PG&E CORPORATION 2005 DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS

PG&E CORPORATION

2005 DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS

PG&E CORPORATION

2005 DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS

1.   Purpose of the Plan .  The Plan is established and is maintained for the benefit of Directors of PG&E CORP in order to provide the Directors with an opportunity to defer receipt of their Meeting Fees and Retainer Fees.  The Plan is an unfunded deferred compensation plan.

2.   Definitions .  The following words and phrases shall have the following meanings unless a different meaning is plainly required by the context:

(a)   “ Board of Directors ” shall mean the Board of Directors of PG&E CORP, as from time to time constituted.

(b)   “ Code ” shall mean the Internal Revenue Code of 1986, as amended.  Reference to a specific section of the Code shall include such section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing, or superseding such section.

(c)   “ Committee ” shall mean the Compensation Committee of the Board of Directors, as it may be constituted from time to time.

(d)   “ Deferred Compensation Account ” or “ Account ” shall mean as to any Director, the separate account maintained on the books of PG&E CORP in accordance with Section 6(a) in order to reflect his or her interest under the Plan.  Accounts shall be centrally administered by the Plan Administrator or its designee.

(e)   “ Director ” shall mean any member of the Board of Directors who is not an employee of PG&E CORP or a Subsidiary.

(f)   “ Director's Termination Date ” shall mean the date of the Director's separation from service (within the meaning of Section 409A of the Code).

(g)   “ Investment Funds ” shall mean the investment funds established by the Board of Directors and reflected from time to time on Appendix A.  The Investment Funds shall be used for tracking phantom investment results under the Plan.

(h)   “ Meeting Fee ” means the amount of compensation paid by PG&E CORP to a Director for his or her attendance and services at a meeting of the Board of Directors or any committee thereof.  A Meeting Fee shall not include (i) any Retainer Fee, or (ii) any reimbursement by PG&E CORP of expenses incurred by a Director incidental to attendance at a

(i)   “ PG&E CORP ” shall mean PG&E Corporation, a California corporation.

(j)   “ Plan ” shall mean the PG&E Corporation 2005 Deferred Compensation Plan for Non-Employee Directors, as set forth in this instrument and as amended from time to time.

(k)   “ Plan Year ” shall mean the calendar year.

(l)   “ Prior Plan ” shall mean the PG&E Corporation Deferred Compensation Plan for Non-Employee Directors.

(m)   “ Retainer Fee ” means the amount of compensation paid by PG&E CORP to a Director for retaining his or her services during a calendar quarter.  A Retainer Fee shall not include (i) any Meeting Fee, or (ii) any reimbursement by PG&E CORP of expenses incurred by a Director incidental to attendance at a meeting of the Board of Directors or of a committee thereof or of any other expense incurred on behalf of PG&E CORP.

(n)   “ Subsidiary ” shall mean a subsidiary of PG&E CORP.

(o)   “ Valuation Date ” shall mean:

(1)   For purposes of valuing Plan assets and Directors’ Accounts for periodic reports and statements, the date as of which such reports or statements are made; and

(2)   For purposes of determining the amount of assets actually distributed to the Director or his or her beneficiary (or available for withdrawal), a date that shall not be more than seven business days prior to the date the check is issued to the Director.

3.   Eligibility .  Each Director who receives a Meeting Fee or Retainer Fee for service on the Board of Directors shall be eligible to participate in the Plan.

4.   Deferrals .

(a)   Amount of Deferral .  A participating Director may defer (i) all Retainer Fees only; (ii) Meeting Fees only; or (iii) all Retainer Fees and all Meeting Fees.

(b)   Credits to Accounts .  Deferrals shall be credited to a Director’s Account as of the date that they otherwise would have been paid.

(c)   Deferral Election .  A Director must file an election form with the Corporate Secretary which indicates whether Retainer Fees, Meeting Fees or both are to be deferred under the Plan.  The election shall occur no later than December 31 (or such earlier date established by the Plan Administrator) of the calendar year next preceding the service year (within the meaning of Treasury Regulation Section 1.409A-2(a)(3)).  Notwithstanding the foregoing, to the extent permitted under Treasury Regulation Section 1.409A-2(a)(7), upon first becoming a Director, an election to defer shall be effective for Meeting Fees and/or Retainer Fees earned with respect to service provided following the filing of a Deferral Election Form, provided said Form is filed with the Corporate Secretary within 30 days following the date when the individual first becomes a Director.  The Plan Administratory may, in its sole discretion, permit elections to made under other timing rules that comply with Code Section 409A.

5.   Investment Funds .  Although no assets will be segregated or otherwise set aside with respect to a Director’s Account, the amount that is ultimately payable to the Director with respect to such Account shall be determined as if such Account had been invested in some or all of the Investment Funds.  The Plan Administrator, in its sole discretion, shall adopt (and modify from time to time) such rules and procedures as it deems necessary or appropriate to implement the deemed investment of the Directors’ Accounts.  Such procedures generally shall provide that a Director’s Account shall be deemed to be invested among the available Investment Funds in the manner elected by the Director in such percentages and manner as prescribed by the Plan Administrator.  In the event no election has been made by the Director, such Account will be deemed to be invested in the AA Utility Bond Fund.  Directors shall be able to reallocate their Accounts between the Investment Funds and reallocate amounts newly credited to their Accounts at such time and in such manner as the Plan Administrator shall prescribe.  Anything to the contrary herein notwithstanding, a Director may not reallocate Account balances between Investment Funds if such reallocation would result in a non-exempt Discretionary Transaction as defined in Rule 16b-3 of the Securities Exchange Act of 1934, as amended, or any successor to Rule 16b-3, as in effect when the reallocation is requested.  The available Investment Funds shall be listed on Appendix A and may be changed from time to time by the Board of Directors.

6.   Accounting .

(a)   Accounts .  At the direction of the Plan Administrator, there shall be established and maintained on the books of PG&E CORP, a separate account for each participating Director in order to reflect his or her interest under the Plan.

(b)   Investment Earnings .  Each Director’s Account shall initially reflect the value of his or her Account’s interest in each of the Investment Funds, deemed acquired with the amounts credited thereto.  Each Director’s Account shall also be credited (or debited) with the net appreciation (or depreciation), earnings and gains (or losses) with respect to the investments deemed made by his or her Account.  Any such net earnings or gains deemed realized with respect to any investment of any Director’s Account shall be deemed reinvested in additional amounts of the same investment and credited to the Director’s Account.

(c)   Accounting Methods .  The accounting methods or formulae to be used under the Plan for the purpose of maintaining the Directors’ Accounts shall be determined by the Plan Administrator.  The accounting methods or formulae selected by the Plan Administrator may be

(d)   Valuations and Reports .  The fair market value of each Director’s Account sh