the Attorney General filed his amended complaint in the Superior Court. The Attorney General also appealed the Bankruptcy Court's remand order to the U.S. District Court for the Northern District of California (District Court).

On October 8, 2003, the District Court reversed, in part, the Bankruptcy Court's June 2002 decision and ordered that the Attorney General's restitution claims under Section 17200 be sent to the Bankruptcy Court. concerning jurisdictional issues. The District Court found that these claims are the property of Pacific Gas and Electric Company's Chapter 11 estate and therefore within the Bankruptcy Court's jurisdiction. The District Court also affirmed, in part, the Bankruptcy Court's June 2002 decision andNinth Circuit found that the Superior Court had jurisdiction over the Attorney General's civil penalty and injunctive relief claims under Section 17200 could be resolved in Superior Court. The Attorney General appealed the District Court's remand order toGeneral’s restitution claims. (In October 2006, the U.S. Supreme Court of Appeals fordeclined to grant PG&E Corporation’s request to review the Ninth Circuit (Ninth Circuit).

In December 2004, while the Ninth Circuit appeal was pending, the Superior Court considered the appropriate standard for determining 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"Circuit’s decision.). 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 Attorney General, which standards potentially could have resulted in millions of separate "violations." The Superior Court found that the appropriate standard was each transfer of money from Pacific Gas and Electric Company to PG&E Corporation that the Attorney General alleges violated Section 17200. On July 27, 2005, the California Court of Appeal summarily denied a petition filed by the Attorney General seeking to overturn this decision.

On January 10, 2006, a three-judge panel of the Ninth Circuit issued a 2-1 decision reversing the District Court's October 2003 order regarding which court had jurisdiction of the Attorney General's restitution claims. The Ninth Circuit ruled that the Attorney General's restitution claims were actions to enforce police or regulatory power, and therefore were exempt from the provisions of the Bankruptcy Code permitting removal of state actions to Bankruptcy Court. The Ninth Circuit remanded the restitution claims back to the Superior Court. PG&E Corporation filed a request for rehearing with the Ninth Circuit.

The Ninth Circuit did not address the Attorney General'sGeneral’s underlying allegations that PG&E Corporation and the other defendants violated Section 17200. The Ninth Circuit also did not decide who would be entitled to receive the proceeds, if any, of a restitution award. PG&E Corporation continues to believe that any such proceeds would be the property of Pacific Gas and Electric Company. ThePursuant to the December 19, 2003 Settlement Agreement provides thatto resolve Pacific Gas and Electric Company’s proceeding under Chapter 11 of the U.S. Bankruptcy Code, the CPUC released all claims by the CPUC against PG&E Corporation or Pacific Gas and Electric Company arising out of or in any way related to the energy crisis, are released, including the CPUC'sCPUC’s investigation into past PG&E Corporation actions during the energy crisis. Accordingly, PG&E Corporation believes that any claims for such proceeds by the CPUC would be precluded.

Certain Relationships

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 Related Transactions

“per [customer] bill” approaches advocated by the Attorney General, which standards potentially could have resulted in millions of separate “violations.” The following describes compensation paid during 2005 to employeesSuperior Court found that the appropriate standard was each transfer of money from Pacific Gas and Electric Company who also are immediate family membersto PG&E Corporation that the Attorney General alleges violated Section 17200. In July 2005, the California Court of individuals who served asAppeal summarily denied a director or executive officerpetition filed by the Attorney General seeking to overturn this decision. The Attorney General has resumed discovery in the Superior Court action. The next case management conference is scheduled for April 17, 2007.

Related Person Transactions

The entity Goldman Sachs Asset Management L.P. (GSAM) owns 6.6 percent of PG&E Corporation’s common stock.

•	Upon Pacific Gas and Electric Company’s emergence from Chapter 11 in April 2004, the company placed into the Goldman Sachs FS Federal Fund 520 (Goldman Fund) a portion of the total funds placed in escrow at Deutsche Bank for possible payment to members of Class 6 in the company’s Chapter 11 case. This investment was made before GSAM obtained greater than 5 percent of PG&E Corporation’s stock. As of December 31, 2006, Pacific Gas and Electric Company held $242.7 million in the Goldman Fund, out of the total $1.25 billion in Class 6 settlement funds placed in escrow at Deutsche Bank. For 2006, it is estimated that GSAM earned approximately $500,000 from management of Pacific Gas and Electric Company’s investment in the Goldman Fund. The company’s investment in the Goldman Fund will be reduced to the extent that (i) Class 6 claims are settled, or (ii) alternate investment funds are selected.
•	GSAM manages the Goldman Sachs Asset Management Core Flex Fund (Goldman Core Fund). Approximately $270 million in the PG&E Corporation Retirement Master Trust and approximately $35 million in the Pacific Gas and Electric Company Post-Retirement Medical Trust for Bargaining-Unit Employees are invested in the Goldman Core Fund. Investment decisions for these pension trusts are made by the PG&E Corporation Employee Benefit Committee, which is comprised of officers from PG&E Corporation and Pacific Gas and Electric Company. For 2006, it is estimated that GSAM earned approximately $1 million in fees from management of this investment. Such management services are expected to continue in the future.

The fees for managing these funds are calculated in accordance with the management fee formula stated in the applicable fund’s prospectus to investors. As such, the terms of engagement for these services are comparable to those that could be obtained in arm’s-length dealings with an unrelated third party.

During 2006, several affiliates of GSAM provided investment banking-related services to PG&E Corporation orand Pacific Gas and Electric Company, with a value of approximately $1.23 million. It is contemplated that affiliates of GSAM may provide other investment banking-related services to PG&E Corporation and Pacific Gas and Electric Company during 2005:

•

Robert D. Glynn, Jr. served as a director2007. These services are provided under customary terms and as Chairmanconditions. As such, the terms of the Boardengagement for these services are comparable to those

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that could be obtained in arm’s-length dealings with an unrelated third party.

Review, Approval, and Ratification of Related Person Transactions

The Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company during 2005, retiring on December 31, 2005. Mr. Glynn's son, Robert D. Glynn III,each have adopted identical written policies regarding review, approval, and ratification of related party transactions involving the companies. The policy requires the appropriate Audit Committee’s review and approval or ratification of any related party transaction in which either company is Program Managera participant, including, among other things, any related party transaction that would be required to be disclosed under the Securities and Exchange Commission rules. All related party transactions (as defined in Information Technology User Support Services, for Pacific Gasthe policy) must be disclosed to the appropriate Audit Committee, and Electric Company. all material related party transactions must be disclosed to the full Board of Directors.

During 2005, Mr. Glynn III was paid $156,9282006, all “related party transactions” involving either company were in annual salary and annual short-term incentive awards.

•

Gregory M. Rueger served as Senior Vice President, Generation and Chief Nuclear Officer of Pacific Gas and Electric Company until his retirement on August 31, 2005. During 2005, Mr. Rueger's brother-in-law, Roy M. Kuga, served as Vice President, Gas and Electric Supply, of Pacific Gas and Electric Company. From January 1, 2005 to August 31, 2005, Mr. Kuga was paid $257,646 in annual salary and annual short-term incentive awards.

conformance with this policy.

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Security Ownership of Management

The following table sets forth the number of shares of PG&E Corporation common stock beneficially owned (as defined in the rules of the Securities and Exchange Commission) as of February 1, 2006,7, 2007 by the directors, the nominees for director, and the individuals named in the Summary Compensation Table on pages 3646 and 37,47, and all directors and executive officers of PG&E Corporation and Pacific Gas and Electric Company as a group. As of February 1, 2006,7, 2007, no listed individual owned shares of any class of Pacific Gas and Electric Company securities. The table also sets forth common stock equivalents credited to the accounts of directors and executive officers under PG&E Corporation'sCorporation’s deferred compensation and equity plans.

		Beneficial Stock				Percent of				Common Stock
Name		Ownership(1)(2)(3)				Class(4)				Equivalents(5)				Total
David R. Andrews(6)			18,879				*				812				19,691
Leslie S. Biller(6)			6,542				*				10,399				16,941
David A. Coulter(6)			8,702				*				34,192				42,894
C. Lee Cox(6)			65,957				*				6,495				72,452
Peter A. Darbee(7)			231,877				*				11,153				243,030
Maryellen C. Herringer(6)			3,746				*				2,159				5,905
Thomas B. King(8)			189,105				*				10,125				199,230
Richard A. Meserve(6)			846				*				0				846
Mary S. Metz(6)			26,648				*				7,302				33,950
Barbara L. Rambo(6)			2,554				*				0				2,554
Barry Lawson Williams(6)			37,772				*				6,918				44,690
Christopher P. Johns(9)			107,607				*				23,830				131,437
Leslie H. Everett(9)			34,156				*				0				34,156
Kent M. Harvey(10)			47,146				*				5,211				52,357
Thomas E. Bottorff(11)			50,811				*				58				50,869
All PG&E Corporation directors and executive officers as a group (17 persons)			834,863				*				118,595				953,458
All Pacific Gas and Electric Company directors and executive officers as a group (21 persons)			1,051,896				*				113,442				1,165,338

	*	Less than 1 percent

	(1)	This column includes any shares held in the name of the spouse, minor children, or other relatives sharing the home of the listed individuals and, in the case of current and retired executive officers, includes shares of PG&E Corporation common stock held in the defined contribution retirement plan maintained by PG&E Corporation. Except as otherwise indicated below, the listed individuals have sole voting and investment power over the shares shown in this column. Voting power includes the power to direct the voting of the shares held, and investment power includes the power to direct the disposition of the shares held.
		This column also includes the following shares of PG&E Corporation common stock in which the listed individuals share voting and investment power: Mr. Andrews 4,630 shares, Mr. Biller 3,605 shares, Mr. Coulter 8,703 shares, Mr. Cox 38,986 shares, Mr. Darbee 15,950 shares, Ms. Herringer 2,100 shares, Dr. Metz 8,793 shares, all PG&E Corporation directors and executive officers as a group 82,767 shares, and all Pacific Gas and Electric Company directors and executive officers as a group 83,434 shares.

	(2)	This column includes the following shares of PG&E Corporation common stock which the listed individuals have the right to acquire within 60 days of February 7, 2007 through the exercise of vested stock options granted under the PG&E Corporation Long-Term Incentive Program or the PG&E Corporation 2006 Long-Term Incentive Plan, as follows: Mr. Andrews 14,249 shares, Mr. Biller 2,937 shares, Mr. Cox 26,971 shares, Mr. Darbee 69,300 shares, Mr. King 139,252 shares, Dr. Metz 15,628 shares, Mr. Williams 28,884 shares, Mr. Johns 80,100 shares, Ms. Everett 12,575 shares, Mr. Harvey 26,538 shares, Mr. Bottorff 15,850 shares, all PG&E Corporation directors and executive officers as a group 416,434 shares, and all Pacific Gas and Electric Company directors and executive officers as a group 450,612 shares. The listed individuals have neither voting power nor investment power with respect to these shares unless and until they are purchased through the exercise of the options, under the terms of the PG&E Corporation Long-Term Incentive Program.

Name		Beneficial Stock Ownership(1)(2)(3)		Percent of Class(4)		Common Stock Equivalents(5)		Total
David R. Andrews(6)		13,257		*		793		14,050
Leslie S. Biller(6)		5,696		*		8,170		13,866
David A. Coulter(6)		7,613		*		30,382		37,995
C. Lee Cox(6)		60,946		*		5,472		66,418
Peter A. Darbee(7)		191,154		*		10,806		201,960
Maryellen C. Herringer(6)		2,900				348		3,248
Thomas B. King(8)		286,439		*		9,810		296,249
Mary S. Metz(6)		25,421		*		6,255		31,676
Barbara L. Rambo(6)		1,708		*		0		1,708
Barry Lawson Williams(6)		31,900		*		5,884		37,784
Christopher P. Johns(9)		122,949				23,015		145,964
Bruce R. Worthington(9)		245,651		*		8,187		253,838
Robert D. Glynn, Jr.(10)		142,727		*		0		142,727
Gordon R. Smith(11)		199,090		*		0		199,090
All PG&E Corporation directors and executive officers as a group (16 persons)		1,118,699		*		114,104		1,232,803
All Pacific Gas and Electric Company directors and executive officers as a group (19 persons)		1,173,366		*		109,178		1,282,544

*

Less than 1 percent

(1)

This column includes any shares held in the name of the spouse, minor children, or other relatives sharing the home of the listed individuals and, in the case of current and retired executive officers, includes shares of PG&E Corporation common stock held in the defined contribution retirement plan maintained by PG&E Corporation. Except as otherwise indicated below, the listed individuals have sole voting and investment power over the shares shown in this column. Voting power includes the power to direct the voting of the shares held, and investment power includes the power to direct the disposition of the shares held.

This column also includes the following shares of PG&E Corporation common stock in which the listed individuals share voting and investment power: Mr. Andrews 3,784 shares, Mr. Biller 2,759 shares, Mr. Coulter 7,613 shares, Mr. Cox 33,975 shares, Mr. Darbee 37,241 shares, Ms. Herringer 2,100 shares, Dr. Metz 7,566 shares, Mr. Worthington 12 shares, Mr. Glynn 63,130 shares, Mr. Smith 42,993 shares, all PG&E Corporation directors and executive officers as a group 95,050 shares, and all Pacific Gas and Electric Company directors and executive officers as a group 95,050 shares.29

(2)

This column includes the following shares of PG&E Corporation common stock which the listed individuals have the right to acquire within 60 days of February 1, 2006, through the exercise of vested stock options granted under the PG&E Corporation Long-Term Incentive Program, as follows: Mr. Andrews 9,473 shares, Mr. Biller 2,937 shares, Mr. Cox 26,971 shares, Mr. Darbee 69,300 shares, Mr. King 231,926 shares, Dr. Metz 15,628 shares, Mr. Williams 24,108 shares, Mr. Johns 94,975 shares, Mr. Worthington 212,250 shares, Mr. Glynn 63,750 shares, Mr. Smith 150,212 shares, all PG&E Corporation directors and executive officers as a group 733,770 shares, and all Pacific Gas and Electric Company directors and executive officers as a group 756,460 shares. The listed individuals have neither voting power nor investment power with respect to these shares unless and until they are purchased through the exercise of the options, under the terms of the PG&E Corporation Long-Term Incentive Program.

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	(3)	This column includes restricted shares of PG&E Corporation common stock awarded under the PG&E Corporation Long-Term Incentive Program and the PG&E Corporation 2006 Long-Term Incentive Plan. As of February 7, 2007, the listed individuals held the following numbers of restricted shares that may not be sold or otherwise transferred until certain vesting conditions are satisfied: Mr. Andrews 4,630 shares, Mr. Biller 3,650 shares, Mr. Coulter 6,257 shares, Mr. Cox 6,257 shares, Mr. Darbee 126,494 shares, Ms. Herringer 1,646 shares, Mr. King 38,527 shares, Dr. Meserve 846 shares, Dr. Metz 6,610 shares, Ms. Rambo 2,554 shares, Mr. Williams 6,610 shares, Mr. Johns 25,035 shares, Ms. Everett 11,473 shares, Mr. Harvey 12,514 shares, Mr. Bottorff 12,059 shares, all PG&E Corporation directors and executive officers as a group 305,679 shares, and all Pacific Gas and Electric Company directors and executive officers as a group 446,095 shares.
	(4)	The percent of class calculation is based on the number of shares of PG&E Corporation common stock outstanding as of February 7, 2007, excluding shares held by a subsidiary.
	(5)	This column reflects the number of stock units that were purchased by listed individuals through salary and other compensation deferrals or that were awarded under equity compensation plans. The value of each stock unit is equal to the value of a share of PG&E Corporation common stock and fluctuates daily based on the market price of PG&E Corporation common stock. The listed individuals who own these stock units share the same market risk as PG&E Corporation shareholders, although they do not have voting rights with respect to these stock units.
	(6)	Mr. Andrews, Mr. Biller, Mr. Coulter, Mr. Cox, Ms. Herringer, Dr. Meserve, Dr. Metz, Ms. Rambo, and Mr. Williams are directors of both PG&E Corporation and Pacific Gas and Electric Company.
	(7)	Mr. Darbee is a director and an executive officer of both PG&E Corporation and Pacific Gas and Electric Company. He is named in the Summary Compensation Table on pages 46 and 47.
	(8)	Mr. King is a director and an executive officer of Pacific Gas and Electric Company, and also is an executive officer of PG&E Corporation. He is named in the Summary Compensation Table on pages 46 and 47.
	(9)	Mr. Johns and Ms. Everett are executive officers of both PG&E Corporation and Pacific Gas and Electric Company and are named in the Summary Compensation Table on pages 46 and 47.

(10)	Mr. Harvey is an executive officer of PG&E Corporation and is named in the Summary Compensation Table on pages 46 and 47.
(11)	Mr. Bottorff is an executive officer of Pacific Gas and Electric Company and is named in the Summary Compensation Table on pages 46 and 47.

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(3)

This column includes restricted shares of PG&E Corporation common stock awarded under the PG&E Corporation Long-Term Incentive Program and the PG&E Corporation 2006 Long-Term Incentive Plan. As of February 1, 2006, the listed individuals held the following numbers of restricted shares that may not be sold or otherwise transferred until certain vesting conditions are satisfied: Mr. Andrews 3,784 shares, Mr. Biller 2,759 shares, Mr. Coulter 5,411 shares, Mr. Cox 5,411 shares, Mr. Darbee 85,946 shares, Ms. Herringer 800 shares, Mr. King 43,515 shares, Dr. Metz 5,764 shares, Ms. Rambo 1,708 shares, Mr. Williams 5,764 shares, Mr. Johns 25,740 shares, Mr. Worthington 33,130 shares, Mr. Glynn 63,130 shares, Mr. Smith 39,109 shares, all PG&E Corporation directors and executive officers as a group 280,193 shares, and all Pacific Gas and Electric Company directors and executive officers as a group 289,459 shares.

(4)

The percent of class calculation is based on the number of shares of PG&E Corporation common stock outstanding as of February 1, 2006, excluding shares held by a subsidiary.

(5)

This column reflects the number of stock units that were purchased by listed individuals through salary and other compensation deferrals or that were awarded under equity compensation plans. The value of each stock unit is equal to the value of a share of PG&E Corporation common stock and fluctuates daily based on the market price of PG&E Corporation common stock. The listed individuals who own these stock units share the same market risk as PG&E Corporation shareholders, although they do not have voting rights with respect to these stock units.

(6)

Mr. Andrews, Mr. Biller, Mr. Coulter, Mr. Cox, Ms. Herringer, Dr. Metz, Ms. Rambo, and Mr. Williams are directors of both PG&E Corporation and Pacific Gas and Electric Company.

(7)

Mr. Darbee is a director and an executive officer of both PG&E Corporation and Pacific Gas and Electric Company. He is named in the Summary Compensation Table on pages 36 and 37.

(8)

Mr. King is a director and an executive officer of Pacific Gas and Electric Company, and also is an executive officer of PG&E Corporation. He is named in the Summary Compensation Table on pages 36 and 37.

(9)

Mr. Johns and Mr. Worthington are executive officers of both PG&E Corporation and Pacific Gas and Electric Company and are named in the Summary Compensation Table on pages 36 and 37.

(10)

Mr. Glynn was a director and an officer of PG&E Corporation and Pacific Gas and Electric Company through December 31, 2005, and is named in the Summary Compensation Table on pages 36 and 37.

(11)

Mr. Smith was a director and an executive officer of Pacific Gas and Electric Company and an executive officer of PG&E Corporation through December 31, 2005, and is named in the Summary Compensation Table on pages 36 and 37.

Item No. 2:

Ratification of Appointment of the Independent Registered

Public Accounting Firm for PG&E Corporation and

Pacific Gas and Electric Company

The Audit Committees of PG&E Corporation and Pacific Gas and Electric Company each have selected and appointed Deloitte & Touche LLP as the independent registered public accounting firm for that company to audit the consolidated financial statements as of and for the year ended December 31, 2006,2007, and to audit the effectiveness of internal control over financial reporting and management'smanagement’s assessment of internal control over financial reporting, as of December 31, 2006.2007. Deloitte & Touche LLP is a major national accounting firm with substantial expertise in the energy and utility businesses. Deloitte & Touche LLP has served as independent public accountants for PG&E Corporation and Pacific Gas and Electric Company since 1999.

One or more representatives of Deloitte & Touche LLP are expected to be present at the annual meetings. They will have the opportunity to make a statement if they wish, and are expected to be available to respond to appropriate questions from shareholders.

PG&E Corporation and Pacific Gas and Electric Company are not required to submit these appointments to a vote of their shareholders. If the shareholders of either PG&E Corporation or Pacific Gas and Electric Company do not ratify the appointment, the appropriate Audit Committee will investigate the reasons for rejection by the shareholders and will reconsider the appointment.

The Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company Unanimously Recommend a VoteFOR the Proposal to Ratify the Appointment of Deloitte & Touche LLP.

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Information Regarding the Independent Registered

Public Accounting Firm for PG&E Corporation and

Pacific Gas and Electric Company

Fees Paid to the Independent Registered Public Accounting Firm

The PG&E Corporation and Pacific Gas and Electric Company Audit Committees have reviewed the audit and non-audit fees that PG&E Corporation, Pacific Gas and Electric Company, and their respective subsidiaries have paid to the independent registered public accounting firm, in order to consider whether those fees are compatible with maintaining the accounting firm'sfirm’s independence.

Table 1:

Estimated Fees Billed to PG&E Corporation

(Amounts include Estimated Fees Billed to Pacific Gas and Electric Company and its Subsidiaries shown in Table 2 below)

		2005		2004
Audit Fees		$4.2 million		$4.6 million
Audit-Related Fees		$0.3 million		$0.6 million
Tax Fees		$0.07 million		$0.3 million
All Other Fees		$0		$0

		2006				2005
Audit Fees		$	4.2 million			$	4.2 million
Audit-Related Fees		$	0.3 million			$	0.3 million
Tax Fees		$	0			$	0.07 million
All Other Fees		$	0			$	0

Table 2:

Estimated Fees Billed to Pacific Gas and Electric Company and its Subsidiaries

(Amounts are included in Estimated Fees Billed to PG&E Corporation shown in Table 1 above)

		2005		2004
Audit Fees		$3.4 million		$3.6 million
Audit-Related Fees		$0.2 million		$0.2 million
Tax Fees		$0		$0
All Other Fees		$0		$0

		2006				2005
Audit Fees		$	3.5 million			$	3.4 million
Audit-Related Fees		$	0.2 million			$	0.2 million
Tax Fees		$	0			$	0
All Other Fees		$	0			$	0

Audit Fees. Audit fees billed for 20052006 and 20042005 relate to services rendered by Deloitte & Touche LLP in connection with reviews of Quarterly Reports on Form 10-Q, certain limited procedures on registration statements, the audits of the financial statements of PG&E Corporation and its subsidiaries and Pacific Gas and Electric Company and its subsidiaries, and the audits of both PG&E Corporation'sCorporation’s and Pacific Gas and Electric Company'sCompany’s internal control over financial reporting and managements'managements’ assessment of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act.

Audit-Related Fees. Fees billed for 20052006 and 20042005 relate to services rendered by Deloitte & Touche LLP to both PG&E Corporation and its subsidiaries and Pacific Gas and Electric Company and its subsidiaries for employee benefit plan audits, nuclear decommissioning trust audits, consultations on financial accounting and reporting standards, and required agreed-upon procedure reports related to contractual obligations of Pacific Gas and Electric Company and its subsidiaries.

Tax Fees. Fees For 2006, no tax fees were billed and no related services were provided to PG&E Corporation and its subsidiaries nor to Pacific Gas and Electric Company and its subsidiaries. Tax fees billed for 2005 and 2004 relate to services rendered by Deloitte & Touche LLP to PG&E Corporation and its subsidiaries to support Internal Revenue Service audit appeals and questions, and tax strategy services. No tax fees were billed and no related services were provided to Pacific Gas and Electric Company or its subsidiaries during 2005 and 2004.

for 2005.

All Other Fees. Deloitte & Touche LLP provided no services in this category to PG&E Corporation and its subsidiaries or to Pacific Gas and Electric Company and its subsidiaries during 20052006 and 2004.

2005.

Obtaining Services from the Independent Registered Public Accounting Firm

The following section describes policies and procedures regarding how PG&E Corporation, Pacific Gas and Electric Company, and their consolidated affiliates may obtain services from Deloitte & Touche LLP, including limitations on the types of services that the companies may obtain, and approval procedures relating to those services.

Services Provided by the Independent Registered Public Accounting Firm

In June 2002, PG&E Corporation adopted a policy providing that the corporation and its controlled subsidiaries only could enter into new engagements with Deloitte & Touche LLP and its affiliate, Deloitte Consulting, for three types of services. The three permitted categories of services are:

•	Audit services,
•	Audit-related services, and
•	Tax services that Deloitte & Touche LLP and its affiliates are allowed to provide to Deloitte &

•

Audit services,

•

Audit-related services, and

•

Tax services that Deloitte & Touche LLP and its affiliates are allowed to provide to Deloitte & Touche LLP's audit clients under the Sarbanes-Oxley Act.

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	Touche LLP’s audit clients under the Sarbanes-Oxley Act.

PG&E Corporation and its subsidiaries traditionally have obtained these types of services from its independent registered public accounting firm.

Audit Committee Pre-Approval Policy for Services Provided by the Independent Registered Public Accounting Firm

At the beginning of each year, the PG&E Corporation and Pacific Gas and Electric Company Audit Committees approve the selection of the independent registered public accounting firm for that fiscal year, and approve obtaining from the accounting firm a detailed list of (1) audit services, (2) audit-related services, and (3) tax services, all up to specified fee amounts.

(1)

"Audit services" generally include audit and review of annual and quarterly financial statements and services that only the independent registered public accounting firm reasonably can provide (e.g., comfort letters, statutory audits, attest services, consents, and assistance with and review of documents filed with the Securities and Exchange Commission).

(2)

"Audit-related services" generally include assurance and related services that traditionally are performed by the independent registered public accounting firm (e.g., employee benefit plan audits, due diligence related to mergers and acquisitions, accounting consultations and audits in connection with acquisitions, internal control reviews, agreed-upon procedure reports related to contractual obligations, and attest services that are not required by statute or regulation).

(3)

"Tax services" generally include compliance, tax strategy, tax appeals, and specialized tax issues, all of which also must be permitted under the Sarbanes-Oxley Act.

(1)	“Audit services”generally include audit and review of annual and quarterly financial statements and services that only the independent registered public accounting firm reasonably can provide (e.g., comfort letters, statutory audits, attest services, consents, and assistance with and review of documents filed with the Securities and Exchange Commission).
(2)	“Audit-related services”generally include assurance and related services that traditionally are performed by the independent registered public accounting firm (e.g., employee benefit plan audits, due diligence related to mergers and acquisitions, accounting consultations and audits in connection with acquisitions, internal control reviews, agreed-upon procedure reports related to contractual obligations, and attest services that are not required by statute or regulation).
(3)	“Tax services”generally include compliance, tax strategy, tax appeals, and specialized tax issues, all of which also must be permitted under the Sarbanes-Oxley Act.

In determining whether to pre-approve any services from the independent registered public accounting firm, the Audit Committees assess, among other things, the impact of that service on the accounting firm'sfirm’s independence.

Additional Services. After the initial annual pre-approval, the Audit Committees must pre-approve any proposed engagement of the independent registered public accounting firm for any audit, audit-related, and tax services that are not included on the list of pre-approved services, and must pre-approve any listed pre-approved services that would cause PG&E Corporation or Pacific Gas and Electric Company to exceed the authorized fee amounts. Other services may be obtained from the independent registered public accounting firm only following review and approval from the applicable company'scompany’s management and review and pre-approval by the applicable Audit Committee.

Delegation of Pre-Approval Authority. Each Audit Committee has delegated to the Committee Chair, or to any other independent Committee member if the Chair is not available, the authority to pre-approve audit and non-audit services provided by the company'scompany’s independent registered public accounting firm. Any pre-approvals granted under this authority must be presented to the full Audit Committee at the next regularly scheduled Committee meeting.

Monitoring Pre-Approved Services. At each regular meeting of the Audit Committees, management provides a report on the nature of specific audit and non-audit services being performed by Deloitte & Touche LLP for the company and its subsidiaries, the year-to-dateyear-to-date fees paid for those services, and a comparison of year-to-dateyear-to-date fees to the pre-approved amounts.

Pre-Approval of Services During 20052006 and 2004.2005. During 20052006 and 2004,2005, all services provided by Deloitte & Touche LLP to PG&E Corporation, Pacific Gas and Electric Company, and their consolidated affiliates were approved under the applicable pre-approval procedures.

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Item Nos. 3 and 4:

PG&E Corporation Shareholder Proposals

To Be Voted on by PG&E Corporation Shareholders Only

The following shareholder proposals and related supporting statements represent the views of the shareholders who submitted them, and not the views of PG&E Corporation. PG&E Corporation is not responsible for, and does not endorse, the content of any shareholder proposal or supporting statement. These shareholder proposals and supporting statements are included in this proxy statement pursuant to rules established by the Securities and Exchange Commission.

Item No. 3: Shareholder Proposal

Mr. Ray T. Chevedden, 5965 S. Citrus Avenue, Los Angeles, California 90043, beneficial owner of 3,000 shares of PG&E Corporation common stock, has given notice of his intention to present the following proposal for action at the PG&E Corporation annual meeting:

	“3 – Performance Based Stock Options
	Resolved, Shareholders request that our Board of Directors adopt a policy whereby at least 75% of future equity compensation (stock options and restricted stock) awarded to senior executives shall be performance-based, and the performance criteria adopted by the Board disclosed to shareowners.
	“Performance-based” equity compensation is defined here as:

	(a)	Indexed stock options, the exercise price of which is linked to an industry index;

	(b)	Premium-priced stock options, the exercise price of which is substantially above the market price on the grant date; or

	(c)	Performance-vesting options or restricted stock, which vest only when the market price of the stock exceeds a specific target for a substantial period.

	This is not intended to unlawfully interfere with existing employment contracts. However, if there is a conflict with any existing employment contract, our Compensation Committee is urged for the good of our company to negotiate revised contracts that are consistent with this proposal.
	As a long-term shareholder, I support compensation policies for senior executives that provide challenging performance objectives that motivate executives to achieve long-term shareowner value. I believe that a greater reliance on performance-based equity grants is particularly warranted at PG&E.
	Many leading investors criticize standard options as inappropriately rewarding mediocre performance. Warren Buffett has characterized standard stock options as “really a royalty on the passage of time” and has spoken in favor of indexed options.
	In contrast, peer-indexed options reward executives for outperforming their direct competitors and discourage re-pricing. Premium-priced options reward executives who enhance overall shareholder value. Performance-vesting equity grants tie compensation more closely to key measures of shareholder value, such as share appreciation and net operating income, thereby encouraging executives to set and meet performance targets.
	Performance Based Stock Options

Yes on 3”

The Board of Directors of PG&E Corporation Recommends a VoteAGAINST This Proposal.

We believe PG&E Corporation’s equity compensation policies already meet the goals of this proposal.

PG&E Corporation’s executive officer compensation is comprised of base salary, short-term incentives, and long-term incentives (consisting of restricted stock and performance shares). We believe that performance-based compensation is important. Thus, a significant portion of both the short-term and long-term incentive compensation paid to our executive officers is performance-based. Like indexed stock options, our performance-based long-term incentive awards align employees’ and shareholders’ interests in achieving superior stock-based performance relative to performance of peer companies in PG&E Corporation’s comparator group. Target awards are paid only if PG&E Corporation’s total shareholder return is in the top quartile, as compared to peer companies. Additional details regarding the Corporation’s executive officer compensation practices

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and policies can be found in the “Compensation Discussion and Analysis” section on pages 37 to 44 of this proxy statement.

PG&E Corporation believes that its current compensation philosophy and program, including the allocation of compensation between different types of equity-based compensation, meet the proponent’s goal of aligning executive compensation incentives with the Corporation’s long-term performance for shareholders, while still meeting the Corporation’s specific business, management, and organizational needs.

For this reason, the PG&E Corporation Board of Directors unanimously recommends that shareholders voteAGAINST this proposal.

Item No. 4: Shareholder Proposal

Mr. Simon Levine, 960 Shorepoint Ct., No. 306, Alameda, California 94501, holder of 3,000 shares of PG&E Corporation common stock, has given notice of his intention to present the following proposal for action at the PG&E Corporation annual meeting:

"3 – Redeem or Vote Poison Pill

RESOLVED, Shareholders request that our Board redeem any future or current poison pill, unless such poison pill is subject to a shareholder vote as a separate ballot item, to be held as soon as may be practicable. Charter or bylaw inclusion if practicable.

Thus there would be no loophole to allow exceptions to override the implementation of a shareholder vote as soon as may be practicable. Since a vote would be as soon as may be practicable, it accordingly could take place within 4-months of the adoption of a new poison pill. To give our board valuable insight on our views of their poison pill, a vote would occur even if our board had promptly terminated a new poison pill because our board could turnaround and readopt their poison pill.

Shareholder Accountability Sadly Lacking at Our 2005 Annual Meeting

The ability to have a shareholder vote on a management poison pill would focus our management on greater accountability. Shareholder accountability was sadly lacking at our April 20, 2005 annual meeting. Our management moved the meeting out of San Francisco – creating a hardship for shareholders who live in San Francisco and do not have a car.

At our 2005 annual meeting I do not believe our management followed the definitive proxy it filed with the SEC establishing the order of business. Apparently our management intended that the formal discussion of ballot items 1 through 8 would take about 5 minutes. It was a surprise that the company flashed the voting results for all 8 ballot items on a screen and shortly thereafter opened the meeting to random questions. It was amazing how fast the first person jumped up to ask the first question – "company-ringer" concern.

Proponents of the five formal 14a-8 proposals had to interrupt the random questions to introduce their proposals. (If proponents did not formally introduce their proposals at the meeting, PG&E could argue that the votes do not count.) Our new CEO, Mr. Darbee did not initiate a call to any proponent to present a proposal.

These random questions were readily accepted by our management. Some questions appeared to be planted by company "ringers." This included soft-ball questions and testimonials of praise. Our management had a group of uniformed military personnel wait throughout the entire 2-plus hour meeting before properly acknowledging them. Our management has repeatedly ignored requests for a transcript of this confusing and rude annual meeting.

Pills Entrench Current Management

"Poison Pills... prevent shareholders, and the overall market, from exercising their right to discipline management by turning it out. They entrench the current management, even when it's doing a poor job. They water down shareholders' votes and deprive them of a meaningful voice in corporate affairs."

        "Take on the Street" by Arthur Levitt, SEC Chairman, 1993-2001

Stock Value

If a poison pill makes our stock difficult to sell at a profit – the value of our stock could suffer.

Redeem or Vote Poison Pill

	“4 – Cumulative Voting
	RESOLVED: Cumulative Voting. Shareholders recommend that our Board adopt cumulative voting. Cumulative voting means that each shareholder may cast as many votes as equal to number of shares held, multiplied by the number of directors to be elected. A shareholder may cast all such cumulated votes for a single candidate or split votes between multiple candidates, as that shareholder sees fit. Under cumulative voting shareholders can withhold votes from certain nominees in order to cast multiple votes for others.
	Mr. Simon Levine, 960 Shorepoint Ct., No. 306, Alameda, CA 94501 sponsors this proposal.
	Cumulative voting won impressive yes-votes of 54% at Aetna and 56% at Alaska Air in 2005 and 55% at GM in 2006. The GM 55% vote was up from 49% in 2005. The Council of Institutional Investorswww.cii.org formally recommends adoption of this proposal topic.
	Cumulative voting allows a significant group of shareholders to elect a director of its choice — safeguarding minority shareholder interests and bringing independent perspectives to Board decisions.
	Cumulative Voting could increase the possibility of electing at least one director with a specialized expertise and advocacy needed at our company to improve our corporate governance. For instance to convince other directors that we need an independent board chairman, especially since we do not even have an independent lead director. Also to guard against a repeat of our dividend suspension for years while our former Chairman, Mr. Glynn was paid buckets of money like $14 million in one year.
	And furthermore to repeat a reoccurrence of a fiasco like this: Court Rejects PG&E Appeal of State Case Bloomberg News, October 3, 2006
	PG&E Corp. lost a U.S. Supreme Court appeal aimed at thwarting California’s effort to recoup $5 billion transferred by the company’s Pacific Gas & Electric utility unit before its 2001 bankruptcy filing. The justices, without comment, refused to consider PG&E’s arguments.
	Pacific Gas & Electric, California’s largest utility, filed for bankruptcy protection in April 2001 after accruing $9 billion in losses by buying power for more than it could charge customers.
	Cumulative voting allows a significant group of shareholders to elect a director of its choice — safeguarding minority shareholder interests and bringing independent perspectives to Board decisions.
	Cumulative Voting

Yes on 3"

4”

The Board of Directors of PG&E Corporation Recommends a VoteAGAINST This Proposal.

This proposal is unnecessary. The

PG&E Corporation Boardbelieves that cumulative voting would erode shareholders’ ability to elect directors who represent the interests of Directors votedthe shareholders as a whole. Instead, adoption of cumulative voting for directors could unduly aggrandize the views of a minority of shareholders.

Under cumulative voting, the total number of votes that each shareholder may cast in February 2004,an election for directors is determined by multiplying the number of directors to terminatebe elected by the number of votes to which the shareholder’s shares are entitled. Each shareholder may “cumulate” his or her votes by giving them all to one candidate, or may distribute his or her votes among as many candidates as the shareholder rights plan (poison pill), in responsesees fit. For example, if 10 directors were to shareholders who supportedbe elected, application of the cumulative voting formula indicates that a shareholder proposal on this topicor group of shareholders holding approximately 9 percent of the shares voting at the Corporation's 2003 annual meeting.

Also, in furtherancemeeting would be capable of electing a director. This is true even if the holders of the Corporation's commitmentremaining 91 percent of the voting shares are opposed to goodthe election of that candidate and cast their votes to elect 10 other directors.

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Cumulative voting would give a disproportionate and unfair weight to the votes cast by a minority shareholder or shareholders. Not adopting cumulative voting ensures that all directors are elected in a manner that preserves equal rights for all shares.

The proponent’s comments regarding corporate governance fail to mention that PG&E Corporation’s corporate governance practices are highly regarded. As of February 1, 2007, PG&E Corporation’s Corporate Governance Quotient (CGQ) is better than 98.1 percent of companies in June 2004, the Board of Directors adopted a policy to submit the adoption or extension of a shareholder rights plan to a shareholder vote within 12 monthsS&P 500 index and 99.2 percent of the adoption or extension. This policy was adopted in response to a shareholder proposal on this topic that was approved at the Corporation's 2004 annual meeting.

The 12-month period in the Corporation's policy provides the Board of Directors a reasonable amount of time to seek a shareholder vote on any new shareholder rights plan that the Board may adopt if it decides that such a plan is in the best interest of shareholders. The 12-month period also is consistent with the policy ofutility companies, as rated by Institutional Shareholder Services (ISS), an independent corporate governance firm. The CGQ rating is a leading proxy advisory firm.

The proponent recommends thatcommonly referenced measure of corporate governance practices, and is included in company profiles on Yahoo! Finance. Also, contrary to the Board obtain a shareholder vote within only four months of taking action. As a practical matter, this time period might not be sufficient forproponent’s statement, the Corporation to obtain, tally,has had a designated independent lead director since 2003.

PG&E Corporation believes that its existing corporate governance structure and processpolicies, including its position on cumulative voting, protect the over 345,000,000 votes from the over 200,000 individuals who hold shares either in their own names or through brokers and other third parties.

The proponent's objection to the conductinterests of the Corporation's 2005 annual meeting is not justified, nor is it relevant to the subject matter of this proposal. Contrary to the proponent's claims, the format of the Corporation's 2005 annual meeting was designed to increase shareholder participation and management accountability to shareholders. The location of the meeting was more accessible to the Corporation's manyall shareholders living outside San Francisco. Unnecessary formalities were removed to provide more time for shareholders to share their thoughts with management and the Board, and to give a wider variety of shareholders an opportunity to speak and ask questions during the meeting.

All of the proposals included in the Corporation's 2005 proxy statement were presented at the annual meeting for voting and each individual who represented a shareholder proposal had an opportunity to speak about that proposal at the meeting. Preliminary voting results were presented during the meeting, consistent with past practice.

equally.

For these reasons, the PG&E Corporation Board of Directors unanimously recommends that shareholders voteAGAINST this proposal.

Item No. 4: Shareholder Proposal36

Mr. Nick Rossi, P.O. Box 249, Boonville, California 95415, beneficial owner of 600 shares

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Compensation Discussion and Analysis

The following section provides information about compensation objectives, policies, and decisions applicable to the executive officers of PG&E Corporation common stock, has given notice of his intention to presentand Pacific Gas and Electric Company who are named in the following proposal for action at the PG&E Corporation annual meeting:

"4 – Independent Board Chairman

RESOLVED: Stockholders request that our Board of Directors change our governing documents (Charter or Bylaws if practicable) to require that the Chairman of our Board serve in that capacity onlySummary Compensation Table (on pages 46 and have no management duties, titles, or responsibilities. This proposal gives our company an opportunity to cure our Chairman's loss of independence should it exist or occur once this proposal is adopted.

The primary purpose of the Board of Directors is to protect shareholders' interests by providing independent oversight of management, including our new CEO. Separating the roles of Chairman and CEO can promote greater management accountability to shareholders and lead to a more objective evaluation of our new CEO.

When a person acts both as a company's Chairman and its CEO, a vital separation of power is eliminated – and we as the owners of our company are deprived of both a crucial protection against conflicts of interest and also of a clear and direct channel of communication to our company through our Chairman.

The Council of Institutional Investorswww.cii.org, whose members have $3 trillion invested, recommends adoption47 of this proposal topic.

Mr. Darbee's Conduct at his First Annual Meeting

The needJoint Proxy Statement). This section also discusses the compensation that was awarded to, have one personearned by, or paid during 2006 to act solelythese executive officers, as our Chairman was illustrated by our new CEO Mr. Darbee's conduct at his first annual meetingdetailed in 2005. Our management filed papers with the Securities and Exchange Commission leading shareholders to believe that the first formal items for discussion at our 2005 annual meeting would be the 8 ballot items – 3 from management and 5 from shareholders. However, the 5 shareholder items were not allowed to be completely presented until after nearly 2-hours and after dozens of random questions and testimonials of praise were readily accepted by Mr. Darbee (planted by company "ringer" concern).

Ratings Downgrade

The Corporate Library's April 26, 2005 Ratings Downgrade of our management stated: It's hard for us to believe that any board aloof and dismissive of shareholders can be genuinely effective, and we suspect that there may well be deeper, as yet undisclosed concerns here that will ultimately have a negative impact on PG&E's overall value. Combine these concerns with the company's latest reported compensation policies and practices and we find we have no choice but to downgrade PG&E's overall rating to a "D".

Moreover

It is well to remember that at Enron, WorldCom, Tyco, and other legends of mis-management and/or corruption, the Chairman also served as CEO. When a Chairman runs a company as Chairman and CEO, the information given to directors may or may not be accurate. If a CEO wants to cover up improprieties and directors disagree, with whom do they lodge complaints? The Chairman?

Independent Board Chairman
Yes on 4"

The Board of Directors of PG&E Corporation Recommends a VoteAGAINST This Proposal.

This proposal is not necessary. The Corporation's existing governance practices already ensure independent oversight of management and sound policymaking. These practices include the following:

•

The Corporation's Corporate Governance Guidelines state that at least 75 percent of the Board must be independent. The Guidelines' definition of "independence" can be found on page 7 of the proxy statement, and in many ways is more stringent than applicable requirements of the Securities and Exchange Commission, the New York Stock Exchange,tables and the American Stock Exchange.

•

The Audit Committee, the Finance Committee, the Nominating, Compensation, and Governance Committee, and the Public Policy Committee are each composed solely of independent directors, as defined in the Corporation's Corporate Governance Guidelines and applicable New York Stock Exchange and American Stock Exchange listing requirements.

•

The independent directors meet in executive session without management present during each regularly scheduled meeting of the Board of Directors.

•

The Chair of the Nominating, Compensation, and Governance Committee also serves as the lead director of the Board, and is selected by and from the independent directors. Among other things, the lead director:

•

Presides at all meetings of the Board at which the Chairman is not present, including executive session meetings of the independent directors.

•

Serves as a liaison between the Chairman and the independent directors.

•

Approves the meeting agendas, schedules, and matters raised at each meeting of the Board of Directors.

•

Has the authority to call meetings of the independent directors.

•

If requested by major shareholders, is available for consultation and direct communication.

The Corporation's Corporate Governance Guidelines providenarrative disclosure that based on the circumstances existing at a time that there is a vacancy in the office of either the Chairman of the Board or the Chief Executive Officer (CEO), the Board will consider whether the role of the CEO should be separate from that of Chairman of the Board, and, if the roles are separate, whether the Chairman should be selected from the independent directors or should be an employee of the Corporation.

Atfollow this time, it is neither appropriate nor prudent to prohibit the CEO from serving as Chairman. Combining the offices of CEO and Chairman contributes to a more efficient and effective Board. The CEO bears primary responsibility for managing the Corporation's business day to day, and is the person in the best position to chair regular Board meetings and help ensure that key business issues and stakeholder interests are brought to the Board's attention. Any director may request the inclusion of specific agenda items for discussion at Board meetings.

The proponent's comments regarding the conduct of the 2005 annual meeting are unjustified and they are not relevant to the subject matter of this proposal. The Corporation's response to these comments is contained in management's response to Item No. 3 (see page 31).

For these reasons, the PG&E Corporation Board of Directors unanimously recommends that shareholders voteAGAINST this proposal.

section.

Executive Compensation

Nominating, Compensation, and Governance Committee Report on Compensation

The Nominating, Compensation, and Governance Committee of the PG&E Corporation Board of Directors (Committee) is responsible for overseeing and establishing officer compensation policies for PG&E Corporation and its subsidiaries, including Pacific Gas and Electric Company. The Committee also overseesadministers the equity-based incentive programs of PG&E Corporation as well as2006 Long-Term Incentive Plan (LTIP) under which equity-based awards are made, and oversees other employee benefit plans. The Committee is composed entirelyBoard of independent directors as defined by the New York Stock Exchange and the Pacific Exchange, and each company's Corporate Governance Guidelines.

This report relates to the compensation for officersDirectors of PG&E Corporation andor Pacific Gas and Electric Company during(as the fiscal year ended December 31, 2005.

For 2005,case may be) is responsible for approving compensation for the Chief Executive Officers of PG&E Corporation and Pacific Gas and Electric Company was approved bybased on the independent members of the applicable Board of Directors, who ratified the recommendations of the Committee.

Compensation for all other PG&E Corporation and Pacific Gas and Electric Company officers is approved by the Committee, except that the Committee has delegated to the PG&E Corporation Chief Executive Officer the authority to approve compensation for certain officers of PG&E Corporation and Pacific Gas and Electric Company. However, under New York Stock Exchange rules, the Committee may not delegate authority to approve compensation for individuals who are "executive officers" for purposes of Section 16 of the Securities Exchange Act.

Committee’s recommendations.

The Committee retains an independent consulting firm, Hewitt Associates (Hewitt), to help evaluate PG&E Corporation'sCorporation’s compensation policies, to provide information about industry compensation practices and competitive paycompensation levels at companies within a comparator group,¹ and to recommend compensation alternatives whichthat are consistent with PG&E Corporation'sCorporation’s compensation policies. Founded

How Does the Committee Define the Compensation Program and Philosophy?

In establishing levels of executive compensation, each year the Committee reviews the appropriateness of the comparator groups used to assess the competitiveness of PG&E Corporation’s compensation programs (Pay Comparator Group) and PG&E Corporation’s corporate performance (Performance Comparator Group), and approves the objectives, general framework, and elements of officer compensation for the following year. After the Committee approves the comparator groups, Hewitt undertakes a comparative study of the compensation practices at the Pay Comparator Group.

Market practices among general industry companies with annual revenues ranging from $8 billion to $20 billion also are reviewed for selected officer positions whose job scope and skill set are easily transferable to other industries.

After reviewing the comparative data as well as management’s recommendations (and Hewitt’s recommendations with respect to Chief Executive Officer compensation only), the Committee (and with respect to the Chief Executive Officers of PG&E Corporation and Pacific Gas Electric Company, the independent members of the applicable Board of Directors based on the Committee’s recommendation) approves the amounts of total target compensation for executive officers. In addition, the Committee uses comparative data throughout the year to set the total target compensation of new executive officers, whether they are promoted internally or new hires.

1

The primary comparator group used for purposes of setting 2006 officer compensation consists of all companies listed in the Dow Jones Utility Index and the Standard & Poor’s Electrics Index, and all California investor-owned utilities (the “Pay Comparator Group”): AES Corporation, Allegheny Energy, Inc., Ameren Corporation, American Electric Power Company, Inc., CenterPoint Energy, Inc., Cinergy Corp., Consolidated Edison, Inc., DTE Energy Company, Dominion Resources, Inc., Duke Energy Group, Edison International, Entergy Corporation, Exelon Corporation, First Energy Corp., FPL Group, Inc., NiSource Inc., PPL Corporation, Pinnacle West Capital Corporation, Progress Energy, Inc., Public Service Enterprise Group, Sempra Energy, Southern Company, TECO Energy, Inc., TXU Corp., Williams Companies, and Xcel Energy Inc. This group of companies is broad enough to provide statistical validity and data availability, represents the segment of the market where PG&E Corporation and Pacific Gas and Electric Company recruit officers with industry-specific experience, and is determined on an objective and transparent basis. For purposes of corporate performance comparisons (including the relative total shareholder return measured for the 2006-2008 performance share award cycle), the Committee uses a subgroup of 12 companies that have similar characteristics and business models as PG&E Corporation (the “Performance Comparator Group”): Ameren Corporation, American Electric Power, CenterPoint Energy, Inc., Consolidated Edison, Entergy Corporation, FPL Group, NiSource Inc., Pinnacle West Capital, Progress Energy, Inc., Southern Company, TECO Energy, and Xcel Energy. This group of companies is a subset of the Pay Comparator Group and, like PG&E Corporation, is focused on core regulated-utility activities with either a distribution or an integrated-utility focus.

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In determining specific compensation amounts for individual officers, the Committee (or the independent members of the applicable Board of Directors, in 1940, Hewitt Associates is a major global human resources consultingthe case of the Chief Executive Officers of PG&E Corporation and outsourcing firm.

OfficerPacific Gas and Electric Company) considers such factors as (1) the officer’s experience, (2) individual performance, (3) the officer’s role in achieving corporate objectives established at the beginning of the year, (4) the officer’s compensation compared to individuals in similar positions in the Pay Comparator Group as well as compared to other officers internally, and (5) when appropriate, other relevant factors.

The Committee seeks to design competitive, performance-based compensation programs that meet the Committee’s stated objectives and protect shareholders’ interests. Although the Committee considers the potential impact on PG&E Corporation’s compensation programs of the tax deductibility limitations imposed by Section 162(m) of the U.S. Internal Revenue Code, the Committee does not limit compensation to those levels or types of compensation that will be deductible.

What Were the Committee’s 2006 Compensation Philosophy

Program Objectives?

The Committee established compensation programs for 20052006 to meet three objectives:

•

•	To emphasize long-term incentives to further align shareholders’ and officers’ interests, and focus employees on enhancing total return for shareholders.
•	To attract, retain, and motivate employees with the necessary mix of skills and experience for the development and successful operation of PG&E Corporation’s businesses.
•	To manage the delivery of compensation in a cost-efficient and transparent manner.

In addition, the Committee defined specific objectives for officer compensation as follows:

•	A significant component of every officer’s compensation should be tied directly to PG&E Corporation’s performance for shareholders.
•	Target cash compensation (base salary and target short-term incentive) should be equal to the average target cash compensation for comparable officers in the Pay Comparator Group.
•	The Committee’s objective is to provide long-term compensation in line with PG&E Corporation’s performance for shareholders. Performance is defined as total shareholder return (TSR). The terms of performance-based long-term incentive awards are designed to track PG&E Corporation’s TSR relative to companies in the Performance Comparator Group. For example, if PG&E Corporation performs only at the 50th percentile of the Performance Comparator Group, the total long-term incentive value realized by grant recipients would be approximately equal to long-term compensation at the 50th percentile of the Pay Comparator Group.

2006 Officer Compensation Program

In the fall of 2005, Hewitt conducted a detailed position-by-position benchmark job review of the companies in the Pay Comparator Group as well as a group of general industry companies, and a review of salary-related budget projections for 2006. Management’s recommendations for 2006 compensation were based on the comparative data gathered by Hewitt. All of management’s recommendations were reviewed with Hewitt. Based on Hewitt’s comparative data analysis and management’s recommendation, in October and December 2005, the Committee approved the elements of the 2006 officer compensation program discussed below.

Total target compensation includes (1) base salary, (2) the target amount of the annual cash incentive that could be received under the PG&E Corporation Short-Term Incentive Plan (STIP) based on a percentage of base salary, i.e.,short-term incentives, and (3) the target value of LTIP awards, i.e.,long-term incentives. The actual value of incentive awards is variable and reflects performance during the relevant measurement period.

Base Salary. Base salary is the fixed cash amount paid to an officer each year. The Committee aims to set base salary at levels that are equal to the average base salary for comparable officers in the Pay Comparator Group. For 2006, the Committee approved a base salary increase budget of 3.5 percent for base salary adjustments, mid-year discretionary salary increases, and lump-sum payments. The comparative data showed that the companies in the Pay Comparator Group expected to provide officers a 3.4 percent average salary increase in 2006, and that those companies’ actual average salary increase in 2005 was 3.6 percent. The overall market position of executive officers at PG&E Corporation and Pacific Gas and Electric Company, including the named executive officers, is comparable to the comparator group average. The Committee believes this position is appropriate.

Consistent with the Committee’s objective of tying a significant component of every executive officer’s

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compensation directly to PG&E Corporation’s performance for shareholders through short-term and long-term incentives, base salary comprises only 18 percent to 37 percent of executive officer compensation, depending on officer level.

The Committee also believes that this proportion of base salary to short-term and long-term incentives provides the right mix to attract, retain, and motivate officers with the necessary mix of skills and experience for the development and successful operation of PG&E Corporation’s businesses. It also provides a direct connection between compensation and performance as described below.

In December 2005, the Committee (and with regard to Peter A. Darbee and Thomas B. King, the independent members of the Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company, respectively) approved 2006 base salaries for the executive officers named in the Summary Compensation Table on pages 46 and 47.

Short-Term Incentive. Target STIP awards are short-term cash incentive opportunities that are realized only to the extent that the performance measures stated in the annual STIP are achieved. The Committee aims to have target STIP awards that are equal to the average short-term incentive awards for comparable officers in the Pay Comparator Group. For 2006, the Committee approved target STIP awards that range from 50 percent of base salary for lower-level executive officers to 100 percent of base salary for the Chief Executive Officer of PG&E Corporation, with a maximum payout of two times the target STIP award (depending on the extent to which certain pre-established performance goals are met, as determined by the Committee). This range of target STIP awards is consistent with the Pay Comparator Group’s practice, and reflects no change from 2005.

For 2006, the Chief Executive Officer of PG&E Corporation had the discretion to recommend to the Committee an additional performance rating for an individual officer, to recognize that officer’s efforts to manage his or her organization’s financial budget. This additional performance rating could modify (up or down) an individual officer’s final STIP award by no more than 15 percent. The Committee continues to retain full discretion as to the determination of final officer STIP awards.

Under the 2006 STIP structure approved by the Committee in December 2005, 70 percent of the officer STIP awards is based on whether the corporate financial performance objective, as measured by corporate earnings from operations, is achieved. 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. Unbudgeted items impacting results, such as changes in accounting methods, workforce restructuring, and one-time occurrences, are excluded. The remaining 30 percent of the 2006 officer STIP awards is based on the extent to which key strategic and operational objectives (aimed at the achievement of operational excellence and improved customer service, as measured by 11 equally weighted financial, operating, and service measures) are met. These weightings balance direct (through earnings) and indirect (through key strategic and operation-specific objectives) returns to shareholders. The measures are disclosed in PG&E Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005.

This performance incentive structure reinforces the Committee’s objectives of aligning officer compensation with the successful management of assets and resources to generate stable and growing financial results for the benefit of shareholders as well as to deliver safe, reliable, and exceptional service to utility customers.

In December 2005, the Committee (and with regard to Peter A. Darbee and Thomas B. King, the independent members of the Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company, respectively) approved 2006 target STIP award values (based on a percentage of base salary) for the executive officers named in the Summary Compensation Table on pages 46 and 47.

The Committee establishes a threshold or minimum performance requirement for each STIP performance objective in addition to target and maximum performance levels. The Committee then determines individual award levels at the end of the year based on actual performance. The actual STIP awards reported in the Summary Compensation Table as “Non-Equity Incentive Plan Compensation” on page 46 were based on financial objectives (70 percent weighting) as measured by earnings from operations, and eleven equally-weighted operating and service measures (30 percent weighting). This approach balanced direct (through earnings) and indirect (through operation-specific objectives) returns to shareholders. The financial result was a score of 1.651 based on earnings from operations of $921 million compared to a budget of $875 million. The operating/service result was a score of 1.226 based on aggregate performance against the eleven measures. Those results translate to actual STIP awards equal to 76 percent of the maximum award opportunity.

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Long-Term Incentives. The LTIP permits the award of various types of stock-based incentives to officers and other key employees. The PG&E Corporation Board of Directors has delegated the administration of the LTIP to the Committee, including the power to determine the types of awards to be granted, the amounts, terms, and conditions of LTIP awards, and the individuals to whom LTIP awards are granted. Grants to the Chief Executive Officers of PG&E Corporation and Pacific Gas and Electric Company also are approved by the independent members of the applicable Board of Directors. The PG&E Corporation Board of Directors has delegated to the Chief Executive Officer of PG&E Corporation the authority to approve LTIP awards, within guidelines approved by the Committee, to lower-level officers and to non-officer employees. The Committee approves guidelines that include the LTIP award value ranges for different categories of employees, as well as the terms and conditions of all LTIP awards to be made in the following year. The guidelines also specify that the grant date for all annual LTIP awards will be the first business day of January of the following year. Actual awards are generally made within the range of target LTIP values previously approved by the Committee.

The grant of any LTIP awards for new executive officers occurs on the officer’s prospective start date or the date on which the Committee has approved the individual awards, whichever is later. The amount of LTIP awards for new executive officers is determined by reference to the range of LTIP values specified in the guidelines approved by the Committee, as well as any unique factors taken into account in the recruiting process in order to induce the officer to join PG&E Corporation or Pacific Gas and Electric Company.

Consistent with its stated compensation philosophy, the Committee establishes LTIP award value guidelines that generally reach the 75th percentile of the Pay Comparator Group for delivering 75th percentile performance, as measured by the TSR of the companies in the Performance Comparator Group. For 2006, the Committee approved target LTIP values ranging from $400,000 for lower-level executive officers to $4,500,000 for the Chief Executive Officer of PG&E Corporation.

In December 2005, the Committee (and with regard to Peter A. Darbee and Thomas B. King, the independent members of the Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company, respectively) approved the recommended 2006 target LTIP award values for the executive officers named in the Summary Compensation Table on pages 46 and 47.

At its October 2005 meeting, the Committee determined that the 2006 LTIP target award values for all award recipients, including executive officers, would be equally allocated between restricted stock and performance shares. This allocation balances the interests of shareholders for increased value with the interests of officers for long-term compensation as expressed by stock price appreciation and TSR. The restricted stock provides a tangible retention incentive aligned with shareholders’ interests (i.e., increasing the stock price and avoiding decreasing stock price). The performance shares reward recipients for achieving superior returns to shareholders, as measured by TSR relative to the Performance Comparator Group. Based on an analysis of competitive market trends and the impact of new accounting rules for expensing stock-based awards, the Committee determined to discontinue granting stock options as part of the annual LTIP award value.

Restricted stock. The number of shares of restricted stock granted in 2006 was determined by dividing one-half of the LTIP award value by the average daily closing price of a share of PG&E Corporation common stock for the month of November 2005 (or the closing price on the date of grant for a newly hired officer), as reported on the New York Stock Exchange. Actual restricted stock grants for 2006 are included in the Grants of Plan-Based Awards in 2006 table on page 48. Shares of restricted stock granted in 2006 will vest in 20 percent increments over three years, with an acceleration of the remaining 40 percent on the third anniversary of the date of grant if PG&E Corporation’s TSR for the prior three-year period is in the top quartile relative to the Performance Comparator Group. If PG&E Corporation’s TSR for that period is not in the top quartile, the restrictions will continue, and the remaining 40 percent of the restricted stock will vest on the fifth anniversary of the date of grant. This acceleration feature adds a performance component to the restricted stock grant that further aligns the motivation of award recipients with those of shareholders by emphasizing increasing returns to shareholders.

The terms of these restricted stock grants align officers’ interests with those of shareholders (i.e., increasing the stock price and dividends), in addition to rewarding officers for top quartile performance. Restricted stock also provides a tangible retention incentive to officers because it vests over a three- or five-year period depending on PG&E Corporation’s TSR.

Performance shares. The number of performance shares granted in 2006 was determined by dividing one-half of the target LTIP award value by the average daily closing price of a share of PG&E Corporation common stock for the month of November 2005 (or the closing price on the date of grant for a newly

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hired officer), as reported on the New York Stock Exchange. Actual performance shares awards for 2006 are included in the Grants of Plan-Based Awards in 2006 table on page 48.

The Committee determined that performance shares granted in 2006 will vest, if at all, at the end of a three-year period, depending on PG&E Corporation’s TSR relative to the Performance Comparator Group for the period. The payment for performance shares will be in cash and will be calculated by multiplying (1) the number of vested performance shares, (2) the average closing price of PG&E Corporation common stock over the last 30 calendar days of the year preceding the vesting date, and (3) a payout factor based on corporate performance.

There will be no payout for TSR performance below the 25th percentile of the Performance Comparator Group; there will be a 25 percent payout if TSR is at the 25th percentile; there will be a 100 percent payout if TSR is at the 75th percentile; and there will be a 200 percent payout if PG&E Corporation’s TSR ranks first in the Performance Comparator Group. If PG&E Corporation’s TSR is between the 25th percentile and the 75th percentile, or above the 75th percentile, award payouts will be determined by straight-line interpolation, adjusted to round numbers (i.e., the nearest multiple of five).

The performance shares are tied directly to PG&E Corporation’s performance for shareholders and align officers’ interests with those of shareholders.

Other Compensation

Perquisites. The Committee (and with regard to Peter A. Darbee and Thomas B. King, the independent members of the Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company, respectively) also approved the 2006 perquisite amount for each executive officer, ranging from $20,000 to $35,000, depending on officer level. In addition, executive officers receive a partial subsidy for financial planning services from a third-party financial advisory firm and the other perquisites described in the Summary Compensation Table on pages 46 and 47.

Executive Stock Ownership Program. PG&E Corporation has adopted an executive stock ownership program to encourage senior officers to achieve and maintain a minimum investment in PG&E Corporation common stock at levels set by the Committee. The program provides incentives for senior officers to focus on improving long-term shareholder value. Executive stock ownership guidelines have been adopted by most of the companies in the Pay Comparator Group, and are increasingly viewed as an important element of a company’s governance policies.

PG&E Corporation’s executive stock ownership targets are based on a multiple of base salary and are designed to be met within five years. The stock ownership target for the Chief Executive Officer of PG&E Corporation is three times base salary. The target ownership level for the Chief Executive Officer of Pacific Gas and Electric Company, the President and Chief Operating Officer of Pacific Gas and Electric Company, and certain other senior officers is two times base salary. The target ownership level for other senior officers is one-and-one-half times base salary.

The program features annual milestones equal to 20 percent of the target. Incentives called Special Incentive Stock Ownership Premiums (SISOPs) are provided to encourage participants to use their own monies to meet their targets as soon as possible. The incentives are granted only during the first three years of the officer’s eligibility, and are awarded only for stock that is “beneficially owned” by the officer.²

When participants meet a milestone, they receive an incentive equal to 20 percent of that milestone. When participants exceed a milestone, the incentive equals 30 percent. The incentive takes the form of additional common stock which is automatically deferred to the 2005 PG&E Corporation Supplemental Retirement Savings Plan (SRSP), a deferred compensation plan, upon grant and is converted to units in the PG&E Corporation Phantom Stock Fund under the SRSP. The units vest in full on the third anniversary of the date of grant, and are subject to forfeiture if the participant fails to maintain the applicable stock ownership target. Upon retirement or termination, the vested units are distributed in the form of an equivalent number of shares of PG&E Corporation common stock. The vesting of SISOPs can be accelerated under certain circumstances, as specified in the discussion regarding “Potential Payments Upon Resignation, Retirement, Termination, Change in Control, Death, or Disability” on pages 56 to 61 of this proxy statement.

Actual SISOPs for 2006 are included in the Grants of Plan-Based Awards in 2006 table on page 48. If an officer fails to meet or maintain the applicable stock ownership target, cash-based awards that the officer would otherwise be entitled to receive (such as a STIP payment) are

2	“Beneficially owned” stock includes actual shares of stock held in the name of the officer (or his/her immediate family members) and stock held in a 401(k) or deferred compensation plan. It does not include stock options or restricted stock.

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converted into phantom stock units and credited to the officer’s account under the SRSP until the stock ownership target is met.

All officers who are currently subject to stock ownership targets under the Executive Stock Ownership Program have met or exceeded their targets.

Retention Awards

In July 2006, the independent members of the Board of Directors of Pacific Gas and Electric Company approved an arrangement for Thomas B. King, Chief Executive Officer of Pacific Gas and Electric Company, that provides a retention mechanism. This mechanism will entitle Mr. King to an unreduced pension benefit if he remains employed by PG&E Corporation or its subsidiaries until age 55. Under the defined benefit pension plan, employees who are at least 55 years old with a minimum of five years of consecutive service may retire before age 65 with a reduced pension benefit. The applicable early retirement reduction factors depend on the age of the retiring employee and years of service. Under the arrangement approved by the Pacific Gas and Electric Company Board of Directors, Mr. King’s pension benefit will not be reduced by the reduction factor that would otherwise apply if he retires before age 65. Assuming that Mr. King’s salary will increase 4 percent annually and that he will retire at age 55, the net present value of the elimination of the early retirement reduction factors is $1.5 million. Any enhanced pension benefit that may become payable to Mr. King would be paid from the PG&E Corporation Supplemental Executive Retirement Plan (described below under “Retirement Benefits”).

As part of this arrangement, the independent members of the Pacific Gas and Electric Company Board of Directors also awarded Mr. King 25,233.41 restricted phantom stock units with an aggregate value of $1 million, based on the closing stock price of PG&E Corporation common stock on July 12, 2006 (the date of grant) of $39.63, as reported on the New York Stock Exchange. The restricted phantom stock units will vest five years after the date of grant, provided that Mr. King is still an employee of PG&E Corporation or its subsidiaries at that time. These restricted stock units are included in the Grants of Plan-Based Awards in 2006 table on page 48.

Mr. King’s right to receive the unreduced pension benefit and the vesting of the restricted phantom stock units are subject to either partial or full acceleration under certain circumstances associated with his death, disability, or termination of employment. Mr. King’s right to the unreduced pension benefit and the vesting of the restricted phantom stock units also would accelerate in full upon a Change in Control of PG&E Corporation (as defined in the LTIP) if these modifications to Mr. King’s compensation arrangements are not assumed by the Acquiror (as defined in the LTIP).

On January 3, 2007, Mr. Darbee, Chief Executive Officer of PG&E Corporation, received a grant of 21,155 shares of restricted stock, with a grant date value of approximately $1 million. The grant was approved by the independent members of the PG&E Corporation Board of Directors and serves as a retention mechanism for Mr. Darbee. The restrictions on the restricted shares will lapse five years after the date of grant, provided that Mr. Darbee is still employed by PG&E Corporation or any of its affiliates. Vesting of the restricted shares is subject to either partial or full acceleration under certain circumstances associated with Mr. Darbee’s death, disability, or termination of employment. The vesting of the restricted shares would accelerate in full upon a Change in Control of PG&E Corporation (as defined in the LTIP) if this modification to Mr. Darbee’s compensation arrangements is not assumed by the Acquiror (as defined in the LTIP). If Mr. Darbee retires from PG&E Corporation and its affiliates before the five-year vesting period lapses, a portion of these restricted shares will vest, in a ratio of the number of months worked after the grant date divided by 60 months (i.e., the normal vesting period).

Retirement Benefits

Pacific Gas and Electric Company provides retirement benefits under a tax-qualified defined benefit plan to a number of PG&E Corporation and Pacific Gas and Electric Company executive officers named in the Summary Compensation Table on page 46, as well as to all other eligible employees. In addition, PG&E Corporation has adopted a Supplemental Executive Retirement Plan (SERP), a non-tax-qualified defined benefit pension plan that provides officers and key employees of PG&E Corporation and its subsidiaries, including Pacific Gas and Electric Company, with a pension benefit based on a combination of base salary and payments under the STIP. PG&E Corporation also has established a grantor trust to set aside funds to pay for a portion of the non-qualified benefits payable to officers. Assets held in the trust are subject to claims of creditors and, upon the commencement of a bankruptcy case, become part of the debtor’s estate subject to the jurisdiction of the bankruptcy court.

In addition, PG&E Corporation provides a matching contribution to officers who participate in the PG&E Corporation Retirement Savings Plan (RSP), a qualified

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401(k) plan. For all executives and most employees, PG&E Corporation provides a maximum matching contribution of 75 cents for each dollar contributed up to 6 percent of base salary. To the extent that matching contributions cannot be made to an officer’s RSP account because the Internal Revenue Code limits would be exceeded, PG&E Corporation contributes the excess amount to the PG&E Corporation Supplemental Retirement Savings Plan (SRSP).

The majority of companies in the Pay Comparator Group provide tax-qualified defined benefit plans, other tax-qualified defined contribution plans (i.e., 401(k) plans), and non-tax-qualified retirement plans.

In 2003, Mr. Darbee and Mr. King were credited with an additional five years of service under the SERP. Mr. Darbee and Mr. King each also are eligible to earn an additional five years of credited service under the SERP, provided that they are employed by PG&E Corporation or a subsidiary on July 1, 2008. Mr. King also may qualify for an unreduced pension benefit at age 55, pursuant to a July 2006 arrangement that is more fully described above in the discussion regarding “Retention Awards.”

The value of pension benefits accumulated as of December 31, 2006 for the executive officers named in the Summary Compensation Table is reported in the table entitled “Pension Benefits” on pages 53 and 54.

Compensation Related to Termination of Employment or Termination of Employment Following a Change in Control or Potential Change in Control of PG&E Corporation

In February 2006, the PG&E Corporation Board of Directors amended the Corporation’s plans and policies to ensure that any compensation related to a change in control is contingent on a “double trigger,” and is paid only if certain events occur in addition to the change in control. These changes are discussed below.

The PG&E Corporation Board of Directors has adopted an Officer Severance Policy to provide certain officers with severance benefits if their employment is terminated without cause. The severance benefits are described on pages 57 to 61 under the sections entitled “Potential Payments Upon Termination Without Cause” and “Potential Payments Following a Change in Control and Other Triggering Events.” The purpose of the severance policy is to (1) attract and retain senior management by defining the terms and conditions for severance benefits, (2) provide severance benefits that are part of a competitive total compensation package, (3) provide consistent treatment for all terminated officers, and (4) minimize potential litigation costs associated with officers’ termination of employment.

On November 13, 2006, PG&E Corporation announced the departure of Bruce R. Worthington, who had served as Senior Vice President and General Counsel of PG&E Corporation from 1997 to November 10, 2006. Mr. Worthington will receive severance benefits in accordance with the PG&E Corporation Officer Severance Policy, contingent upon his execution of a severance agreement as called for under the Officer Severance Policy.

If a covered officer is actually or constructively terminated following a “change in control” or “potential change in control” of PG&E Corporation, the severance policy provides covered officers with certain benefits. The benefits payable under these circumstances are described below under the section entitled “Potential Payments Following a Change in Control and Other Triggering Events.” The PG&E Corporation Board of Directors has determined that the Officer Severance Policy’s provision of such benefits in these circumstances is an integral part of PG&E Corporation’s officer compensation program. In a hostile takeover or change in control situation, it is important for management to remain focused on maximizing shareholder value and protecting shareholders’ interests, and not be distracted by concerns about the security of their jobs.

In addition, upon the occurrence of a change in control of PG&E Corporation, all outstanding stock-based awards granted before December 31, 2006 will accelerate, regardless of whether an officer has been terminated. For grants made in 2007 and after, acceleration will occur only if either (1) the successor company fails to continue previously granted awards in a manner that preserves the value of those awards, or (2) the award recipient is terminated during a specified period of time before or after the change in control. The PG&E Corporation Board of Directors made this change to more closely align PG&E Corporation’s policies with market trends and to better balance the interests of award recipients and shareholders, maintaining security for award recipients in a time of uncertainty and maintaining an incentive to stay with PG&E Corporation even following a transaction.

In February 2006, the PG&E Corporation Board of Directors adopted a policy, the Golden Parachute Restriction Policy (described below in the section entitled “Potential Payments Following a Change in Control and Other Triggering Events”), that requires shareholder approval of executive severance payments provided in connection with a change in control of PG&E Corporation, to the extent that those payments exceed 2.99 times the sum of a covered officer’s base

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salary and target annual bonus. This policy responds to a shareholder proposal that was approved by shareholders at PG&E Corporation’s 2005 annual meeting.

In addition, in February 2006, the PG&E Corporation Board of Directors amended the definition of “change in control” to narrow the circumstances under which a change in control would be deemed to have occurred. Before these amendments were made, the definition of “change in control” included shareholder approval of certain consolidation or merger transactions. The amendments provide that a “change in control” occurs upon the consummation of a transaction following shareholder approval, rather than upon shareholder approval alone. The Board of Directors made this change to more closely align PG&E Corporation’s policies with those of the companies in the Pay Comparator Group. In addition, the amendment addresses an issue raised in a shareholder proposal that was approved by shareholders at PG&E Corporation’s 2005 annual meeting.

Conclusion

The amount of executive compensation provided by PG&E Corporation and Pacific Gas and Electric Company reflects the Committee’s compensation objectives and policies to (1) provide long-term incentives to further align shareholders'shareholders’ and officers'officers’ interests and focus employees on enhancingenhance total return for shareholders.

•

Toshareholders, (2) attract, retain, and motivate employees with the necessary mix of skills and experience for the development and successful operation of PG&E Corporation's businesses.

•

To minimize short-termCorporation’s businesses, and long-term costs and reduce corporate exposure to longer-term financial risk.

In addition, the Committee defines the specific compensation objectives for all officers as follows:

•

A significant component of every officer's compensation should be tied directly to PG&E Corporation's performance for shareholders.

•

Target cash compensation (base salary and target short-term incentive) should be equal to the average target cash compensation for comparable(3) compensate officers in the comparator group.

•

Consistent with the Corporation's performance aspirationa cost-efficient and transparent manner.

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Compensation Committee Report

The Nominating, Compensation, and Governance Committee of being a top quartile performer, it is the Committee's objective to set long-term incentive targets for officers at this performance level that are equal to the 75th percentile target compensation for comparable officers in the comparator group.

In order to provide compensation that is competitive with companies similar to PG&E Corporation in 2005,is comprised of independent directors and operates under a written charter adopted by the Committee selected a group consisting of 15 other major energy companies (the comparator group) that are comparable to PG&E Corporation in size, scope, business mix,Board of Directors. The Nominating, Compensation, and other characteristics. The majority of the companies in the comparator group are included in the Dow Jones Utility Index.

In June 2005, theGovernance Committee approved a modification to the comparator group to address changes in the industry over the last few years. Beginning in 2006, the comparator groupis responsible for overseeing and establishing officer compensation programs will consist of all companies listed in the Dow Jones Utility Index and the Standard & Poor's Electric Utilities Index, and all investor-owned California utilities, currently 26 companies.

Under Section 162(m) of the U.S. Internal Revenue Code (the "Code"), a public corporation may not take a tax deductionpolicies for compensation in excess of $1 million paid to any of the five highest paid officers, unless certain specific and detailed criteria are satisfied. Section 162(m) does not limit the deductibility of qualified performance-based compensation (as defined in the tax law). When evaluating compensation program alternatives, the Committee's philosophy is to retain maximum program flexibility in designing competitive, performance-based compensation programs that meet the Committee's stated objectives and protect shareholder interests. The Committee considers the potential impact of Section 162(m) on PG&E Corporation's compensation programs, and how that comports with the Committee's overall compensation philosophy. The Committee does not limit compensation to those levels or types of compensation that will be deductible.

Officer Compensation

The principal components of officer compensation at PG&E Corporation and its subsidiaries, including Pacific Gas and Electric Company are: (1) base salary, (2) short-term incentives, (3) long-term incentives,Company.

The Nominating, Compensation, and (4) benefits. The considerations underlying 2005 officer compensation are described below.

Base Salary

Executive officer salaries at PG&E CorporationGovernance Committee has reviewed and Pacific Gasdiscussed the section of this Joint Proxy Statement entitled “Compensation Discussion and Electric Company are reviewed annually byAnalysis” with management. Based on its review and discussion with management, the Nominating, Compensation, and Governance Committee based on (1)has recommended to the results achieved by each individual, (2) expected corporate financial performance, measured by combined earnings per share, dividends, and stock price performance, and (3) changes in the salaries paid to comparable executive officers in the comparator group.

In setting the 2005 base salary levels for the executive officersBoards of Directors of PG&E Corporation and Pacific Gas and Electric Company that the Committee's objective was“Compensation Discussion and Analysis” section be included in this Joint Proxy Statement.

March 13, 2007

C. Lee Cox, Chair

David A. Coulter

Barbara L. Rambo

Barry Lawson Williams

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Executive Officer Compensation Information

Summary Compensation Table — 2006

This table summarizes the principal components of compensation paid or granted during 2006, or the compensation cost of equity-based grants for 2006, to make the salary paid to each executive officer (including the companies' Chief Executive Officers) approximately equal toOfficers and the average of the salaries paid to the comparable executive officers in the comparator group.

The overall average of the base salaries received by each executive officerChief Financial Officer of PG&E Corporation and Pacific Gas and Electric Company, (includingand certain other officers of those entities, including the companies' Chief Executive Officers) for 2005 was approximately equal to the average base salaries paid to the comparablenext three most highly compensated executive officers during the past year.

																						Change in
																						Pension
																		Non-				Value and
																		Equity				Nonqualified
																		Incentive				Deferred				All
										Stock				Option				Plan				Compensation				Other
Name and						Salary				Awards				Award(s)				Compensation				Earnings				Compensation				Total
Principal Position		Year				($)(1)				($)(2)				($)(3)				($)(4)				($)(5)				($)(6)				($)
Peter A. Darbee(7)			2006			$	975,000			$	3,666,389			$	604,092			$	1,485,900			$	1,028,440			$	230,237			$	7,990,058
Christopher P. Johns(8)			2006			$	494,000			$	931,415			$	221,802			$	414,071			$	157,985			$	94,638			$	2,313,911
Leslie H. Everett(9)			2006			$	290,000			$	762,746			$	101,552			$	220,980			$	332,140			$	33,050			$	1,740,468
Kent M. Harvey(10)			2006			$	352,085			$	565,087			$	182,526			$	268,290			$	116,713			$	44,919			$	1,529,620
Bruce R. Worthington(11)			2006			$	489,250			$	1,793,902			$	374,182			$	410,090			$	518,882			$	65,008			$	3,651,314
Thomas B. King(12)			2006			$	615,000			$	1,590,363			$	395,251			$	702,945			$	855,085			$	69,465			$	4,228,109
Thomas E. Bottorff(13)			2006			$	282,500			$	557,625			$	134,151			$	215,265			$	204,202			$	46,106			$	1,439,849

(1)		Includes 2006 base salary deferred at the election of the officer (Mr. Johns $163,020, Ms. Everett $81,200, and Mr. Worthington $244,625).
(2)		Represents the 2006 compensation cost of restricted stock, performance shares, common stock equivalents called Special Incentive Stock Ownership Premiums (SISOPs), and a retention award in the form of restricted phantom stock units, granted in 2006 and prior years, measured in accordance with SFAS No. 123R, without taking into account an estimate of forfeitures related to service-based vesting.
(3)		Represents the 2006 compensation cost of stock options granted in prior years, measured in accordance with SFAS No. 123R without taking into account an estimate of forfeitures related to service-based vesting. Assumptions used in determining the grant date fair value are set forth in the Stock Options section of Note 14 to the Consolidated Financial Statements in the 2005 and 2006 Annual Reports to Shareholders of PG&E Corporation and Pacific Gas and Electric Company.
(4)		Amounts represent payments received or deferred in 2007 for achievement of corporate or organizational objectives in 2006 under the Short-Term Incentive Plan.
(5)		Amounts consist of (i) the change in pension value during 2006 (Mr. Darbee $1,023,619, Mr. Johns $157,918, Ms. Everett $330,681, Mr. Harvey $116,623, Mr. Worthington $502,001, Mr. King $853,356, and Mr. Bottorff $204,139), and (ii) the above-market earnings on deferred compensation (Mr. Darbee $4,821, Mr. Johns $67, Ms. Everett $1,459, Mr. Harvey $90, Mr. Worthington $16,881, Mr. King $1,729, and Mr. Bottorff $63). The above-market earnings are calculated as the difference between actual earnings from the Utility Bond Fund investment option of the Supplemental Retirement Savings Plan and hypothetical earnings that would have resulted using an interest rate equal to 120% of the applicable federal rate. Earnings for the Utility Bond Fund are based on Moody’s Investors Service’s long-term Aa bond rate for utilities.
(6)		Amounts consist of (i) perquisites and personal benefits, as detailed below (Mr. Darbee $181,494, Mr. Johns $40,405, Ms. Everett $20,000, Mr. Harvey $23,613, Mr. Worthington $39,488, Mr. King $41,790, and Mr. Bottorff $24,943, (ii) tax reimbursement payments (Mr. Darbee $4,868, Mr. Johns $3,504, Mr. Harvey $994, and Mr. Worthington $3,504), (iii) sale of vacation (Mr. Johns $28,499, Mr. Harvey $20,312, and Mr. Bottorff $8,451), and (iv) contributions to defined contribution retirement plans (Mr. Darbee $43,875, Mr. Johns $22,230, Ms. Everett $13,050, Mr. Worthington $22,016, Mr. King $27,675, and Mr. Bottorff $12,712).
(7)		During 2006, Mr. Darbee served as Chairman of the Board, Chief Executive Officer, and President of PG&E Corporation and Chairman of the Board of Pacific Gas and Electric Company.

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Summary Compensation Table — 2006

Continued

(8)		During 2006, Mr. Johns served as Senior Vice President, Chief Financial Officer, and Treasurer of PG&E Corporation and Pacific Gas and Electric Company.
(9)		During 2006, Ms. Everett served as Senior Vice President, Communications and Public Affairs of PG&E Corporation.
(10)		During 2006, Mr. Harvey served as Senior Vice President and Chief Risk and Audit Officer of PG&E Corporation.
(11)		Mr. Worthington served as Senior Vice President and General Counsel of PG&E Corporation through November 10, 2006.
(12)		Mr. King served as Senior Vice President of PG&E Corporation and President and Chief Executive Officer of Pacific Gas and Electric Company through August 14, 2006, and as Senior Vice President of PG&E Corporation and Chief Executive Officer of Pacific Gas and Electric Company thereafter.
(13)		During 2006, Mr. Bottorff served as Senior Vice President, Regulatory Relations of Pacific Gas and Electric Company.

The following chart provides additional information regarding perquisites that are included in the comparator group.

Short-Term Incentives

Summary Compensation Table.

						Transpor-				Life												Execu-
		Perquisite				tation				Insur-												tive				Financial
		Allowance				Services				ance				Parking				Fitness				Health				Services				Total
P. A. Darbee		$	35,000			$	127,883			$	2,208			$	4,750							$	4,495			$	7,158			$	181,494
C. P. Johns		$	25,000											$	4,750							$	4,085			$	6,570			$	40,405
L. H. Everett		$	20,000																											$	20,000
K. M. Harvey		$	20,000											$	2,070							$	1,543							$	23,613
B. R. Worthington		$	25,000											$	4,750							$	2,145			$	7,593			$	39,488
T. B. King		$	25,000							$	4,160			$	2,100			$	1,237			$	3,377			$	5,916			$	41,790
T. E. Bottorff		$	20,000							$	2,843			$	2,100															$	24,943

The PG&E Corporation and Pacific Gas and Electric Company Short-Term Incentive Plans for 2005 were designed to provide annual incentives to all officers based on the level of achievement in meeting key corporate financial and strategic objectives and, where appropriate, line of business results.

At the beginningabove perquisites consist of the year, targets are set basedfollowing:

•	Alump-sum perquisite allowance.
•	Transportation services for Mr. Darbee, consisting of car transportation for Mr. Darbee’s commute and non-business travel. Amounts include the pro-rated salary and burden of the driver and vehicle costs.
•	The cost of life insurance coverage exceeding amounts available to all employees (i.e., $50,000).
•	The cost of parking.
•	The value of reimbursements for health club fees, pursuant to a program available to certain management employees.
•	The cost of executive health services provided to executive officers. Amounts vary between officers, reflecting the decisions of each individual officer regarding the specific types of tests and consultations provided, and the exact value of reimbursed expenses.
•	Fees paid for financial services provided by an independent contractor selected by PG&E Corporation to provide such services.

Please see the Compensation Discussion and Analysis Section on each officer's responsibilitiespages 37 to 44 of this Joint Proxy Statement for additional information regarding the elements of compensation discussed above, including salary,short-term incentives, and salary level. Final amounts are determined bylongterm- incentives. Additional information regarding grants of LTIP awards can be found following the Committeetable entitled “Grants of Plan-Based Awards in 2006.”

47

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Grants of Plan-Based Awards in 2006

This table provides information regarding incentive awards and may rangeother stock-based awards granted during 2006 to individuals named in the Summary Compensation Table. The compensation cost from zero2006 of these awards also is reflected in the Summary Compensation Table.

																																		All Other
																																		Stock
																																		Awards
										Estimated Future Payouts Under Non-												Estimated Future Payouts Under												Number				Grant Date
										Equity Incentive Plan Awards(1)												Equity Incentive Plan Awards(2)												of Shares				Fair Value of
						Committee																												of Stock				Stock and
		Grant				Action				Threshold				Target				Maximum				Threshold				Target				Maximum				or Units				Option
Name		Date				Date				($)				($)				($)				(#)				(#)				(#)				(#)(3)				Awards
P. A. Darbee										$	0			$	975,000			$	1,950,000
			1/3/06				12/21/05																0				48,705				97,410							$	1,824,976
			1/3/06				12/21/05																												48,705			$	1,824,976
C. P. Johns										$	0			$	271,700			$	543,400
			1/3/06				12/21/05																0				12,520				25,040							$	469,124
			1/3/06				12/21/05																												12,520			$	469,124
L. H. Everett										$	0			$	145,000			$	290,000
			1/3/06				12/21/05																0				5,565				11,130							$	208,521
			1/3/06				12/21/05																												5,565			$	208,521
			1/3/06				(4)																												695			$	26,053
K. M Harvey										$	0			$	176,043			$	352,085
			1/3/06				12/21/05																0				5,565				11,130							$	208,521
			1/3/06				12/21/05																												5,565			$	208,521
B. R. Worthington										$	0			$	269,088			$	538,176
			1/3/06				12/21/05																0				11,130				22,260							$	417,041
			1/3/06				12/21/05																												11,130			$	417,041
T. B. King										$	0			$	461,250			$	922,500
			1/3/06				12/21/05																0				20,175				40,350							$	755,957
			1/3/06				12/21/05																												20,175			$	755,957
			7/12/06				7/12/06																												25,233			$	1,000,000
T. E. Bottorff										$	0			$	141,250			$	282,500
			1/3/06				12/21/05																0				5,910				11,820							$	221,448
			1/3/06				12/21/05																												5,910			$	221,448
			1/3/06				(4)																												3,026			$	113,400

(1)	Compensation opportunity granted for 2006 under the Short-Term Incentive Plan (STIP). Actual amounts earned are reported in the Summary Compensation Table in the “Non-Equity Incentive Plan Compensation” column.
(2)	Represents performance shares granted under the PG&E Corporation 2006 Long-Term Incentive Plan (LTIP).
(3)	Represents shares of restricted stock granted under the LTIP. In addition, Mr. King received a retention award in the form of a grant of 25,233 restricted phantom stock units. Ms. Everett received 695 common stock equivalents called Special Incentive Stock Ownership Premiums (SISOPs) and Mr. Bottorff received 3,026 SISOPs.
(4)	Award of SISOPs under the Executive Stock Ownership Program. No specific action is required by the PG&E Corporation Nominating, Compensation, and Governance Committee, or by the PG&E Corporation or Pacific Gas and Electric Company Board of Directors.

Information regarding specific grants is provided below.

STIP Awards. Information regarding the terms and basis of STIP awards can be found in the Compensation Discussion and Analysis section on pages 37 to twice44 of this Joint Proxy Statement.

Restricted Stock Grants. Shares of restricted stock carry the target, depending on corporate and individual officer performancesame dividend rights as measured against the key corporate objectives. The Committee has discretion to adjust or modify any of the performance measures.

In 2005, PG&E Corporation achieved earnings from operations of $907 million. The majorityshares of PG&E Corporation and Pacific Gas and Electric Company officers received Short-Term Incentive Plan awards that ranged from 141common stock. Shares of restricted stock granted in 2006 will vest in 20 percent to 150 percent of their target awards.

Long-Term Incentives

For 2005, various types of stock-based incentives were granted to officers and other key employeesincrements over three years, with an acceleration of the Corporation and Pacific Gas and Electric Company underremaining 40 percent on the PG&E Corporation Long-Term Incentive Program (PG&E LTIP). The PG&E LTIP expired on December 31, 2005, and was replaced by its successor, the PG&E Corporation 2006 Long-Term Incentive Plan (2006 LTIP), which also permits similar long-term stock-based incentives to be granted to officers and other key employeesthird anniversary of the Corporation and Pacific Gas and Electric Company.date of grant if PG&E Corporation's performance aspiration is to be a top quartile performer. Consistent with this performance aspiration, the Committee's objective is to set long-term incentive targets for officers at this performance level that are equal to the 75th percentile target compensation for comparable officers in the comparator group.

The Committee uses a mixture of equity-based incentives to provide long-term incentive compensation, including stock options, restricted stock, and performance shares. The size of each officer's grant is determined primarily based on the compensation objectives described above.

Performance Shares. Performance shares provide incentives based on a comparison ofCorporation’s total shareholder return (dividends plus(TSR) for the prior three-year period is in the top quartile relative to the Performance Comparator Group. If PG&E Corporation’s TSR for that period is not in the top quartile, the restrictions will continue, and the remaining 40 percent of the restricted stock price appreciation) with returns provided bywill vest on the comparator group over a three-year period.

fifth anniversary of the date of grant.

Performance Shares. The Committee determined that performance shares are hypothetical shares of stock thatgranted in 2006 will vest at the end of a three-year period, and are settleddepending on PG&E Corporation’s TSR relative to the Performance Comparator Group for the period. The payment for performance shares will be in cash only if performance targets are met. Forand will be

48

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calculated by multiplying (1) the number of vested performance shares granted in 2005,(2) the amountaverage closing price of cash, if any, that recipients are entitled to receive followingPG&E Corporation common stock over the last 30 calendar days of the year preceding the vesting date, will beand (3) a payout factor based on a payout percentage measured by the performance of PG&E Corporation's total shareholder returns (TSR) for the prior three-year calendar period compared to the TSR of the 15 other companies in the comparator group. corporate performance.

There will be no payout for TSR performance below the 25th percentile of the comparator group. TSR performance at the 25th percentilePerformance Comparator Group; there will result inbe a 25 percent payout of performance shares;if TSR performanceis at the 75th percentile25th percentile; there will result inbe a 100 percent payout of performance shares; andif TSR performanceis at the 90th percentile or greater75th percentile; and there will result inbe a 200 percent payout of performance shares. For performanceif PG&E Corporation’s TSR ranks first in the Performance Comparator Group. If PG&E Corporation’s TSR is between the 25th percentile and the target, and between75th percentile, or above the target and the 90th75th percentile, award payouts arewill be determined by straight-line interpolation.

Stock Options. Stock options provide incentives based on PG&E Corporation's abilityinterpolation, adjusted to sustain financial performance. Officers and other key employeesround numbers (i.e., the nearest multiple of PG&E Corporation and its subsidiaries receive stock options based on their responsibilities. After options vest, the holder may purchase a specified number of shares of PG&E Corporation common stock at the market price on the date of grant.

Stock options granted in 2005 vest in annual increments of 25 percent on the first, second, third, and fourth anniversaries of the date of grant. Options generally must be exercised within 10 years of the date of grant.

Restricted Stock. Restricted stock provides incentives based on its intrinsic economic value, and its future value as tied to the price performance of PG&E Corporation common stock. Officers and other key employees of PG&E Corporation receive restricted stock based on their responsibilities and performance. Restricted stock also aligns the recipients' motivational interests with those of shareholders.

For restricted stock granted in 2005, the restrictions lapse in annual increments of up to 25 percent on the first business day of each of the next four years following the date of grant.

CEO Compensation

The Committee followed the philosophy described above in determining 2005 compensation for Peter A. Darbee, Chief Executive Officer of PG&E Corporation, and for Gordon R. Smith, who served as Chief Executive Officer of Pacific Gas and Electric Company through December 31, 2005.

Mr. Darbee received an annual base salary of $850,000 in 2005. The salary level for Mr. Darbee is in the bottom quartile when compared to the salaries of chief executive officers in the comparator group, reflecting his tenure in the Chief Executive Officer position and the fact that he did not have the additional responsibility of Chairman of the Board in 2005. As noted in the accompanying compensation tables, during 2005, Mr. Darbee also received stock options, restricted stock, and performance shares. These grants were made based on the same factors and criteria as apply to similar grants for other PG&E Corporation officers.

Mr. Smith received an annual base salary of $810,000 in 2005. The salary level for Mr. Smith is above the average salary of senior executive officers in comparable positions in the comparator group. As noted in the accompanying compensation tables, during 2005, Mr. Smith also received stock options, restricted stock, and performance shares. These grants were made based on the same factors and criteria as apply to similar grants for other Pacific Gas and Electric Company officers.

Summary

We, the members of the Nominating, Compensation, and Governance Committee of the Board of Directors of PG&E Corporation, believe that the compensation programs of PG&E Corporation and Pacific Gas and Electric Company are successful in attracting and retaining qualified employees and in tying compensation directly to performance for shareholders. We will continue to monitor closely the effectiveness and appropriateness of each of the components of compensation to reflect changes in the business environment of PG&E Corporation and Pacific Gas and Electric Company.

March 14, 2006

Nominating, Compensation, and Governance Committee of the Board of Directors of PG&E Corporation

C. Lee Cox, Chair
David A. Coulter
Barbara L. Rambo
Barry Lawson Williams

five).

Summary Compensation Table

This table summarizes the principal components of compensation paid to the Chief Executive Officers, the Chairman of the Board, and other officers, including the other most highly compensated executive officers of PG&E Corporation and Pacific Gas and Electric Company during the past year.

		Annual Compensation											Long-Term Compensation
													Awards					Payouts
Name and Principal Position*		Year		Salary ($)			Bonus ($)(1)			Other Annual Compen- sation ($)(2)			Restricted Stock Award(s) ($)(3)			Securities Underlying Options/SARs (# of Shares)		LTIP Payouts ($)(4)			All Other Compen- sation ($)(5)
Peter A. Darbee(a) President and Chief Executive Officer of PG&E Corporation		2005 2004 2003		$	850,000 525,000 490,000		$	1,239,300 585,926 526,162		$	178,846 2,339 2,368		$	827,481 372,506 678,269		108,700 67,200 101,300		$	3,472 366,928 4,023,098		$	38,539 25,851 329,140
Christopher P. Johns Senior Vice President, Chief Financial Officer, and Treasurer of PG&E Corporation and Pacific Gas and Electric Company		2005 2004 2003		$	475,000 316,860 290,700		$	380,903 272,024 240,118		$	3,548 2,339 2,368		$	231,470 186,253 265,537		30,400 33,600 39,700		$	0 114,323 195,256		$	35,994 14,478 136,645
Bruce R. Worthington Senior Vice President and General Counsel of PG&E Corporation		2005 2004 2003		$	475,000 455,000 425,000		$	380,903 429,679 386,155		$	3,548 2,339 836,295		$	297,840 335,201 530,708		39,100 60,500 79,300		$	0 324,126 2,310,713		$	35,432 34,746 306,575
Gordon R. Smith(b) Senior Vice President of PG&E Corporation; President and Chief Executive Officer of Pacific Gas and Electric Company		2005 2004 2003		$	810,000 780,000 735,000		$	855,360 1,075,230 906,255		$	152,108 951 2,402,048		$	529,311 596,065 943,441		69,550 107,550 140,900		$	0 469,974 5,842,500		$	3,005,554 37,652 453,723
Thomas B. King(c) Executive Vice President and Chief Operating Officer of Pacific Gas and Electric Company		2005 2004 2003		$	570,000 520,000 500,000		$	563,200 621,244 519,350		$	0 0 23,780		$	330,860 368,713 530,708		43,450 65,150 79,300		$	17,111 513,304 2,938,351		$	25,754 68,714 659,488
Robert D. Glynn, Jr.(d) Chairman of the Board of PG&E Corporation and Pacific Gas and Electric Company		2005 2004 2003		$	1,090,000 1,090,000 1,050,000		$	1,589,220 1,871,530 1,734,600		$	163,664 103,123 3,154,268		$	0 1,415,960 2,169,950		0 255,000 486,000		$	0 639,790 9,879,911		$	201,939 62,225 666,050

*

The principal positions shown are as of December 31, 2005.

(a)

Mr. Darbee served as President and Chief Executive Officer of PG&E Corporation through December 31, 2005. Effective January 1, 2006, he was elected Chairman of the Board, Chief Executive Officer, and President of PG&E Corporation and Chairman of the Board of Pacific Gas and Electric Company.

(b)

Mr. Smith served as Senior Vice President of PG&E Corporation and President and Chief Executive Officer of Pacific Gas and Electric Company through December 31, 2005.

(c)

Mr. King was elected Senior Vice President of PG&E Corporation and President and Chief Executive Officer of Pacific Gas and Electric Company effective January 1, 2006.

(d)

Mr. Glynn served as Chairman of the Board of PG&E Corporation and Pacific Gas and Electric Company through December 31, 2005.

(1)

Represents payments received or deferred in 2006, 2005, and 2004 for achievement of corporate and organizational objectives in 2005, 2004, and 2003, respectively, under the Short-Term Incentive Plan.

(2)

Amounts reported consist of (i) reportable officer benefits, including perquisite allowances (Mr. Darbee $35,000 in 2005, Mr. Smith $25,000 in 2005, and Mr. Glynn $35,000 in each of 2005, 2004, and 2003), amounts for non-business related travel (Mr. Glynn $8,048 in 2005, $60,221 in 2004, and $62,998 in 2003), and, for 2005, commute services (Mr. Darbee $134,177, Mr. Smith $122,761, and Mr. Glynn $110,954), (ii) payments of related taxes, and (iii) for 2003, the cost of annuities and associated tax restoration payments to replace existing retirement benefits. The annuities will not change the amount and timing of after-tax benefits that would have been provided upon retirement under existing arrangements. Amounts reported for 2005 include benefits that did not previously require disclosure.

(3)

As of the end of the year, the aggregate number of shares or units of restricted stock held by each named officer, and the value using the year-end closing price of a share of PG&E Corporation common stock of $37.12, were: Mr. Darbee 58,532 (with a value of $2,172,708), Mr. Johns 21,227 (with a value of $787,946), Mr. Worthington 36,414 (with a value of $1,351,688), Mr. Smith 64,734 (with a value of $2,402,926), Mr. King 38,299 (with a value of $1,421,659), and Mr. Glynn 113,261 (with a value of $4,204,248). The restrictions lapse in annual increments of up to 25 percent on the first business day of each of the four years following the grant, subject to the recipient's continued employment. For the grant made in 2003, 20 percent of each year's increment is subject to forfeiture if PG&E Corporation fails to be in the top quartile of the comparator group as measured by relative annual total shareholder return at the end of the prior year. With respect to the 2003 grant to Mr. Glynn, 25 percent of each year's increment is subject to forfeiture if PG&E Corporation fails to be in the top quartile of the comparator group as measured by total shareholder return at the end of the prior year, and an additional 25 percent is subject to forfeiture if PG&E Corporation fails to be in the top half of the comparator group. PG&E Corporation's 2005 performance was in the top half but not the top quartile of its comparator group. Therefore, the shares subject to the top quartile performance requirement were cancelled in 2006. The shares of restricted stock have the same dividend rights as unrestricted shares of PG&E Corporation common stock.

(4)

Represents (i) payments received or deferred for achievement of corporate performance objectives over 3-year rolling periods under the Performance Unit Plan, and (ii) vested common stock equivalents called Special Incentive Stock Ownership Premiums (SISOPs) earned by officers under the Executive Stock Ownership Program and additional common stock equivalents reflecting dividends accrued on those SISOPs.

(5)

Amounts reported for 2005 consist of: (i) contributions to defined contribution retirement plans (Mr. Darbee $6,375, Mr. Johns $7,374, Mr. Worthington $3,562, Mr. Smith $9,322, Mr. King $9,450, and Mr. Glynn $9,450), (ii) contributions received or deferred under excess benefit arrangements associated with defined contribution retirement plans (Mr. Darbee $31,875, Mr. Johns $14,001, Mr. Worthington $17,812, Mr. Smith $27,128, Mr. King $16,200, and Mr. Glynn $39,600), (iii) above-market interest on deferred compensation (Mr. Darbee $289, Mr. Johns $4, Mr. Worthington $356, Mr. Smith $163, Mr. King $104, and Mr. Glynn $1,966), (iv) amounts received pursuant to separation agreements (Mr. Smith $2,835,000), and (v) sale of vacation (Mr. Johns $14,615, Mr. Worthington $13,702, Mr. Smith $133,941, and Mr. Glynn $150,923).

Option/SAR Grants in 2005

This table summarizes the distribution and the terms and conditions of stock options granted to the officers named in the Summary Compensation Table during the past year.

Individual Grants											Grant Date Value
Name		Number of Securities Underlying Options/SARs Granted(#)(1)(2)		% of Total Options/SARs Granted to Employees in 2005(2)		Exercise or Base Price ($/Sh)(3)			Expiration Date(4)		Grant Date Present Value ($)(5)
Peter A. Darbee		108,700		7.47	%	$	33.02		01-04-2015		$	833,729
Christopher P. Johns		30,400		2.09	%		33.02		01-04-2015			233,168
Bruce R. Worthington		39,100		2.69	%		33.02		01-04-2015			299,897
Gordon R. Smith		69,550		4.78	%		33.02		01-04-2015			533,449
Thomas B. King		43,450		2.99	%		33.02		01-04-2015			333,262
Robert D. Glynn, Jr.		0		0	%							0

(1)

All options granted to officers in 2005 are exercisable as follows: 25 percent of the options may be exercised on or after the first anniversary of the date of grant, 50 percent on or after the second anniversary, 75 percent on or after the third anniversary, and 100 percent on or after the fourth anniversary, provided that options will vest immediately upon the occurrence of certain events. No options were accompanied by tandem dividend equivalents.

(2)

No stock appreciation rights (SARs) have been granted since 1991.

(3)

The exercise price is equal to the closing price of PG&E Corporation common stock on the date of grant.

(4)

All options granted to officers in 2005 expire 10 years and 1 day from the date of grant, subject to earlier expiration in the event of the officer's termination of employment with PG&E Corporation, Pacific Gas and Electric Company, or one of their subsidiaries.

(5)

Estimated present values are based on the Black-Scholes Model, a mathematical formula used to value options traded on stock exchanges. The Black-Scholes Model considers a number of factors, including the expected volatility and dividend rate of the stock, interest rates, and time of exercise of the option. The following assumptions were used in applying the Black-Scholes Model to the 2005 option grants shown in the table above: (i) volatility of 33.3 percent, (ii) risk-free rate of return of 4.10 percent, (iii) dividend yield of $1.20, and (iv) an exercise date 10 years after the date of grant. The ultimate value of the options will depend on the future market price of PG&E Corporation common stock, which cannot be forecast with reasonable accuracy. That value will depend on the future success achieved by employees for the benefit of all shareholders. The estimated grant date present value for the options shown in the table was $7.67 per share.

Aggregated Option/SAR Exercises in 2005 and Year-End Option/SAR Values

This table summarizes exercises of stock options and tandem stock appreciation rights (granted in prior years) by the officers named in the Summary Compensation Table during the past year, as well as the number and value of all unexercised options held by such named officers at the end of 2005.

Name		Shares Acquired on Exercise (#)		Value Realized ($)			Number of Securities Underlying Unexercised Options/SARs at End of 2005 (#) (Exercisable/ Unexercisable)		Value of Unexercised In-the-Money Options/SARs at End of 2005 ($)(1) (Exercisable/ Unexercisable)
Peter A. Darbee		253,391		$	3,159,728		0/209,750		$	0/$2,084,258
Christopher P. Johns		79,700			811,576		69,050/75,450			1,368,170/820,692
Bruce R. Worthington		196,825			3,877,782		167,525/124,125			1,125,006/1,501,590
Gordon R. Smith		366,679			3,967,467		220,662/0			2,668,732/0
Thomas B. King		122,700			1,913,666		248,245/131,962			2,897,003/1,549,832
Robert D. Glynn, Jr.		1,158,973			12,168,621		484,250/0			8,244,893/0

(1)

Based on the difference between the option exercise price (without reduction for the amount of accrued dividend equivalents, if any) and a fair market value of $37.12, which was the closing price of PG&E Corporation common stock on December 30, 2005.

Long-Term Incentive Program – Awards in 2005

This table summarizes the long-term incentive grants made to the officers named in the Summary Compensation Table during the past year.

		Awards				Estimated Future Payouts Under Non-Stock Price-Based Plans
Name		Number of Shares, Units, or Other Rights(1)		Performance or Other Period Until Maturation or Payout		Threshold ($ or #)(2)		Target ($ or #)(2)		Maximum ($ or #)(2)
Peter A. Darbee		25,060	(1)	3 years		0 units		25,060 units		50,120 units
Christopher P. Johns		7,010 2,504	(1) (3)	3 years 3 years		0 units		7,010 units		14,020 units
Bruce R. Worthington		9,020	(1)	3 years		0 units		9,020 units		18,040 units
Gordon R. Smith		16,030	(1)	3 years		0 units		16,030 units		32,060 units
Thomas B. King		10,020	(1)	3 years		0 units		10,020 units		20,040 units
Robert D. Glynn, Jr.		0

(1)

Represents performance shares granted under the Long-Term Incentive Program. The shares vest three years after the grant year and are earned based on PG&E Corporation's 3-year cumulative total shareholder return (dividends plus stock price appreciation) as compared with that achieved by other companies in the comparator group. Each time that a cash dividend is paid on PG&E Corporation common stock, an amount equal to the cash dividend per share multiplied by the number of shares held by the recipient will be accrued on behalf of the recipient and, atrecipient. At the end of the vesting period, the amount of accrued dividend equivalents will be increased or decreased by the same percentage used to increase or decrease the number of vested performance shares for the period.

(2)

Payments for performance shares are determined by multiplying the number of shares earned for a given period by the average market price of PG&E Corporation common stock for the 30 calendar day period prior to the end

SISOPs — As part of the period.

(3)

Represents common stock equivalents calledExecutive Stock Ownership Program, eligible officers may receive Special Incentive Stock Ownership Premiums (SISOPs) earnedthat are designed to encourage new participants to meet certain stock ownership milestones. Upon grant, SISOPs are automatically deferred to the recipient’s account in the PG&E Corporation Supplemental Retirement Savings Plan (SRSP), a deferred compensation plan, and are converted to units in the PG&E Corporation Phantom Stock Fund under the Executive Stock Ownership Program. SISOPs are earned by eligible officers who achieve and maintain minimum PG&E Corporation common stock ownership levels as set bySRSP. The units vest in full on the Nominating, Compensation, and Governance Committee. Allthird anniversary of the officers named indate of grant, and are subject to forfeiture if the Summary Compensation Table on page 36 are eligible officers. Each SISOP represents a share of PG&E Corporation common stock that vests at the end of three years. Units can be forfeited prior to vesting if an eligible officerparticipant fails to maintain his or her minimumthe applicable stock ownership level.target. Upon retirement or termination, the vested SISOPsunits are distributed in the form of an equivalent number of shares of PG&E Corporation common stock.

Dividends are converted into additional units of phantom stock.

Retention Award. During 2006, Mr. King was awarded 25,233.41 restricted phantom stock units in the PG&E Corporation Phantom Stock Fund under the SRSP. The restricted phantom stock units will vest five years after the date of grant, provided that Mr. King is still an employee of PG&E Corporation or its subsidiaries at that time. Upon retirement or termination, the vested units will be distributed in cash. Dividends are converted into additional units of phantom stock.

Retirement Benefits

For more information regarding the terms of plan-based awards, please see the discussion in the Compensation Discussion and Analysis section on pages 37 to 44 of this Joint Proxy Statement.

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Outstanding Equity Awards at Fiscal Year-End — 2006

This table provides additional information regarding stock options, restricted stock, performance shares, and other equity-based awards that were held as of December 31, 2006 by the individuals named in the Summary Compensation Table, including awards granted prior to 2006. Any awards described below that were granted in 2006 are also reflected in the Grants of Plan-Based Awards in 2006 table.

		Option Awards																	Stock Awards
																															Equity
																											Equity				Incentive Plan
																											Incentive Plan				Awards:
																											Awards:				Market or
																							Market				Number of				Payout Value
																			Number of				Value of				Unearned				of Unearned
		Number of				Number of													Shares or				Shares or				Shares, Units				Shares, Units
		Securities				Securities													Units of				Units of				or Other				or Other
		Underlying				Underlying				Option									Stock That				Stock That				Rights That				Rights That
		Unexercised				Unexercised				Exercise				Option					Have Not				Have Not				Have Not				Have Not
		Options (#)				Options (#)				Price				Expiration					Vested				Vested				Vested				Vested
Name		Exercisable				Unexercisable				($)				Date					(#)(1)				($)(2)				(#)(3)				($)(2)
P. A. Darbee							25,325	(4)		$	14.61				1/3/13					83,625	(5)		$	3,957,971				89,766	(6)		$	8,387,397
							33,600	(7)		$	27.23				1/3/14
							81,525	(8)		$	33.02				1/4/15
C. P. Johns			4,500							$	21.125				1/3/07					27,561	(9)		$	1,304,462				27,278	(10)		$	2,539,160
			29,775				9,925	(11)		$	14.61				1/3/13			��
			16,800				16,800	(12)		$	27.23				1/3/14
			7,600				22,800	(13)		$	33.02				1/4/15
L. H. Everett							4,425	(14)		$	14.61				1/3/13					12,534	(15)		$	593,234				13,248	(16)		$	1,234,982
							5,874	(17)		$	27.23				1/3/14
			863				1,724	(18)		$	28.40				8/3/14
							13,050	(19)		$	33.02				1/4/15
K. M. Harvey							10,175	(20)		$	14.61				1/3/13					15,507	(21)		$	733,946				16,567	(22)		$	1,524,121
							14,274	(23)		$	27.23				1/3/14
			4,613				13,837	(24)		$	33.02				1/4/15
B. R. Worthington							19,825	(25)		$	14.61				1/3/13					31,314	(26)		$	1,482,092				34,276	(27)		$	3,158,615
							30,250	(28)		$	27.23				1/3/14
			9,775				29,325	(29)		$	33.02				1/4/15
T. B. King			50,000							$	32.00				12/17/08					67,129	(30)		$	3,177,216				45,501	(31)		$	4,221,173
			100,000							$	30.9375				1/5/09
							19,825	(32)		$	14.61				1/3/13
			30,250				30,250	(33)		$	27.23				1/3/14
			2,326				2,324	(34)		$	28.40				8/3/14
			10,863				32,587	(35)		$	33.02				1/4/15
T. E. Bottorff							6,800	(36)		$	14.61				1/3/13					16,417	(37)		$	777,017				14,371	(38)		$	1,330,967
							9,400	(39)		$	27.23				1/3/14
							13,050	(40)		$	33.02				1/14/15

(1)

Includes restricted stock and stock-based awards such as restricted stock units and phantom stock awards granted under the PG&E Corporation 2006 Long-Term Incentive Plan (LTIP) and its predecessor (the PG&E Corporation Long-Term Incentive Program), common stock equivalents called Special Incentive Stock Ownership Premiums (SISOPs) that were granted under the Executive Stock Ownership Program, and individual retention and incentive awards. See the Compensation Discussion and Analysis section on pages 37 to 44 of this Joint Proxy Statement for additional details regarding grants in 2006.

	(2)	Value based on the December 29, 2006 closing price of PG&E Corporation common stock ($47.33). Consistent with Securities and Exchange Commission rules, performance shares are valued at the maximum payout because PG&E Corporation exceeded its target performance measure in the previous year.
	(3)	Includes performance shares and restricted stock with a performance requirement granted under the LTIP and its predecessor. See the Compensation Discussion and Analysis section on pages 37 to 44 of this Joint Proxy Statement for additional details regarding grants in 2006.

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	(4)	25,325 stock options vested on January 2, 2007.
	(5)	Restrictions on 28,711 shares of restricted stock lapsed January 3, 2007. Restrictions on 19,426 shares will lapse January 2, 2008, and on 16,006 shares January 2, 2009. Restrictions on an additional 19,482 shares will lapse January 4, 2011 but may lapse earlier, on January 2, 2009, if PG&E Corporation’s three-year total shareholder return for the period ending December 31, 2008 is in the top quartile of the comparator group.
	(6)	Restrictions on 2,321 shares of restricted stock lapsed January 3, 2007. 13,680 performance shares vested on January 3, 2007 (10,944 actually paid out following application of the performance-based payout factor). 25,060 performance shares are scheduled to vest January 2, 2008 and 48,705 performance shares are scheduled to vest January 2, 2009.
	(7)	16,800 stock options vested on January 2, 2007 and 16,800 stock options vest January 2, 2008.
	(8)	27,175 stock options vested on January 3, 2007, 27,175 stock options vest January 3, 2008, and 27,175 stock options vest January 3, 2009.
	(9)	Restrictions on 9,602 shares of restricted stock lapsed January 3, 2007. Restrictions on 5,966 shares will lapse January 2, 2008, and on 4,256 shares January 2, 2009. Restrictions on an additional 5,008 shares will lapse January 4, 2011, but may lapse earlier, on January 2, 2009, if PG&E Corporation’s three-year total shareholder return for the period ending December 31, 2008 is in the top quartile of the comparator group. 75 SISOPs vested January 2, 2007. 2,654 SISOPs will vest January 3, 2008.

(10)	Restrictions on 908 shares of restricted stock lapsed January 3, 2007. 6,840 performance shares vested on January 3, 2007 (5,472 actually paid out following application of the performance-based payout factor). 7,010 performance shares are scheduled to vest January 2, 2008 and 12,520 performance shares are scheduled to vest January 2, 2009.
(11)	9,925 stock options vested on January 2, 2007.
(12)	8,400 stock options vested on January 2, 2007, and 8,400 stock options vest January 2, 2008.
(13)	7,600 stock options vested on January 3, 2007, 7,600 stock options vest January 3, 2008, and 7,600 stock options vest January 3, 2009.
(14)	4,425 stock options vested on January 2, 2007.
(15)	Restrictions on 4,548 shares of restricted stock lapsed January 3, 2007. Restrictions on 2,932 shares will lapse January 2, 2008, and on 2,115 shares January 2, 2009. Restrictions on an additional 2,226 shares will lapse January 4, 2011, but may lapse earlier, on January 2, 2009, if PG&E Corporation’s three-year total shareholder return for the period ending December 31, 2008 is in the top quartile of the comparator group. 713 SISOPs will vest January 3, 2009.
(16)	Restrictions on 403 shares of restricted stock lapsed January 3, 2007. 3,270 performance shares vested on January 3, 2007 (2,616 actually paid out following application of the performance-based payout factor). 4,010 performance shares are scheduled to vest January 2, 2008 and 5,565 performance shares are scheduled to vest January 2, 2009.
(17)	2,937 stock options vested on January 2, 2007 and 2,937 stock options vest January 2, 2008.
(18)	862 stock options vest August 2, 2007 and 862 stock options vest August 2, 2008.
(19)	4,350 stock options vested on January 3, 2007, 4,350 stock options vest January 3, 2008, and 4,350 stock options vest January 3, 2009.
(20)	10,175 stock options vested on January 2, 2007.
(21)	Restrictions on 7,360 shares of restricted stock lapsed January 3, 2007. Restrictions on 3,630 shares will lapse January 2, 2008, and 2,178 shares January 2, 2009. Restrictions on an additional 2,226 shares will lapse January 4, 2011, but may lapse earlier, on January 2, 2009, if PG&E Corporation’s three-year total shareholder return for the period ending December 31, 2008 is in the top quartile of the comparator group. Of 113 SISOPs scheduled to vest January 2, 2007, 68 vested.
(22)	Restrictions on 932 shares of restricted stock lapsed January 3, 2007. 5,810 performance shares vested on January 3, 2007 (4,648 actually paid out following application of the performance-based payout factor). 4,260 performance shares are scheduled to vest January 2, 2008 and 5,565 performance shares are scheduled to vest January 2, 2009.
(23)	7,137 stock options vested on January 2, 2007 and 7,137 stock options vest January 2, 2008.

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(24)	4,613 stock options vested on January 3, 2007, 4,612 stock options vest January 3, 2008, and 4,612 stock options vest January 3, 2009.
(25)	19,825 stock options vested on January 2, 2007.
(26)	Restrictions on 14,823 shares of restricted stock lapsed January 3, 2007. Restrictions on 7,558 shares will lapse January 2, 2008, and on 4,481 shares January 2, 2009. Restrictions on an additional 4,452 shares will lapse January 4, 2011, but may lapse earlier, on January 2, 2009, if PG&E Corporation’s three-year total shareholder return for the period ending December 31, 2008 is in the top quartile of the comparator group.
(27)	Restrictions on 1,816 shares of restricted stock lapsed January 3, 2007. 12,310 performance shares vested on January 3, 2007 (9,848 actually paid out following application of the performance-based payout factor). 9,020 performance shares are scheduled to vest January 2, 2008 and 11,130 performance shares are scheduled to vest January 2, 2009.
(28)	15,125 stock options vested on January 2, 2007, and 15,125 stock options vest January 2, 2008.
(29)	9,775 stock options vested on January 3, 2007, 9,775 stock options vest January 3, 2008, and 9,775 stock options vest January 3, 2009.
(30)	Restrictions on 17,177 shares of restricted stock lapsed January 3, 2007. Restrictions on 9,912 shares will lapse January 2, 2008, and on 6,540 shares January 2, 2009. Restrictions on an additional 8,070 shares will lapse January 4, 2011, but may lapse earlier, on January 2, 2009, if PG&E Corporation’s three-year total shareholder return for the period ending December 31, 2008 is in the top quartile of the comparator group. 25,430 restricted phantom stock units will vest May 12, 2011.
(31)	Restrictions on 1,816 shares of restricted stock lapsed January 3, 2007. 13,490 performance shares vested on January 3, 2007 (10,792 actually paid out following application of the performance-based payout factor). 10,020 performance shares are scheduled to vest January 2, 2008 and 20,175 performance shares are scheduled to vest January 2, 2009.
(32)	19,825 stock options vested on January 2, 2007.
(33)	15,125 stock options vested on January 2, 2007 and 15,125 stock options vest January 2, 2008.
(34)	1,162 stock options vested on August 2, 2007 and 1,162 stock options vest August 2, 2008.
(35)	10,863 stock options vested on January 3, 2007, 10,862 stock options vest January 3, 2008, and 10,862 stock options vest January 3, 2009.
(36)	6,800 stock options vested on January 2, 2007.
(37)	Restrictions on 5,627 shares of restricted stock lapsed January 3, 2007. Restrictions on 3,141 shares will lapse January 2, 2008, and on 2,184 shares January 2, 2009. Restrictions on an additional 2,364 shares will lapse January 4, 2011, but may lapse earlier, on January 2, 2009, if PG&E Corporation’s three-year total shareholder return for the period ending December 31, 2008 is in the top quartile of the comparator group. 3,101 SISOPs will vest January 3, 2009.
(38)	Restrictions on 621 shares of restricted stock lapsed January 3, 2007. 3,830 performance shares vested on January 3, 2007 (3,064 actually paid out following application of the performance-based payout factor). 4,010 performance shares are scheduled to vest January 2, 2008 and 5,910 performance shares are scheduled to vest January 2, 2009.
(39)	4,700 stock options vested on January 2, 2007 and 4,700 stock options vest January 2, 2008.
(40)	4,350 stock options vested on January 3, 2007, 4,350 stock options vest January 3, 2008, and 4,350 stock options vest January 3, 2009.

The table includes stock options that were issued to executive officers in previous years. No options have been awarded to executive officers since 2005. The options listed above were granted to the named executive officers under the PG&E Corporation Long-Term Incentive Program, which was the predecessor to the currently effective PG&E Corporation 2006 Long-Term Incentive Plan. Stock options issued in and after January 2003 are exercisable on a cumulative basis at the rate of one-fourth each year, commencing one year from the date of grant. Stock options issued before January 2003 are exercisable on a cumulative basis at the rate of one-third each year, commencing two years from the date of grant. All options expire 10 years and one day after the date of grant. The option exercise price was set as the closing price of a share of PG&E Corporation common stock on the date of grant, as reported on the New York Stock Exchange.

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Option Exercises and Stock Vested During 2006

This table provides additional information regarding the amounts received during 2006 by individuals named in the Summary Compensation Table upon exercise, vesting, or transfer of stock options, restricted stock, and other stock-based awards.

		Option Awards								Stock Awards
		Number of Shares								Number of Shares
		Acquired on				Value Realized on				Acquired on Vesting				Value Realized on
Name		Exercise (#)				Exercise ($)				(#)(1)				Vesting ($)(1)
P. A. Darbee			69,300			$	1,016,034				18,970			$	698,616
C. P. Johns			36,300			$	889,590				9,819			$	363,501
L. H. Everett			11,713			$	174,961				3,436			$	127,420
K. M. Harvey			17,313			$	341,705				10,262			$	380,188
B. R. Worthington			202,475			$	2,845,725				12,598			$	464,456
T. B. King			101,782			$	2,509,948				13,143			$	484,576
T. E. Bottorff			15,850			$	272,541				4,446			$	165,223

(1)

Reflects both restricted stock and common stock equivalents called Special Incentive Stock Ownership Premiums (SISOPs) that were granted under the Executive Stock Ownership Program and that vested on January 2, 2006. For Mr. Johns, stock awards include 2,721 SISOPs and the value realized on vesting was $100,995. For Mr. Harvey, stock awards include 4,014 SISOPs and the value realized on vesting was $148,985. Receipt has been deferred until the seventh month following the termination of Mr. John’s and Mr. Harvey’s employment.

Pension Benefits — 2006

This table provides information for each individual named in the Summary Compensation Table relating to accumulated benefits as of December 31, 2006 under any plan that provides for payments or other benefits at, after, or relating to retirement.

				Number of				Present Value of				Payments
				Years Credited				Accumulated				During Last
Name		Plan Name		Service (#)				Benefits ($)				Fiscal Year ($)
P. A. Darbee		PG&E Corporation Supplemental Executive Retirement Plan			8.5	(1)		$	2,500,911			$	0
C. P. Johns		Pacific Gas and Electric Company Retirement Plan			10.6			$	480,040			$	0
		PG&E Corporation Supplemental Executive Retirement Plan			10.6			$	170,438			$	0
L. H. Everett		Pacific Gas and Electric Company Retirement Plan			29.6			$	1,552,296			$	0
		PG&E Corporation Supplemental Executive Retirement Plan			29.6			$	749,658			$	0
K. M. Harvey		Pacific Gas and Electric Company Retirement Plan			24.3			$	1,030,464			$	0
		PG&E Corporation Supplemental Executive Retirement Plan			24.3			$	648,172			$	0
B. R. Worthington		Pacific Gas and Electric Company Retirement Plan			32.5			$	1,614,365			$	0
		PG&E Corporation Supplemental Executive Retirement Plan			32.5			$	3,554,603			$	0

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Pension Benefits — 2006

Continued

				Number of				Present Value of				Payments
				Years Credited				Accumulated				During Last
Name		Plan Name		Service (#)				Benefits ($)				Fiscal Year ($)
T. B. King		Pacific Gas and Electric Company Retirement Plan			3.2			$	175,888			$	0
		PG&E Corporation Supplemental Executive Retirement Plan			8.5	(2)		$	1,511,717			$	0
T. E. Bottorff		Pacific Gas and Electric Company Retirement Plan			24.8			$	1,289,924			$	0
		PG&E Corporation Supplemental Executive Retirement Plan			24.8			$	358,456			$	0

(1)	Effective July 1, 2003, Mr. Darbee became a participant in the Supplemental Executive Retirement Plan (SERP) with five years of credited service.
(2)	Effective July 1, 2003, Mr. King became a participant in the SERP with five years of credited service.

Assumptions used in calculating the present value of accumulated pension benefits are the same as were used in preparing the PG&E Corporation and Pacific Gas and Electric Company provide2006 financial statements. Assumptions are set forth in the Annual Report to Shareholders.

Pension benefits are provided to executive officers under two plans. Pacific Gas and Electric Company provides retirement benefits to all of its employees, including its officers, under a tax-qualified defined benefit pension plan, thePacific Gas and Electric Company Retirement Plan (Retirement Plan). The Retirement Plan also covers a significant number of PG&E Corporation’s employees and officers. A participant may begin receiving pension benefits at age 55, but benefits will be reduced unless the officers namedindividual has at least 35 years of service. At age 65, a participant becomes eligible for an unreduced pension, irrespective of the years of service. Between age 55 and age 65, any pension benefit may be reduced based on the number of years of service, and in accordance with pre-set charts set forth in the Summary Compensation Table on pagesRetirement Plan. The benefit formula is 1.7 percent of the average annual salary for the last 36 months of service multiplied by years of credited service. Payments are in the form of a single life annuity or, at the election of the participant, a joint spousal annuity.

PG&E Corporation has also adopted a non-tax qualified defined benefit pension plan that provides benefits to officers and 37.key employees. The benefit formula for eligible officers thePG&E Corporation Supplemental Executive Retirement Plan (SERP)is 1.7 percent of the average of the three highest combined salary and annual Short-Term Incentive Plan payments during the last 10 years of service multiplied by years of credited service.

During 2002 and 2003, annuities were purchased to replace The benefit payable from the SERP is reduced by any benefit payable from the Retirement Plan. Payments are in the form of a significant portionsingle life annuity or, at the election of the unfundedofficer, a joint spousal annuity. Normal retirement benefits for certain officers whose entire accrued benefit could not be provided under the Retirement Plan dueage is 65. Benefits may begin earlier, subject to tax code limits. The annuities will not change the amount or timing of the after-tax benefits that would have been provided upon retirement under the Supplemental Executive Retirement Plan (SERP) or similar arrangements. In connection with the annuities, tax restoration payments were made such that the annuitization was tax-neutral to the officer.

Effective July 1, 2003, Mr. Darbee and Mr. King became participants in the SERP with fivereduction depending on years of credited service. Mr. Darbee and Mr. King will each earn an additional five years of credited service under the SERP, provided that they are employed by PG&E Corporation or a subsidiary on July 1, 2008. If Mr. King remains employed by PG&E Corporation or a subsidiary until age 55, any early retirement reduction factors will be eliminated.

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Non-Qualified Deferred Compensation

This table provides information for 2006 for each individual named in the Summary Compensation Table regarding such individuals’ accounts in non-qualified defined contribution plans and other deferred compensation plans as of December 31, 2006.

		Executive				Registrant								Aggregate
		Contributions in				Contributions in				Aggregate Earnings				Withdrawals/				Aggregate Balance
		Last FY				Last FY				in Last FY				Distribution				at Last FYE
Name		($)(1)				($)(2)				($)(3)				($)				($)(4)
P. A. Darbee		$	0			$	31,875			$	326,625			$	0			$	2,382,946
C. P. Johns		$	454,467			$	14,001			$	336,798			$	0			$	1,915,542
L. H. Everett		$	101,200			$	2,700			$	13,367			$	290,000			$	288,545
K. M. Harvey		$	148,985			$	5,895			$	60,400			$	0			$	268,203
B. R. Worthington		$	650,528			$	17,813			$	214,921			$	0			$	2,764,404
T. B. King		$	0			$	16,200			$	127,646			$	0			$	713,600
T. E. Bottorff		$	0			$	2,700			$	1,607			$	0			$	16,456

(1)	Includes the following amounts which were reported as compensation in the Summary Compensation Table: Mr. Johns $163,020, Ms. Everett $101,200, and Mr. Worthington $269,625.
(2)	Represents amounts earned in 2005 and credited to the officer’s deferred compensation account on the first business day of 2006.
(3)	Represents earnings from the Supplemental Retirement Savings Plan (SRSP). Includes the following amounts which were reported as compensation in the Summary Compensation Table: Mr. Darbee $4,821, Mr. Johns $67, Ms. Everett $1,459, Mr. Harvey $90, Mr. Worthington $16,881, Mr. King $1,729, and Mr. Bottorff $63.
(4)	Includes the following amounts which were reported as compensation in the Summary Compensation Table for 2006 and prior years: Mr. Darbee $1,704,356, Mr. Johns $979,399, Ms. Everett $102,659, Mr. Harvey $5,430, Mr. Worthington $1,885,559, and Mr. King $432,797.

The table presents balances from both the PG&E Corporation Supplemental Retirement Savings Plan, for deferrals made prior to January 1, 2005, and the estimated pre-tax annual retirement benefits payable2005 PG&E Corporation Supplemental Retirement Savings Plan, for deferrals made on and after January 1, 2005.

To the extent that matching contributions to a 401(k) plan cannot be made to an officer’s Retirement Savings Plan account because the Internal Revenue Code limits would be exceeded, PG&E Corporation contributes the excess amount to the PG&E Corporation Supplemental Retirement Savings Plan (SRSP). Under the SRSP, officers may defer 5 percent to 50 percent of their base salary, and all or part of their perquisite allowance, Short-Term Incentive Plan award, and performance share award. PG&E Corporation will also contribute an amount equal to any employer contributions due under the SERPqualified Retirement Savings Plan that were not made due to limitations under Internal Revenue Code Sections 401(m), 401(a)(17), or similar arrangements (assuming credited service415. Special Incentive Stock Option Premiums (SISOPs) granted under the Executive Stock Ownership Program must be deferred pursuant to age 65), adjusted to reflect the effectterms of that program.

Earnings are calculated based on the performance of the annuities,following funds available in the qualified Retirement Savings Plan: Large Company Stock Index Fund (2006 return of 15.78%), International Stock Index Fund (2006 return of 26.31%), Conservative Asset Allocation Fund (2006 return of 9.38%), Moderate Asset Allocation Fund (2006 return of 12.22%), Aggressive Asset Allocation Fund (2006 return of 15.02%), Stable Value Fund (2006 return of 4.51%), Bond Index Fund (2006 return of 4.33%), and the Small Company Stock Index Fund (2006 return of 14.93%). Other available measures are the PG&E Corporation Phantom Stock Fund, which mirrors an investment in PG&E Corporation common stock (2006 return of 31.58%), and the AA Utility Bond Fund. The AA Utility Bond Fund accrues interest based on the long-term corporate bond yield average for Aa utilities reported by Moody’s Investors Service (yields reported during 2006 ranged from 5.45% to 6.26%). Pre-2005 deferrals are limited to the most highly compensated executive officers were as follows: Mr. Darbee $460,435, Mr. Johns $290,525, Mr. Worthington $398,510,Large Company Stock Index Fund, the PG&E Corporation Phantom Stock Fund, and Mr. King $567,129. The estimated annual retirement benefitsthe AA Utility Bond Fund. With the exception of SISOP deferrals, the earnings measures are single life annuity benefitsselected by the officer and wouldmay be reallocated subject to restrictions imposed by regulations of the Securities and Exchange Commission. SISOP deferrals may only be invested in the PG&E Corporation Phantom Stock Fund and may not be subjectreallocated.

Pre-2005 deferrals may be distributed in 1 to any Social Security offsets. Mr. Smith and Mr. Glynn retired December 31,10 installments commencing in January of the year following termination of employment. For deferrals made in 2005 and are entitled to annual retirement benefitsthereafter, distributions may be made in the seventh month following termination of $478,332 and $452,279, respectively. Mr. Smith's and Mr. Glynn's retirement benefits have been adjusted to reflectemployment or in January of a year specified by the effect of the annuities and the election of 100% joint and survivor annuity benefits, and are not subject to Social Security offsets.officer.

Employment Contracts,55

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Potential Payments Upon Resignation, Retirement, Termination, of Employment, and Change in Control, Provisions

What types of employment contracts exist forDeath, or Disability

The executive officers named in the Summary Compensation Table?

NoTable are eligible to receive certain benefits upon termination, a change in the officer’s responsibilities, or a change in control. PG&E Corporation’s and Pacific Gas and Electric Company’s policy is not to provide benefits conditioned solely upon a change in control. In general, payments are triggered only if (1) the change in control has been implemented (not just approved by shareholders), (2) there has been termination or constructive termination of the individual, and (3) with respect to vesting of equity-based awards, the successor entity has elected not to continue any equity-based grants in a manner that preserves the value of those grants.

The following discussions of potential payments upon termination or a change in control assume that the executive officer left employment contracts exist between those officerson December 31, 2006, and that the value of any stock-based compensation received was $47.33 per share, which was the closing price of a share of PG&E Corporation common stock on December 29, 2006. The tables below exclude amounts that represent payment for services rendered (such as unpaid and earned salary or Short-Term Incentive Plan awards) and that would be due to the executive officer even if the individual had remained employed with PG&E Corporation or Pacific Gas and Electric Company. Both companies have a policy against entering into employment contracts generally.

What types ofCompany (as the case may be).

Potential Payments Upon Resignation/ Retirement

This table estimates potential payments do officersfor each individual named in the Summary Compensation Table, if that individual were to resign from employment effective December 31, 2006.

						Non-Qualified
		Present Value				Deferred				Equity-Based
		Of Accumulated				Compensation				Grants
		Pension				Aggregate				That Accelerate
		Benefits				Balance				Upon Retirement(1)				Total
P. A. Darbee		$	2,036,302			$	2,382,946							$	4,419,248
C. P. Johns		$	744,496			$	1,915,542							$	2,660,038
L. H. Everett		$	2,510,992			$	288,545			$	1,827,940			$	4,627,477
K. M. Harvey		$	1,760,491			$	268,203							$	2,028,694
B. R. Worthington		$	5,625,638			$	2,764,404			$	5,034,322			$	13,424,364
T. B. King		$	892,508			$	713,600							$	1,606,108
T. E. Bottorff		$	1,729,979			$	16,456							$	1,746,435

(1)	If Ms. Everett or Mr. Worthington had resigned effective December 31, 2006, they would have been eligible for retirement benefits under the PG&E Corporation 2006 Long-Term Incentive Plan (LTIP) and its predecessor, the PG&E Corporation Long-Term Incentive Program. Those payments are discussed separately in the narrative discussion following this table, below.

If an officer resigns, he or she is entitled to receive accrued pension benefits and the aggregate balance in the officer’s deferred compensation account, as described in the narrative accompanying the Pension Benefits table and the Non-Qualified Deferred Compensation table.

In general, vested stock options are exercisable within 30 days after resignation or the original option term, whichever is shorter. Unvested stock options, restricted stock, performance shares, and Special Incentive Stock Ownership Premiums (SISOPs) are cancelled upon resignation.

However, if theythe individual’s resignation also qualifies as a “retirement” under the LTIP or its predecessor (the PG&E Corporation Long-Term Incentive Program), all unvested options immediately vest and are exercisable for the shorter of five years or the option term, the restrictions on restricted stock continue to lapse as if the officer remained employed, performance shares continue to vest as if the officer remained employed, and unvested SISOPs immediately vest and are payable in the seventh month following termination of employment.

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Potential Payments Upon Termination With Cause

This table estimates potential payments for each individual named in the Summary Compensation Table, if that individual were to be terminated with cause effective December 31, 2006.

						Non-Qualified
		Present Value				Deferred				Equity-Based
		Of Accumulated				Compensation				Grants
		Pension				Aggregate				That Accelerate
		Benefits				Balance				Upon Retirement(1)				Total
P. A. Darbee		$	2,036,302			$	2,382,946							$	4,419,248
C. P. Johns		$	744,496			$	1,915,542							$	2,660,038
L. H. Everett		$	2,510,992			$	288,545			$	1,827,940			$	4,627,477
K. M. Harvey		$	1,760,491			$	268,203							$	2,028,694
B.R. Worthington		$	5,625,638			$	2,764,404			$	5,034,322			$	13,424,364
T. B. King		$	892,508			$	713,600							$	1,606,108
T. E. Bottorff		$	1,729,979			$	16,456							$	1,746,435

(1)	If Ms. Everett or Mr. Worthington had been terminated for cause effective December 31, 2006, they would have been eligible for retirement benefits under the LTIP. Those payments are discussed separately in the narrative discussion following this table, below.

If an officer is terminated for cause, he or she is not eligible to receive an award under the Short-Term Incentive Plan for that year. All outstanding unvested stock options, restricted stock, performance shares, and unvested Special Incentive Stock Ownership Premiums (SISOPs) are cancelled.

The officer is entitled to receive accrued pension benefits and the aggregate balance in the officer’s deferred compensation account, as described in the narrative accompanying the Pension Benefits table and the Non-Qualified Deferred Compensation table.

However, if the individual’s termination also qualifies as a “retirement” under the LTIP or its predecessor, all unvested options become immediately vested and are exercisable for the shorter of five years or the option term, the restrictions on restricted stock continue to lapse as if the officer remained employed, performance shares continue to vest as if the officer remained employed, and unvested SISOPs immediately vest and are payable in the seventh month following termination of employment.

Potential Payments Upon Termination Without Cause

This table estimates potential payments for each individual named in the Summary Compensation Table, if that individual were terminated without cause?cause effective December 31, 2006.

																		Non-Qualified
						Value of				Value of				Value of				Deferred
						Stock				Stock				Accum.				Compensation
		Severance				Options				Awards				Pension				Aggregate								Career
		Payment				Vesting(1)				Vesting(2)				Benefits				Balance				COBRA(3)				Transition				Total
P. A. Darbee		$	3,750,401			$	2,281,743			$	5,051,869			$	2,185,901			$	2,382,946			$	32,266			$	15,000			$	15,700,126
C. P. Johns		$	913,060			$	879,938			$	1,719,659			$	1,362,836			$	1,915,542			$	31,571			$	15,000			$	6,837,606
L. H. Everett		$	870,000			$	482,234			$	1,345,706			$	2,510,992			$	288,545			$	16,786			$	15,000			$	5,529,263
K. M. Harvey		$	163,532			$	751,843			$	1,123,562			$	2,653,214			$	268,203			$	31,571			$	15,000			$	5,006,925
B. R. Worthington		$	1,516,675			$	1,676,340			$	3,357,982			$	5,625,638			$	2,764,404			$	17,798			$	15,000			$	14,973,837
T. B. King		$	1,300,002			$	1,611,577			$	3,830,964			$	1,745,006			$	713,600			$	32,266			$	15,000			$	9,248,415
T. E. Bottorff		$	587,027			$	535,933			$	1,300,552			$	1,990,452			$	16,456			$	17,640			$	15,000			$	4,463,060

(1)	Value based on the difference between the option exercise price and $47.33, which was the closing price of PG&E Corporation common stock on December 29, 2006.
(2)	Value based on the December 29, 2006 closing price of $47.33.
(3)	As required by the health benefit provisions in the Consolidated Omnibus Budget Reconciliation Act (COBRA).

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The PG&E Corporation Officer Severance Policy, which covers most officers of PG&E Corporation and its subsidiaries, including the officers named in the Summary Compensation Table, provides benefits if a covered officer is terminated without cause. In most situations, benefits under the policy include:

1.

A lump sum payment of one and one-half or two times annual base salary and Short-Term Incentive Plan target (the applicable severance multiple being dependent on an officer's level),

2.

Continued vesting of equity-based incentives for 18 months or two years after termination (depending on the applicable severance multiple),

3.

Accelerated vesting of up to two-thirds of the common stock equivalents granted under the Executive Stock Ownership Program (depending on an officer's level), and

4.

Payment of health care insurance premiums for 18 months after termination.

1.	A lump sum payment of one and one-half or two times annual base salary and Short-Term Incentive Plan target (the applicable severance multiple being dependent on an officer’s level),
2.	Continued vesting of equity-based incentives for one and one-half or two years after termination (depending on the applicable severance multiple),
3.	Accelerated vesting of up to two-thirds of the Special Incentive Stock Ownership Premiums (SISOPs) granted under the Executive Stock Ownership Program (depending on an officer’s level), and
4.	Payment of health care insurance premiums for 18 months after termination.

The severance benefit is generally paid to the officer in a lump sum. However, if the officer is covered by the PG&E Corporation'sCorporation Supplemental Executive Retirement Plan and is less thanunder age 55, years old, a portion of that officer'sofficer’s severance benefits will be automatically converted to additional years of age, up to 55 years, for purposes of calculating pension benefits, with the remaining portion of the severance benefit, if any, paid in a lump sum. If the additional age resulting from such conversion does not result in an age of 55, the officer will be paid the entire severance benefit in a lump sum.

If an officer is terminated without cause before December 31 of a given year and has less than six months of service in the year, the officer is not eligible for that year’s Short-Term Incentive Plan (STIP) award. If the officer is terminated before December 31 and has at least six months of service in the year, he or she is eligible for a prorated STIP award for that year, if any. If the officer is terminated on December 31, he or she is eligible for that year’s STIP award, if any.

Unvested stock options and restricted stock continue to vest for a number of months equivalent to the severance multiple set forth in the Officer Severance Policy. Stock options are exercisable within five years after termination or the original option term, whichever is shorter. Restrictions on restricted stock continue to lapse for a number of months equal to the severance multiple. Performance shares vest proportionately based on the number of months during the performance period that the officer was employed divided by 36 months. Two-thirds of unvested SISOPs vest and one-third are forfeited. If the officer is at least 55 years of age with at least 5 years of service, his or her termination is treated as a retirement under the terms of the LTIP (and its predecessor). In that case, any unvested stock options immediately vest. Stock options are exercisable within five years after termination or the original option term, whichever is shorter. Restrictions on restricted stock continue to lapse and performance shares continue to vest as if the officer remained employed. Unvested SISOPs immediately vest. The restricted phantom stock units granted to Mr. King under his retention arrangement vest in proportion to the months of service completed during the60-month performance period.

The officer is entitled to receive accrued pension benefits and the aggregate balance in the officer’s deferred compensation account, as described in the narrative accompanying the Pension Benefits Table and the Non-Qualified Deferred Compensation Table. Career transition services and COBRA premiums for a period of 18 months are also provided.

The officer agrees not to divulge any confidential or privileged information obtained during his or her employment. During a period equal to the severance multiple, the officer agrees to a covenant not to compete and to refrain from soliciting customers and employees. He or she also agrees to assist in legal proceedings as reasonably required during this period.

On November 13, 2006, PG&E Corporation announced the departure of Bruce R. Worthington, who had served as Senior Vice President and General Counsel of PG&E Corporation from 1997 until November 10, 2006. His employment will terminate in April 2007. Mr. Worthington will receive severance benefits in accordance with the PG&E Corporation Officer Severance Policy, contingent upon his execution of a severance agreement, as called for under the Officer Severance Policy. These benefits include a lump sum payment of $1,516,675 and payment of health insurance premiums for 18 months. Mr. Worthington’s termination is treated as a retirement under the terms of the LTIP (and its predecessor). Unvested stock options immediately vest. Restrictions on restricted stock continue to lapse and performance shares continue to vest as if he had remained employed.

What types of58

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Potential Payments Following a Change in Control and Other Triggering Events

This table estimates potential payments are triggered for officerseach individual named in the Summary Compensation Table, uponif there were a change in control?

control of PG&E Corporation and its affiliates, and (1) the successor company does not continue the outstanding awards in a manner that preserves their value, and (2) the individual is terminated or constructively terminated effective December 31, 2006.

																						Present				Non-Qualified
														Value of				Value of				Value of				Deferred
		Short-Term												Stock				Stock				Accumulated				Compensation
		Incentive				Severance				Tax				Options				Awards				Pension				Aggregate
		Plan Award				Payment				Restoration				Vesting(1)				Vesting(2)				Benefits				Balance				Total
P. A. Darbee		$	975,000			$	5,850,000			$	0			$	2,670,617			$	8,829,955			$	3,234,128			$	2,382,946			$	23,942,646
C. P. Johns		$	271,700			$	2,297,100			$	1,881,886			$	988,694			$	2,751,751			$	744,496			$	1,915,542			$	10,851,169
L. H. Everett		$	145,000			$	1,305,000			$	920,917			$	482,234			$	1,307,862			$	2,510,992			$	288,545			$	6,960,550
K. M. Harvey		$	176,043			$	1,584,383			$	0			$	817,841			$	1,602,264			$	1,760,491			$	268,203			$	6,209,225
B. R. Worthington		$	269,088			$	2,275,014			$	0			$	1,676,340			$	3,278,916			$	5,625,638			$	2,764,404			$	15,889,400
T. B. King		$	461,250			$	3,228,750			$	0			$	1,767,012			$	5,543,873			$	2,022,930			$	713,600			$	13,737,415
T. E. Bottorff		$	141,250			$	1,271,250			$	0			$	598,182			$	1,545,080			$	1,729,979			$	16,456			$	5,302,197

(1)	Value based on the difference between the option exercise price and $47.33, which was the closing price of PG&E Corporation common stock on December 29, 2006.
(2)	Value based on the December 29, 2006 closing price of $47.33.

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

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

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

1.

Unpaid base salary earned through the termination date,

2.

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

3.

Any accrued but unpaid vacation pay, and

4.

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

1.	Unpaid base salary earned through the termination date,
2.	Short-Term Incentive Plan target calculated for the fiscal year in which termination occurs (Target Bonus),
3.	Any accrued but unpaid vacation pay, and
4.	Three times the sum of Target Bonus and the officer’s annual base salary in effect immediately before either the date of termination or the change in control, whichever base salary is greater.

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

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

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

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

The Golden Parachute Restriction Policy became effective upon adoption on February 15, 2006, subject to existing contractual obligations in the Officer

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

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

1.

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

2.

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

3.

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

1.	Any time periods relating to the exercise or realization of any stock-based incentive (including performance shares, stock options, performance units, and Special Incentive Stock Ownership Premiums (SISOPs) granted under the Executive Stock Ownership Program) will be accelerated so that such incentive may be exercised or realized in full immediately upon the change in control,
2.	All shares of restricted stock will immediately cease to be forfeitable, and
3.	All conditions relating to the realization of any stock-based incentive will terminate immediately.

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

What constitutes a change in control?

On February 15, 2006, the PG&E Corporation Board of Directors amended the definition of "change“change in control"control” reflected in the PG&E Corporation Officer Severance Policy and the 2006 LTIP. Prior to the effective date of these amendments, the definition of "change“change in control"control” included shareholder approval of certain consolidation or merger transactions. The amendments provide that a "change“change in control"control” occurs upon the consummation of a transaction following shareholder approval, rather than upon shareholder approval alone. The amendments address issues raised in a shareholder proposal that was approved by shareholders at the PG&E CorporationCorporation’s 2005 annual meeting.

Specifically, the PG&E Corporation Officer Severance Policy and 2006 LTIP, as amended, define a change in control as follows:

1.

Any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, but excluding any benefit plan for employees or any trustee, agent, or other fiduciary for any such plan acting in such person's capacity as such fiduciary), directly or indirectly, becomes the beneficial owner of securities of PG&E Corporation representing 20 percent or more of the combined voting power of PG&E Corporation's then outstanding securities,

2.

During any two consecutive years, individuals who at the beginning of that period constitute the Board of Directors cease for any reason to constitute at least a majority of the Board of Directors, unless the election, or the nomination for election by the shareholders of the Corporation, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period, or

3.

Any consolidation or merger of the Corporation shall have been approved by the shareholders and consummated, other than a merger or consolidation that would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent of such surviving entity) at least 70 percent of the combined voting power of the Corporation, such surviving entity, or the parent of such surviving entity outstanding immediately after the merger or consolidation,

4.

The shareholders of the Corporation shall have approved:

a.

Any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation, or

b.

Any plan or proposal for the liquidation or dissolution of the Corporation.

1.	Any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, but excluding any benefit plan for employees or any trustee, agent, or other fiduciary for any such plan acting in such person’s capacity as such fiduciary), directly or indirectly, becomes the beneficial owner of securities of PG&E Corporation representing 20 percent or more of the combined voting power of PG&E Corporation’s then outstanding securities,
2.	During any two consecutive years, individuals who at the beginning of that period constitute the Board of Directors cease for any reason to constitute at least a majority of the Board of Directors, unless the election, or the nomination for election by the shareholders of PG&E Corporation, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period, or
3.	Any consolidation or merger of PG&E Corporation shall have been approved by the shareholders and consummated, other than a merger or consolidation that would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent of such surviving entity) at least 70 percent of the combined voting power of the Corporation, such surviving entity, or the parent of such surviving entity outstanding immediately after the merger or consolidation,
4.	The shareholders of PG&E Corporation shall have approved:

	a.	Any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation, or
	b.	Any plan or proposal for the liquidation or dissolution of the Corporation.

For purposes of this definition, the term "combined“combined voting power"power” means the combined voting power of the then outstanding voting securities of thePG&E Corporation or the other relevant entity.

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The amended definition of "change“change in control"control” in the 2006 LTIP will become effective starting with grants for 2007. The amendments to the Officer Severance Policy became effective upon adoption, subject to existing contractual obligations in the Officer Severance Policy (discussed above under "Golden“Golden Parachute Restriction Policy"Policy”). For officers covered by the Officer Severance Policy on February 15, 2006, the Policy'sPolicy’s amended definition of "change“change in control"control” will become effective sometime during 2009.

The officer is entitled to receive accrued pension benefits and the aggregate balance in the officer’s deferred compensation account, as described in the narrative accompanying the Pension Benefits table and the Non-Qualified Deferred Compensation table.

ComparisonPotential Payments Upon Termination Due to Death or Disability

This table estimates potential payments for each individual named in the Summary Compensation Table, if that individual’s employment were terminated due to death or disability effective December 31, 2006.

										Value of				Non-Qualified
		Value of				Value of				Accum.				Deferred
		Stock				Stock				Pension				Compensation
		Options				Awards				Benefits				Aggregate
		Vesting				Vesting				(Upon Death)				Balance				Total
P. A. Darbee		$	2,670,617			$	9,003,193			$	1,060,253			$	2,382,946			$	15,117,009
C. P. Johns		$	988,694			$	2,797,296			$	384,260			$	1,915,542			$	6,085,792
L. H. Everett		$	482,234			$	1,329,699			$	1,452,127			$	288,545			$	3,552,605
K. M. Harvey		$	817,841			$	1,624,547			$	1,898,506			$	268,203			$	4,609,097
B. R. Worthington		$	1,676,340			$	3,324,373			$	3,490,883			$	2,764,404			$	11,256,000
T. B. King		$	1,767,012			$	5,614,991			$	460,117			$	713,600			$	8,555,720
T. E. Bottorff		$	598,182			$	1,567,828			$	1,445,996			$	16,456			$	3,628,462