PG&E CORPORATION LONG-TERM INCENTIVE PROGRAM FORM OF PERFORMANCE SHARE AGREEMENT

By signing this cover sheet, you agree to all of the terms and conditions described in the attached Agreement.  You and PG&E Corporation agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.  You are also acknowledging receipt of this Agreement and a copy of the prospectus describing the LTIP and the Performance Shares dated January 1, 2005.

The LTIP and Other Agreements

This Agreement constitutes the entire understanding between you and PG&E Corporation regarding the Performance Shares, subject to the terms of the LTIP.  Any prior agreements, commitments or negotiations are superseded.  In the event of any conflict or inconsistency between the provisions of this Agreement and the LTIP, the LTIP shall govern.
     

Grant of Performance Shares

PG&E Corporation grants you the number of Performance Shares shown on the cover sheet of this Agreement.  The Performance Shares are subject to the terms and conditions of this Agreement and the LTIP.
     

Vesting of Performance Shares

As long as you remain employed with PG&E Corporation (or any of its subsidiaries), the Performance Shares will vest on the first business day of January (the “Vesting Date”) of the third year following the date of grant specified in the cover sheet.  Except as described below, all Performance Shares subject to this Agreement that have not vested shall be forfeited upon termination of your employment.
     

Payment of Performance Shares

Upon the Vesting Date, PG&E Corporation’s total shareholder return (TSR) will be compared to the TSR of the fifteen other companies in PG&E Corporation’s comparator group ¹ for the prior three calendar years (the “Performance Period”).  Subject to rounding considerations, there will be no payout for TSR below the 25 ^th percentile of the comparator group; TSR at the 25 ^th percentile will result in a 25% payout of Performance Shares; TSR at the 75 ^th percentile will result in a 100% payout of Performance Shares; and TSR at the 90 ^th percentile or greater will result in a 200% payout of Performance Shares.  The following table sets forth the payout percentages for the various TSR rankings that could be achieved:

        Number of Companies in
                                      Total (Including PG&E)                         
                                                  16                                            

                                                       Performance                  Rounded
                              Rank                Percentile                        Payout         

                                  1                        100%                             200%
                                  2                          93%                             200%
                                  3                          87%                             180%
                                  4                          80%                             135%
                                  5                          73%                             100%
                                  6                          67%                              90%
                                  7                          60%                              80%
                                  8                          53%                              70%
                                  9                          47%                              60%
                                10                          40%                              50%
                                11                          33%                              40%
                                12                          27%                              30%
                                13                          20%                                0%
                                14                          13%                                0%
                                15                            7%                                0%
                                16                            0%                                0%

The payment will equal the product of the number of vested Performance Shares, the applicable payout percentage, and the average closing price of a share of PG&E Corporation common stock for the last 30 calendar days of the year preceding the Vesting Date as reported on the New York Stock Exchange.  Payments will be made as soon as practicable following the Vesting Date.
     

Dividends

Each time that PG&E Corporation declares a dividend on its shares of common stock, an amount equal to the dividend multiplied by the number of Performance Shares granted to you by this Agreement shall be accrued on your behalf.  As soon as practicable following the end of the Performance Period, you shall receive a cash payment, if any, equal to the dividends accrued over the Performance Period multiplied by the same payout percentage used to determine the amount, if any, of the Performance Share payout as specified in the preceding paragraph.
     

Voluntary Termination

If you terminate your employment with PG&E Corporation (or any of its subsidiaries) voluntarily before the Vesting Date, all of the Performance Shares shall be cancelled as of the date of such termination and any dividends accrued with respect to your Performance Shares shall be forfeited.
     

Termination for Cause

If your employment with PG&E Corporation (or any of its subsidiaries) is terminated by PG&E Corporation or the subsidiary for cause before the Vesting Date, all of the Performance Shares shall be cancelled as of the date of such termination and any dividends accrued with respect to your Performance Shares shall be forfeited.  In general, termination for “cause” means termination of employm