Exhibit 10

                               PG&E CORPORATION
                          LONG-TERM INCENTIVE PROGRAM
                   (As amended effective as of May 16, 2001)

1.  Purpose of the Program

This is the controlling and definitive statement of the PG&E Corporation Long-
Term Incentive Program, as amended and restated herein (hereinafter called the
PROGRAM). The purpose of the PROGRAM is to advance the interests of the
CORPORATION by providing ELIGIBLE PARTICIPANTS with financial incentives to
promote the success of its long-term (five to ten years) business objectives,
and to increase their proprietary interest in the success of the CORPORATION. It
is the intent of the CORPORATION to reward those ELIGIBLE PARTICIPANTS who have
a significant impact on improved long-term corporate achievements. Inasmuch as
the PROGRAM is designed to encourage financial performance and to improve the
value of shareholders' investment in PG&E CORPORATION, the costs of the PROGRAM
will be funded from corporate earnings.

2.  Program Administration

The PROGRAM shall be administered by the COMMITTEE, except that the BOARD OF
DIRECTORS shall administer the PROGRAM with respect to grants of INCENTIVE
AWARDS TO NON-EMPLOYEE DIRECTORS. The BOARD OF DIRECTORS may at any time revest
authority to administer the PROGRAM in all respects in the BOARD OF DIRECTORS.
Subject to the provisions of the PROGRAM, the COMMITTEE or the BOARD OF
DIRECTORS, as the case may be, shall have full and final authority, in its sole
discretion:

(a)  to determine the ELIGIBLE PARTICIPANTS to whom INCENTIVE AWARDS shall be
granted and the number of shares of COMMON STOCK to be awarded under each
INCENTIVE AWARD, based on the recommendation of the CHIEF EXECUTIVE OFFICER
(except that awards to the CHIEF EXECUTIVE OFFICER shall be based on the
recommendation of the BOARD OF DIRECTORS and awards to NON-EMPLOYEE DIRECTORS
shall be based on the recommendation of the COMMITTEE);

(b)  to determine the time or times at which INCENTIVE AWARDS shall be granted;

(c)  to designate the types of INCENTIVE AWARD being granted;

(d)  to vary the OPTION vesting schedule described in the STOCK
OPTION PLAN;

(e)  to determine the terms and conditions, not inconsistent with the terms of
the PROGRAM, of any INCENTIVE AWARD granted hereunder (including, but not
limited to, the consideration and method of payment for shares purchased upon
the exercise of an INCENTIVE AWARD, and any vesting acceleration or
exercisability provisions in the event of a CHANGE IN CONTROL or TERMINATION),
based in each case on such factors as the COMMITTEE or BOARD OF DIRECTORS shall
deem appropriate;

(f)  to approve forms of agreement for use under the PROGRAM;

(g)  to construe and interpret the PROGRAM and any related INCENTIVE AWARD
agreement and to define the terms employed herein and therein;

(h)  except as provided in Section 18 hereof, to modify or amend any INCENTIVE
AWARD or to waive any restrictions or conditions applicable to any INCENTIVE
AWARD or the exercise or realization thereof;

(i)  except as provided in Section 18 hereof, to prescribe, amend and rescind
rules, regulations and policies relating to the administration of the PROGRAM;

(j)  except as provided in Section 18 hereof, to suspend, terminate, modify or
amend the PROGRAM;



(k)  to delegate to one or more agents such administrative duties as the
COMMITTEE or BOARD OF DIRECTORS may deem advisable, to the extent permitted by
applicable law; and

(l)  to make all other determinations and take such other action with respect to
the PROGRAM and any INCENTIVE AWARD granted hereunder as the COMMITTEE may deem
advisable, to the extent permitted by applicable law.

Notwithstanding the provisions contained in the foregoing paragraph, the CHIEF
EXECUTIVE OFFICER shall have the authority, in his sole discretion: (a) to grant
INCENTIVE AWARDS to any ELIGIBLE PARTICIPANT who, at the time of the INCENTIVE
AWARD grant, (i) is not an officer of the CORPORATION or a DIRECTOR, and (ii) if
such ELIGIBLE PARTICIPANT is an EMPLOYEE, is receiving an annual salary which is
below the level which requires approval by the COMMITTEE; (b) to determine the
time or times at which INCENTIVE AWARDS shall be granted to such ELIGIBLE
PARTICIPANTS; (c) to designate the types of INCENTIVE AWARD being granted to
such ELIGIBLE PARTICIPANTS; and (d) to vary the OPTION vesting schedule
described in the STOCK OPTION PLAN for the OPTIONS granted to such ELIGIBLE
PARTICIPANTS; provided, however, that all grants of INCENTIVE AWARDS by the
CHIEF EXECUTIVE OFFICER shall conform to the guidelines previously approved by
the COMMITTEE.

3.  Shares of Stock Subject to the Program

There shall be reserved for use under the PROGRAM (subject to the provisions of
Section 13 hereof) a total of 49,389,230 shares of COMMON STOCK, which shares
may be authorized but unissued shares of COMMON STOCK or issued shares of COMMON
STOCK which shall have been reacquired by PG&E CORPORATION. Such shares consist
of (i) 13,000,000 shares of COMMON STOCK originally reserved for use under the
PROGRAM at the time it first became effective on January 1, 1992, (ii) 389,230
shares of COMMON STOCK remaining under the 1986 OPTION PLAN and carried over to
the PROGRAM, (iii) 10,000,000 shares of COMMON STOCK added to the PROGRAM
effective as of January 1, 1996, (iv) 11,000,000 shares of COMMON STOCK added to
the PROGRAM effective as of April 21, 1999, and (v) 15,000,000 shares of COMMON
STOCK added to the PROGRAM effective as of May 16, 2001. No more than 2,000,000
of the shares described in (i) -- (iv), and no more than 3,000,000 of the shares
described in (v) may be designated as RESTRICTED STOCK.

If (i) any INCENTIVE AWARD expires or terminates for any reason without having
been exercised or purchased in full, (ii) an INCENTIVE AWARD is surrendered in
exchange for one or more other INCENTIVE AWARDS, or (iii) any RESTRICTED STOCK
is forfeited, then, in each such case, any unexercised, unpurchased, surrendered
or forfeited shares which were subject to such INCENTIVE AWARD (except shares as
to which a related TANDEM SAR has been exercised) shall again be available for
the future grant of INCENTIVE AWARDS under the PROGRAM (unless the PROGRAM has
terminated). In addition, shares may be reused or added back to the PROGRAM to
the extent permitted by applicable law.

4.  Eligibility

INCENTIVE AWARDS will be granted only to ELIGIBLE PARTICIPANTS. ISOS will be
granted only to EMPLOYEES. The COMMITTEE, in its sole discretion, may grant
INCENTIVE AWARDS to an ELIGIBLE PARTICIPANT who is a resident or citizen of a
foreign country, with such modifications as the COMMITTEE may deem advisable to
reflect the laws, tax policy or customs of such foreign country.

The PROGRAM shall not confer upon any RECIPIENT any right to continuation of
employment, service as a DIRECTOR or consulting relationship with the
CORPORATION; nor shall it interfere in any way with the right of the RECIPIENT
or the CORPORATION to terminate such employment, service as a DIRECTOR or
consulting relationship at any time, with or without cause.

5.  Designation of Incentive Awards

At the time of the grant of each INCENTIVE AWARD under the Program, the
COMMITTEE (or the CHIEF EXECUTIVE OFFICER, in the case of INCENTIVE AWARDS
granted by the CHIEF EXECUTIVE OFFICER to certain ELIGIBLE PARTICIPANTS pursuant
to Section 2 hereof, or the BOARD OF DIRECTORS, in the case of INCENTIVE AWARDS
granted by the BOARD OF DIRECTORS to NON-EMPLOYEE DIRECTORS) shall determine
whether such INCENTIVE AWARD is to be designated as an ISO, NON-QUALIFIED STOCK
OPTION, SAR, DIVIDEND EQUIVALENT,


PERFORMANCE UNIT, stock grant, RESTRICTED STOCK, LSAR, PHANTOM STOCK or other
STOCK-BASED AWARD; provided, however, that ISOS may be granted only to
EMPLOYEES.

Notwithstanding such designation, to the extent that the aggregate FAIR MARKET
VALUE (determined for each share as of the date of grant of the OPTION covering
each share) of the shares with respect to which OPTIONS designated as ISOS
become exercisable for the first time by any RECIPIENT during any calendar year
exceeds $100,000, such OPTIONS shall be treated as NON-QUALIFIED STOCK OPTIONS.

Any INCENTIVE AWARD may be granted alone, contingent upon, in addition to or in
TANDEM with one or more other INCENTIVE AWARDS granted under the PROGRAM. In
addition, except as provided in Section 12 hereof, any INCENTIVE AWARD may be
granted in exchange for one or more other INCENTIVE AWARDS.

6.  Stock Options, Tandem Stock Appreciation Rights and Tandem Dividend
Equivalents

Except as provided in Section 9 below (relating to grants of INCENTIVE AWARDS to
NON-EMPLOYEE DIRECTORS), the COMMITTEE, in its sole discretion, may grant ISOS,
NON-QUALIFIED STOCK OPTIONS, TANDEM SARS and TANDEM DIVIDEND EQUIVALENTS to
ELIGIBLE PARTICIPANTS, subject to the terms and conditions set forth in the
STOCK OPTION PLAN attached hereto as Exhibit A.

7.  Performance Units

Except as provided in Section 9 below (relating to grants of INCENTIVE AWARDS to
NON-EMPLOYEE DIRECTORS), the COMMITTEE, in its sole discretion, may grant
PERFORMANCE UNITS to ELIGIBLE PARTICIPANTS, subject to the terms and conditions
set forth in the PERFORMANCE UNIT PLAN attached hereto as Exhibit B.

8.  Other Incentive Awards

Except as provided in Section 9 below (relating to grants of INCENTIVE AWARDS to
NON-EMPLOYEE DIRECTORS), the COMMITTEE, in its sole discretion, may grant other
INCENTIVE AWARDS (including, but not limited to, SARS granted without OPTIONS,
DIVIDEND EQUIVALENTS granted without OPTIONS, stock grants, RESTRICTED STOCK,
LSARS, PHANTOM STOCK or other STOCK-BASED AWARDS) to ELIGIBLE PARTICIPANTS,
subject to such terms and conditions as the COMMITTEE shall deem appropriate.

9.  Grants of Incentive Awards to Non-Employee Directors

NON-EMPLOYEE DIRECTORS will only be eligible to be granted DIRECTOR RESTRICTED
STOCK, PHANTOM STOCK and NON-QUALIFIED STOCK OPTIONS in accordance with, and
subject to the terms and conditions contained in, the NON-EMPLOYEE DIRECTOR
STOCK INCENTIVE PLAN RULES attached hereto as Exhibit C.

10.  Termination of Employment or Relationship with the CORPORATION

The COMMITTEE may, in its sole discretion, establish terms and conditions
pertaining to the effect of TERMINATION on INCENTIVE AWARDS granted to a
RECIPIENT prior to TERMINATION, to the extent permitted by applicable law.

11.  Tax Withholding

When a RECIPIENT incurs tax liability in connection with the exercise of an
INCENTIVE AWARD or the receipt of shares of COMMON STOCK pursuant to an
INCENTIVE AWARD, which tax liability is subject to tax withholding under
applicable tax laws, and the RECIPIENT is obligated to pay the CORPORATION an
amount required to be withheld under applicable tax laws, the RECIPIENT may
satisfy the withholding tax obligation by (i) electing to have the CORPORATION
withhold such amount from his or her current compensation through payroll
deductions, or (ii) making a direct payment to the CORPORATION in cash or by
check.

The COMMITTEE may, in its sole discretion, permit a RECIPIENT to satisfy all or
part of his or her withholding tax obligations by having the CORPORATION
withhold from the shares to be issued to the RECIPIENT that number of shares


having a FAIR MARKET VALUE equal to the amount required to be withheld
determined on the date when taxes otherwise would be withheld in cash. The
payment of withholding taxes in this manner, if permitted by the COMMITTEE,
shall be subject to such restrictions as the COMMITTEE may impose, including any
restrictions required by rules of the Securities and Exchange Commission.

12.  Replacement of Grants

The COMMITTEE may, in its sole discretion, offer a RECIPIENT (other than NON-
EMPLOYEE DIRECTORS) the option of surrendering an unexercised OPTION or other
INCENTIVE AWARD in exchange for another INCENTIVE AWARD of the same type or for
a different type of INCENTIVE AWARD; provided, however, that no OPTION or
INCENTIVE AWARD may be exchanged for a new OPTION or INCENTIVE AWARD having an
OPTION PRICE or purchase price that is lower than the OPTION PRICE or purchase
price of the original OPTION or INCENTIVE AWARD.

13.  Deferral of Payments

The COMMITTEE may, in its sole discretion, approve a RECIPIENT'S deferral of any
cash payments which may become due under the PROGRAM. Such deferrals shall be
subject to any conditions, restrictions or requirements as the COMMITTEE may
determine.

14.  Adjustments Upon Changes in Number or Value of Shares of Common Stock

If there are any changes in the number or value of shares of COMMON STOCK by
reason of stock dividends, stock splits, reverse stock splits,
recapitalizations, mergers, consolidations or other events that materially
increase or decrease the number or value of issued and outstanding shares of
COMMON STOCK, the COMMITTEE may make such adjustments as it shall deem
appropriate, in order to prevent dilution or enlargement of rights.

15.  Non-Transferability of Incentive Awards

An INCENTIVE AWARD shall not be transferable by the RECIPIENT otherwise than by
will or the laws of descent and distribution, or pursuant to a qualified
domestic relations order as defined by the CODE, Title I of ERISA or the rules
thereunder. During the lifetime of the RECIPIENT, an INCENTIVE AWARD may be
exercised only by the RECIPIENT or by an alternate payee under a qualified
domestic relations order.

16.  Change in Control

Upon the occurrence of a CHANGE IN CONTROL (as defined below):

(a)  Any time periods relating to the exercise or realization of any INCENTIVE
AWARD granted hereunder shall be accelerated so that such INCENTIVE AWARD may be
immediately exercised or realized in full;

(b)  All shares of RESTRICTED STOCK granted hereunder shall immediately cease to
be forfeitable; and

(c)  All conditions relating to the realization of any STOCK-BASED AWARD granted
hereunder shall immediately terminate.

A "CHANGE IN CONTROL" shall be deemed to have occurred if:

(a)  any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the
EXCHANGE ACT, 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 the CORPORATION representing twenty percent (20%) or more of the combined
voting power of the CORPORATION's then outstanding securities;

(b)  during any two consecutive years, individuals who at the beginning of such
a 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 (2/3) of the DIRECTORS then still in office who were
DIRECTORS at the beginning of the period; or

(c)  the shareholders of the CORPORATION shall have approved (i) any
consolidation or merger of the CORPORATION other than a merger or consolidation
which 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; (ii)
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 (iii) any plan or proposal for the liquidation or dissolution of
the CORPORATION. For purposes of this paragraph, the term Combined Voting Power
shall mean the combined voting power of the CORPORATION's or other relevant
entity's then outstanding voting securities.

17.  Listing and Registration of Shares

Each INCENTIVE AWARD shall be subject to the requirement that if at any time the
COMMITTEE shall determine, in its discretion, that the listing, registration or
qualification of the shares covered thereby under any securities exchange or
under any state or federal law or the consent or approval of any governmental
regulatory body, including the California Public Utilities Commission, is
necessary or desirable as a condition of, or in connection with, the granting of
such INCENTIVE AWARD or the issue or purchase of shares thereunder, such
INCENTIVE AWARD may not be exercised in whole or in part unless and until such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the COMMITTEE.

18.  Amendment and Termination of the Program and Incentive Awards

The BOARD OF DIRECTORS or the COMMITTEE may at any time suspend, terminate,
modify or amend the PROGRAM in any respect; provided, however, that to the
extent necessary and desirable to comply with Section 422 of the CODE (or any
other applicable law or regulation, including the requirements of any stock
exchange on which the COMMON STOCK is listed or quoted), shareholder approval of
any PROGRAM amendment shall be obtained in such a manner and to such a degree as
is required by the applicable law or regulation.

No suspension, termination, modification or amendment of the PROGRAM may,
without the consent of the RECIPIENT, adversely affect his or her rights under
INCENTIVE AWARDS theretofore granted to such RECIPIENT. In the event of
amendments to the CODE or applicable rules or regulations relating to ISOS
subsequent to the date hereof, the CORPORATION may amend the PROGRAM, and the
CORPORATION and RECIPIENTS holding OPTION agreements may agree to amend
outstanding OPTION agreements, to conform to such amendments.

The BOARD OF DIRECTORS or COMMITTEE may make such amendments or modifications in
the terms and conditions of any INCENTIVE AWARD as it may deem advisable, or
cancel or annul any grant of an INCENTIVE AWARD; provided, however, that no such
amendment, modification, cancellation or annulment may, without the consent of
the RECIPIENT, adversely affect his or her rights under such INCENTIVE AWARD;
and provided further the BOARD OF DIRECTORS or COMMITTEE may not reduce the
OPTION PRICE or purchase price of any OPTION or INCENTIVE AWARD below the
original OPTION PRICE or purchase price.

Notwithstanding the foregoing, the BOARD OF DIRECTORS or COMMITTEE reserves the
right, in its sole discretion, to (i) convert any outstanding ISOS to NON-
QUALIFIED STOCK OPTIONS, (ii) to require a RECIPIENT to forfeit any unexercised
or unpurchased INCENTIVE AWARDS, any shares received or purchased pursuant to an
INCENTIVE AWARD, or any gains realized by virtue of the receipt of an INCENTIVE
AWARD in the event that such RECIPIENT competes against the CORPORATION, and
(iii) to cancel or annul any grant of an INCENTIVE AWARD in the event of a
RECIPIENT'S TERMINATION FOR CAUSE. For purposes of the PROGRAM, "TERMINATION FOR
CAUSE" shall include, but not be limited to, termination because of dishonesty,
criminal offense or violation of a work rule, and shall be determined by, and in
the sole discretion of, the BOARD OF DIRECTORS or COMMITTEE.

19.  Effective Date of the Program and Duration


The Program first became effective as of January 1, 1992. The first amendment
and restatement of the PROGRAM as of January 1, 1996, was approved by the
shareholders of Pacific Gas and Electric Company at its Annual Meeting on April
17, 1996. Effective January 1, 1997, the PROGRAM was assumed by PG&E
CORPORATION. At its meeting on December 17, 1997, the BOARD OF DIRECTORS amended
and restated the PROGRAM effective January 1, 1998, to (i) reflect the adoption
of new RULE 16B-3 which became effective November 1, 1996, and (ii) provide
automatic formula awards of NON-QUALIFIED STOCK OPTIONS and PHANTOM STOCK to
NON-EMPLOYEE DIRECTORS within the limits of the PROGRAM as previously approved
by shareholders in 1996. The PROGRAM was subsequently amended on October 21,
1998, April 21, 1999, February 16, 2000, September 19, 2000, and February 21,
2001. Effective May 16, 2001, the PROGRAM was amended to add 15,000,000 shares
of COMMON STOCK to the total number of shares of COMMON STOCK reserved for use
under the PROGRAM. Unless terminated sooner pursuant to Section 16 hereof, the
PROGRAM shall terminate on December 31, 2005.

20.  Definitions

(a)  BOARD OF DIRECTORS means the Board of Directors of PG&E CORPORATION.

(b)  CHANGE IN CONTROL has the meaning set forth in Section 16 hereof.

(c)  CHIEF EXECUTIVE OFFICER means the Chief Executive Officer of PG&E
CORPORATION.

(d)  CODE means the Internal Revenue Code of 1986, as amended from time to time.

(e)  COMMITTEE means the Nominating and Compensation Committee of the BOARD OF
DIRECTORS or any successor to such committee.

(f)  COMMON STOCK means common shares of PG&E CORPORATION with no par value and
any class of common shares into which such common shares hereafter may be
converted.

(g)  CONSULTANT means any person, including an advisor, who is engaged by the
CORPORATION to render services.

(h)  CORPORATION means PG&E CORPORATION, and any parent corporation (as defined
in Section 424(e) of the CODE) or subsidiary corporation (as defined in Section
424(f) of the CODE).

(i)  DIRECTOR means any person who is a member of the BOARD OF DIRECTORS or the
Board of Directors of any parent corporation (as defined in Section 424(e) of
the CODE) which may hereafter be established, including an advisory, emeritus or
honorary director.

(j)  DIRECTOR RESTRICTED STOCK means RESTRICTED STOCK granted to a NON-EMPLOYEE
DIRECTOR under the NON-EMPLOYEE DIRECTOR STOCK INCENTIVE PLAN.

(k)  DIVIDEND EQUIVALENT means a right that entitles the RECIPIENT to receive
cash or COMMON STOCK based on the dividends declared on the COMMON STOCK covered
by such right.

(l)  ELIGIBLE PARTICIPANT means any KEY EMPLOYEE. It also means, if so
identified by the COMMITTEE (or by the CHIEF EXECUTIVE OFFICER, in the case of
INCENTIVE AWARDS granted by the CHIEF EXECUTIVE OFFICER to certain ELIGIBLE
PARTICIPANTS pursuant to Section 2 hereof), other EMPLOYEES, DIRECTORS,
CONSULTANTS, employees or consultants of any affiliates of PG&E CORPORATION, and
other persons whose participation in the PROGRAM is deemed by the COMMITTEE (or
by the CHIEF EXECUTIVE OFFICER, in the case of INCENTIVE AWARDS granted by the
CHIEF EXECUTIVE OFFICER to certain ELIGIBLE PARTICIPANTS pursuant to Section 2
hereof) to be in the best interests of the CORPORATION.

(m)  EMPLOYEE means any person who is employed by the CORPORATION. The payment
of a director's fee or consulting fee by the CORPORATION shall not be sufficient
to constitute "employment" by the CORPORATION.


(n)  ERISA means the Employee Retirement Income Security Act of 1974, as
amended.

(o)  EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.

(p)  FAIR MARKET VALUE means the closing price of the COMMON STOCK reported on
the New York Stock Exchange Composite Transactions for the date specified for
determining such value.

(q)  INCENTIVE AWARD means any ISO, NON-QUALIFIED STOCK OPTION, SAR, DIVIDEND
EQUIVALENT, PERFORMANCE UNIT or other STOCK-BASED AWARD granted under the
PROGRAM.

(r)  ISO means an OPTION intended to qualify as an incentive stock option under
Section 422 of the CODE.

(s)  KEY EMPLOYEE means the Corporate Secretary, Treasurer, Vice Presidents and
other executive officers of PG&E CORPORATION above the rank of Vice President.
It also means, if so identified by the COMMITTEE (or by the CHIEF EXECUTIVE
OFFICER, in the case of INCENTIVE AWARDS granted by the CHIEF EXECUTIVE OFFICER
to certain ELIGIBLE PARTICIPANTS pursuant to Section 2 hereof), executive
officers of wholly-owned subsidiaries of PG&E CORPORATION (including
subsidiaries which become such after adoption of the PROGRAM) and any other key
management employee of PG&E CORPORATION or any wholly-owned subsidiary of PG&E
CORPORATION.

(t)  LSAR means a limited stock appreciation right which is exercisable only in
the event of a CHANGE IN CONTROL.

(u)  1986 OPTION PLAN means the Pacific Gas and Electric Company 1986 Stock
Option Plan, as amended to date.

(v)  NON-EMPLOYEE DIRECTOR means a DIRECTOR who is not an EMPLOYEE.

(w)  NON-EMPLOYEE DIRECTOR STOCK INCENTIVE PLAN RULES means the Non-Employee
Director Stock Incentive Plan attached hereto as Exhibit C or any successor
rules which the BOARD OF DIRECTORS may adopt from time to time with respect to
the grant of INCENTIVE AWARDS to NON-EMPLOYEE DIRECTORS under the PROGRAM.

(x)  NON-QUALIFIED STOCK OPTION means any OPTION which is not an ISO.

(y)  OPTION means an option to purchase shares of COMMON STOCK granted under the
STOCK OPTION PLAN.

(z)  OPTION PRICE means the purchase price for the COMMON STOCK upon exercise of
an OPTION.

(aa) PERFORMANCE UNIT means a performance unit granted under the PERFORMANCE
UNIT PLAN.

(bb) PERFORMANCE UNIT PLAN means the Performance Unit Plan Rules attached hereto
as Exhibit B or any successor rules which the COMMITTEE may adopt from time to
time with respect to the grant of PERFORMANCE UNITS under the PROGRAM.

(cc) PG&E CORPORATION means PG&E CORPORATION, a California corporation.

(dd) PHANTOM STOCK means allocated hypothetical shares of COMMON STOCK that can
be converted at a future date into cash or stock.

(ee) PROGRAM means the PG&E Corporation Long-Term Incentive Program set forth
herein and as may be amended from time to time.

(ff) RECIPIENT means the ELIGIBLE PARTICIPANT receiving the INCENTIVE AWARD, or
his or her legal representative, legatees, distributees or alternate payees, as
the case may be.

(gg) RESTRICTED STOCK means COMMON STOCK that is subject to forfeiture by the
RECIPIENT to the CORPORATION under such circumstances as may be specified by the
COMMITTEE in its sole discretion.


(hh) RETIREMENT means termination of employment with the CORPORATION at age 55
or later, provided that the ELIGIBLE PARTICIPANT was employed by the CORPORATION
for at least five consecutive years prior to the date of termination.

(ii) RULE 16b-3 means Rule 16b-3 under the EXCHANGE ACT or any successor to Rule
16b-3, as in effect when discretion is being exercised with respect to the Plan.

(jj) SAR means a stock appreciation right whose value is based on the increase
in the FAIR MARKET VALUE of the COMMON STOCK covered by such right.

(kk) SECTION 16 OFFICER means any person who is designated by the BOARD OF
DIRECTORS as an executive officer of PG&E CORPORATION and any other person who
is designated as an officer of PG&E CORPORATION for purposes of Section 16 of
the EXCHANGE ACT.

(ll) STOCK-BASED AWARD means any award that is valued in whole or in part by
reference to, or is otherwise based on, the COMMON STOCK, including, but not
limited to, stock grants, RESTRICTED STOCK, LSARS and PHANTOM STOCK.

(mm) STOCK OPTION PLAN means the Stock Option Plan Rules attached hereto as
Exhibit A or any successor rules which the COMMITTEE may adopt from time to time
with respect to the grant of OPTIONS under the PROGRAM.

(nn) TANDEM refers to an INCENTIVE AWARD granted in conjunction with another
INCENTIVE AWARD.

(oo) TERMINATION occurs when an EMPLOYEE ceases to be employed by the
CORPORATION as a common law employee, when a DIRECTOR ceases to be a member of
the BOARD OF DIRECTORS or the Board of Directors of any parent corporation which
may hereafter be established (as the case may be), or when the relationship
between the CORPORATION and a CONSULTANT or other ELIGIBLE PARTICIPANT
terminates, as the case may be.

(pp) TERMINATION FOR CAUSE has the meaning set forth in Section 18 hereof.


                                   EXHIBIT A

                               PG&E CORPORATION
                               STOCK OPTION PLAN
                   (As amended effective as of May 16, 2001)

1.  Purpose of the Plan

This is the controlling and definitive statement of the PG&E Corporation Stock
Option Plan set forth herein and as may be amended from time to time
(hereinafter called the PLAN). The purpose of the PLAN is to advance the
interests of the CORPORATION by providing ELIGIBLE PARTICIPANTS with financial
incentives to promote the success of its long-term (five to ten years) business
objectives, and to increase their proprietary interest in the success of the
CORPORATION. It is the intent of the CORPORATION to reward those ELIGIBLE
PARTICIPANTS who have a significant impact on improved long-term corporate
achievements. Inasmuch as the PLAN is designed to encourage financial
performance and to improve the value of shareholders' investment in PG&E
CORPORATION, the costs of the PLAN will be funded from corporate earnings.

2.  Plan Administration

The PLAN shall be administered by the COMMITTEE, which shall be constituted in
such a manner as to comply with the rules governing a plan intended to qualify
as a discretionary plan under RULE 16b-3.

Subject to the provisions of the PLAN, the COMMITTEE shall have full and final
authority, in its sole discretion:

(a)  to determine the ELIGIBLE PARTICIPANTS to whom OPTIONS shall be granted and
the number of shares of COMMON STOCK to be awarded under each OPTION, based on
the recommendation of the CHIEF EXECUTIVE OFFICER (except that awards to the
CHIEF EXECUTIVE OFFICER shall be shall be based on the recommendation of the
BOARD OF DIRECTORS); provided, however, that the number of shares of COMMON
STOCK to be awarded under each OPTION shall be subject to the limitations
specified in Section 5 hereof;

(b)  to determine the time or times at which OPTIONS shall be granted;

(c)  to designate the OPTIONS being granted as ISOS or NON-QUALIFIED STOCK
OPTIONS;

(d)  to vary the OPTION vesting schedule described in Section 11 hereof;

(e)  to determine the terms and conditions, not inconsistent with the terms of
the PLAN, of any OPTION granted hereunder (including, but not limited to, the
consideration and method of payment for shares purchased upon the exercise of an
OPTION, and any vesting acceleration or exercisability provisions in the event
of a CHANGE IN CONTROL or TERMINATION), based in each case on such factors as
the COMMITTEE shall deem appropriate;

(f)  to approve forms of agreement for use under the PLAN;

(g)  to construe and interpret the PLAN and any related OPTION agreement and to
define the terms employed herein and therein;

(h)  except as provided in Section 18 hereof, to modify or amend any OPTION or
to waive any restrictions or conditions applicable to any OPTION or the exercise
thereof;

(i)  except as provided in Section 18 hereof, to prescribe, amend and rescind
rules, regulations and policies relating to the administration of the PLAN;

(j)  except as provided in Section 18 hereof, to suspend, terminate, modify or
amend the PLAN;



(k)  to delegate to one or more agents such administrative duties as the
COMMITTEE may deem advisable, to the extent permitted by applicable law; and

(l)  to make all other determinations and take such other action with respect to
the PLAN and any OPTION granted hereunder as the COMMITTEE may deem advisable,
to the extent permitted by applicable law.

Notwithstanding the provisions contained in the foregoing paragraph, the CHIEF
EXECUTIVE OFFICER shall have the authority, in his sole discretion: (a) to grant
OPTIONS to any ELIGIBLE PARTICIPANT who, at the time of the OPTION grant, (i) is
not an officer of the CORPORATION or a DIRECTOR, and (ii) if such ELIGIBLE
PARTICIPANT is an EMPLOYEE, is receiving an annual salary which is below the
level which requires approval by the COMMITTEE; (b) to determine the time or
times at which OPTIONS shall be granted to such ELIGIBLE PARTICIPANTS; (c) to
designate the OPTIONS being granted to such ELIGIBLE PARTICIPANTS as ISOS or
NON-QUALIFIED STOCK OPTIONS; and (d) to vary the OPTION vesting schedule
described in Section 11 hereof for the OPTIONS granted to such ELIGIBLE
PARTICIPANTS; provided, however, that (x) all grants of OPTIONS by the CHIEF
EXECUTIVE OFFICER shall conform to the guidelines previously approved by the
COMMITTEE, and (y) the number of shares of COMMON STOCK to be awarded under each
OPTION shall be subject to the limitations specified in Section 5 hereof.

3.  Shares of Stock Subject to the Plan

There shall be reserved for use under the PLAN and for the grant of any other
incentive awards pursuant to the PROGRAM (subject to the provisions of Section
14 hereof) a total of 49,389,230 shares of COMMON STOCK, which shares may be
authorized but unissued shares of COMMON STOCK or issued shares of COMMON STOCK
which shall have been reacquired by PG&E CORPORATION.

If any OPTION expires or terminates for any reason without having been exercised
in full, then any unexercised, shares which were subject to such OPTION (except
shares as to which a related TANDEM SAR has been exercised) shall again be
available for the future grant of OPTIONS under the PLAN (unless the PLAN has
terminated). In addition, shares may be reused or added back to the PLAN to the
extent permitted by applicable law.

4.  Eligibility

OPTIONS will be granted only to ELIGIBLE PARTICIPANTS. ISOS will be granted only
to EMPLOYEES. The COMMITTEE, in its sole discretion, may grant OPTIONS to an
ELIGIBLE PARTICIPANT who is a resident or citizen of a foreign country, with
such modifications as the COMMITTEE may deem advisable to reflect the laws, tax
policy or customs of such foreign country.

The PLAN shall not confer upon any OPTIONEE any right to continuation of
employment, service as a DIRECTOR or consulting relationship with the
CORPORATION; nor shall it interfere in any way with the right of the OPTIONEE or
the CORPORATION to terminate such employment, service as a DIRECTOR or
consulting relationship at any time, with or without cause.

5.  Limitation on Options and SARs Awarded to Any Eligible Participant

The aggregate number of shares of COMMON STOCK with respect to which any
ELIGIBLE PARTICIPANT may be granted OPTIONS and SARS under the PLAN during any
calendar year shall in no event exceed two percent (2%) of the total number of
shares reserved for use under the PLAN.

6.  Designation of Options

At the time of the grant of each OPTION under the PLAN, the COMMITTEE (or the
CHIEF EXECUTIVE OFFICER, in the case of OPTIONS granted by the CHIEF EXECUTIVE
OFFICER to certain ELIGIBLE PARTICIPANTS pursuant to Section 2 hereof) shall
determine whether such OPTION is to be designated as an ISO or a NON-QUALIFIED
STOCK OPTION; provided, however, that ISOS may be granted only to EMPLOYEES.


Notwithstanding such designation, to the extent that the aggregate FAIR MARKET
VALUE (determined for each share as of the date of grant of the OPTION covering
each share) of the shares with respect to which OPTIONS designated as ISOS
become exercisable for the first time by any OPTIONEE during any calendar year
exceeds $100,000, such OPTIONS shall be treated as NON-QUALIFIED STOCK OPTIONS.

7.  Option Price

The OPTION PRICE of the COMMON STOCK under each OPTION issued shall be the FAIR
MARKET VALUE of the COMMON STOCK on the date of grant.

8.  Stock Appreciation Rights

At the discretion of the COMMITTEE, an OPTION may be granted with or without a
TANDEM SAR which permits the OPTIONEE to surrender unexercised an OPTION or
portion thereof and to receive in exchange a payment having a value equal to the
difference between (x) the FAIR MARKET VALUE of the COMMON STOCK covered by the
surrendered portion of the OPTION on the date the SAR is exercised and (y) the
OPTION PRICE for such COMMON STOCK. The SAR is subject to the same terms and
conditions as the related OPTION, except that (i) the SAR may be exercised only
when there is a positive spread (i.e., when the FAIR MARKET VALUE of the COMMON
STOCK subject to the OPTION exceeds the OPTION PRICE), (ii) in accordance with
Section 9 hereof, payment of the DEA (if any) to the OPTIONEE may be restricted,
and (iii) if the OPTIONEE is a SECTION 16 OFFICER, DIRECTOR or other person
whose transactions in the COMMON STOCK are subject to Section 16(b) of the
EXCHANGE ACT, the SAR may be exercised only during the period beginning on the
third (3rd) business day following the date of release of the CORPORATION's
quarterly or annual statement of earnings and ending on the twelfth (12th)
business day following such date. Upon the exercise of a SAR, the number of
shares subject to exercise under the related OPTION shall be automatically
reduced by the number of shares represented by the OPTION or portion thereof
surrendered. No payment will be required from the OPTIONEE upon the exercise of
a SAR, except that any amount necessary to satisfy applicable federal, state or
local tax requirements shall be withheld.

9.  Dividend Equivalent Account

At the discretion of the COMMITTEE, an OPTION may be granted with or without
TANDEM DIVIDEND EQUIVALENTS. When an OPTION is granted with TANDEM DIVIDEND
EQUIVALENTS, a Dividend Equivalent Account ("DEA") shall be established for the
OPTIONEE. This DEA shall be credited quarterly on each dividend record date with
dividends which would have been paid on the COMMON STOCK subject to the
unexercised portion of the OPTION (including any portion which has not yet
vested on the record date), if such portion had been exercised. Except as
provided in Section 12(d) hereof, at the time the OPTION or any related SAR is
exercised, the OPTIONEE shall receive all funds which have accumulated in the
DEA with respect to the shares of COMMON STOCK for which the OPTION or SAR is
being exercised; provided, however, that if the OPTIONEE exercises a SAR, such
DEA funds shall only be paid to the OPTIONEE if (i) the percentage increase in
the FAIR MARKET VALUE of the COMMON STOCK over the OPTION PRICE averages at
least five percent (5%) per year for the first five (5) years after the grant,
or (ii) in the case of OPTIONS held for longer than five (5) years from the date
of grant, such FAIR MARKET VALUE has increased by at least twenty-five percent
(25%) over the OPTION PRICE.

10.  Terms of Options

The term of each ISO shall be for ten (10) years from the date of grant, subject
to earlier termination as provided in Section 12 hereof. The term of each NON-
QUALIFIED STOCK OPTION shall be ten (10) years and one (1) day from the date of
grant, subject to earlier termination as provided in Section 12 hereof. Any
provision of the PROGRAM to the contrary notwithstanding, no OPTION shall be
exercised after the time limitations stated in this Section 10.

11.  Limitations on Exercise

(a)  Each OPTION granted under the PROGRAM shall become exercisable and vested
only to the following extent: (i) up to one-third (1/3) of the OPTIONS granted
may be exercised on or after the second (2nd) anniversary of the date of grant;
(ii) up to two-thirds (2/3) of the OPTIONS granted may be exercised on or after
the third (3rd) anniversary of the date of grant; and (iii) up to one hundred
percent (100%) of the OPTIONS granted may be exercised on or after the fourth
(4th) anniversary of the date of grant.


(b)  No OPTION under the PROGRAM designated by the COMMITTEE as an ISO and
granted before January 1, 1987 may be exercised while there is outstanding in
the hands of the OPTIONEE any ISO which was granted before the granting of the
ISO hereunder sought to be exercised. For this purpose an ISO shall be treated
as outstanding until such OPTION is (i) exercised in full, (ii) surrendered in
full by exercising SARS pursuant to Section 8 hereof, or (iii) rendered void by
reason of lapse of time.

12.  Termination of Employment or Relationship with the CORPORATION

(a)  In the event of a TERMINATION by reason of a discharge or TERMINATION FOR
CAUSE, any unexercised OPTIONS theretofore granted to an OPTIONEE under the
PROGRAM shall forthwith terminate.

(b)  In the event of a TERMINATION by reason of RETIREMENT, all OPTIONS held by
the OPTIONEE, to the extent that such OPTIONS have not previously expired or
been exercised, shall become fully exercisable and vested, notwithstanding the
provisions of Section 11(a) hereof, and the OPTIONEE shall have the right to
exercise such OPTIONS in full at any time within their respective terms or
within five (5) years after such RETIREMENT, whichever is shorter. This five-
year period shall be extended if an OPTIONEE remains on the BOARD OF DIRECTORS
after RETIREMENT. In such case, the OPTIONS may be exercised as long as the
OPTIONEE remains a DIRECTOR and for a period of six (6) months thereafter, or
within five (5) years after RETIREMENT, whichever is longer; provided, however,
that no OPTION may be exercised after the expiration of its term. To the extent
any ISO held by the OPTIONEE is exercised after the expiration of three (3)
months after such TERMINATION, the exercise will be deemed to involve the
exercise of a NON-QUALIFIED STOCK OPTION.

(c)  In the event of a TERMINATION by reason of disability or death, all OPTIONS
held by the OPTIONEE, to the extent that such OPTIONS have not previously
expired or been exercised, shall become fully exercisable and vested,
notwithstanding the provisions of Section 11(a) hereof, and the OPTIONEE (or the
OPTIONEE'S estate or a person who acquired the right to exercise such OPTIONS by
bequest or inheritance) shall have the right to exercise such OPTIONS at any
time within their respective terms or within one (1) year after the date of such
TERMINATION, whichever is shorter. The term "disability" shall, for the purposes
of the PLAN, be defined in Section 22(e)(3) of the CODE.

(d)  In the event of a TERMINATION by reason of a divestiture or change in
control of a subsidiary of PG&E CORPORATION, which divestiture or change in
control results in such subsidiary no longer qualifying as a subsidiary
corporation under Section 424(f) of the CODE or in the event of a TERMINATION
coincident with the sale of all or substantially all of the assets of a
subsidiary of PG&E CORPORATION, all OPTIONS held by the OPTIONEE, to the extent
that such OPTIONS have not previously expired or been exercised, shall become
fully exercisable and vested, notwithstanding the provisions of Section 11(a)
hereof, and the OPTIONEE shall have the right to exercise such OPTIONS in full
at any time within their respective terms or within three (3) years after such
TERMINATION, whichever is shorter. This three-year period shall be extended if
an OPTIONEE remains on the BOARD OF DIRECTORS after such TERMINATION. In such
case, the OPTIONS may be exercised as long as the OPTIONEE remains a DIRECTOR
and for a period of six (6) months thereafter, or within three (3) years after
such TERMINATION, whichever is longer; provided, however, that no OPTION may be
exercised after the expiration of its term. To the extent any ISO held by the
OPTIONEE is exercised after the expiration of three (3) months after such
TERMINATION, the exercise will be deemed to involve the exercise of a NON-
QUALIFIED STOCK OPTION.

(e)  In the event of a TERMINATION within one year after a CHANGE IN CONTROL of
the CORPORATION (other than a TERMINATION covered by clauses (a), (b), or (c)
above), OPTIONEE shall have the right to exercise OPTIONS which OPTIONEE then
holds (which OPTIONS will have been accelerated previously in accordance with
Section 16 below), to the extent that such OPTIONS have not previously expired
or been exercised, in full at any time within their respective terms or within
three (3) years after such TERMINATION, whichever is shorter. This three-year
period shall be extended if an OPTIONEE remains on the BOARD OF DIRECTORS after
such TERMINATION. In such case, the OPTIONS may be exercised as long as the
OPTIONEE remains a DIRECTOR and for a period of six (6) months thereafter, or
within three (3) years after such TERMINATION, whichever is longer; provided,
however, that no OPTION may be exercised after the expiration of its term. To
the extent any ISO held by the OPTIONEE is exercised after the expiration of
three (3) months after such TERMINATION, the exercise will be deemed to involve
the exercise of a NON-QUALIFIED STOCK OPTION.


(f)  In the event of a TERMINATION for any reason other than those specified in
subparagraphs (a) through (e) above, (i) any unexercised OPTION or OPTIONS
granted under the PROGRAM shall be deemed canceled and terminated forthwith,
except that the OPTIONEE may exercise any unexercised OPTIONS theretofore
granted which are otherwise exercisable and vested within the provisions of
Section 11(a) hereof, during the balance of their respective terms or within
thirty (30) days of such TERMINATION, whichever is shorter, and (ii) the DEA (if
any) shall not be credited with any dividends paid after the date of such
TERMINATION.

(g)  Notwithstanding the provisions of subparagraphs (a) through (f) above, the
COMMITTEE may, in its sole discretion, establish different terms and conditions
pertaining to the effect of TERMINATION, to the extent permitted by applicable
federal and state law.

13.  Payment for Shares Upon Exercise of Options

The exercise of any OPTION shall be contingent upon receipt by the CORPORATION
of (i) cash (including any DEA funds payable to the OPTIONEE in connection with
the exercise of such OPTION), (ii) check, (iii) shares of COMMON STOCK, (iv) an
executed exercise notice together with irrevocable instructions to a broker to
either sell the shares subject to the OPTION or hold such shares as collateral
for a margin loan and to promptly deliver to the CORPORATION the amount of sale
or loan proceeds required to pay the OPTION PRICE, (v) any combination of the
foregoing in an amount equal to the full OPTION PRICE of the shares being
purchased, or (vi) such other consideration and method of payment, other than a
note from the OPTIONEE, as the COMMITTEE, in its sole discretion, may allow
(which, in the case of an ISO shall be determined at the time of grant), to the
extent permitted by applicable law. For purposes of this paragraph, shares of
COMMON STOCK that are delivered in payment of the OPTION PRICE must have been
previously owned by the OPTIONEE for a minimum of one year, and shall be valued
at their FAIR MARKET VALUE as of the date of the exercise of the OPTION. The
CORPORATION shall not make loans to any OPTIONEE for the purpose of exercising
OPTIONS.

14.  Adjustments Upon Changes in Number or Value of Shares of Common Stock

If there are any changes in the number or value of shares of COMMON STOCK by
reason of stock dividends, stock splits, reverse stock splits,
recapitalizations, mergers, consolidations or other events that materially
increase or decrease the number or value of issued and outstanding shares of
COMMON STOCK, the COMMITTEE may make such adjustments as it shall deem
appropriate, in order to prevent dilution or enlargement of rights.

15.  Non-Transferability of Options

An OPTION shall not be transferable by the OPTIONEE otherwise than by will or
the laws of descent and distribution, or pursuant to a qualified domestic
relations order as defined by the CODE, Title I of ERISA or the rules
thereunder. During the lifetime of the OPTIONEE, an OPTION may be exercised only
by the OPTIONEE or by an alternate payee under a qualified domestic relations
order.

16.  Change in Control

Upon the occurrence of a CHANGE IN CONTROL (as defined below), any time periods
relating to the exercise of any OPTION granted hereunder shall be accelerated so
that such OPTION may be immediately exercised in full.

A "CHANGE IN CONTROL" shall be deemed to have occurred if:

(a)  any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the
EXCHANGE ACT, 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 twenty percent (20%) or more of the combined
voting power of the CORPORATION's then outstanding securities;

(b)  during any two consecutive years, individuals who at the beginning of such
a 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 (2/3) of the DIRECTORS then still in office who were
DIRECTORS at the beginning of the period; or

(c)  the shareholders of the CORPORATION shall have approved (i) any
consolidation or merger of the CORPORATION other than a merger or consolidation
which 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; (ii)
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 (iii) any plan or proposal for the liquidation or dissolution of
the CORPORATION. For purposes of this paragraph, the term Combined Voting Power
shall mean the combined voting power of the CORPORATION's or other relevant
entity's then outstanding voting securities.

17.  Listing and Registration of Shares

Each OPTION shall be subject to the requirement that if at any time the
COMMITTEE shall determine, in its discretion, that the listing, registration or
qualification of the shares covered thereby under any securities exchange or
under any state or federal law or the consent or approval of any governmental
regulatory body, including the California Public Utilities Commission, is
necessary or desirable as a condition of, or in connection with, the granting of
such OPTION or the issue or purchase of shares thereunder, such OPTION may not
be exercised in whole or in part unless and until such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the COMMITTEE.

18.  Amendment and Termination of the Plan and Options

The BOARD OF DIRECTORS or the COMMITTEE may at any time suspend, terminate,
modify or amend the PLAN in any respect; provided, however, that, to the extent
necessary and desirable to comply with Section 422 of the CODE (or any other
applicable law or regulation, including the requirements of any stock exchange
on which the COMMON STOCK is listed or quoted), shareholder approval of any PLAN
amendment shall be obtained in such a manner and to such a degree as is required
by the applicable law or regulation.

No suspension, termination, modification or amendment of the PLAN may, without
the consent of the OPTIONEE, adversely affect his or her rights under OPTIONS
theretofore granted to such OPTIONEE. In the event of amendments to the CODE or
applicable rules or regulations relating to ISOS subsequent to the date hereof,
the CORPORATION may amend the PLAN, and the CORPORATION and OPTIONEES holding
OPTION agreements may agree to amend outstanding OPTION agreements, to conform
to such amendments.

The COMMITTEE may make such amendments or modifications in the terms and
conditions of any OPTION as it may deem advisable, or cancel or annul any grant
of an OPTION; provided, however, that no such amendment, modification,
cancellation or annulment may, without the consent of the OPTIONEE, adversely
affect his or her rights under such OPTION; and provided further the COMMITTEE
may not reduce the OPTION PRICE or purchase price of any OPTION or OPTION below
the original OPTION PRICE or purchase price.

Notwithstanding the foregoing, the COMMITTEE reserves the right, in its sole
discretion, to (i) convert any outstanding ISOS to NON-QUALIFIED STOCK OPTIONS,
(ii) to require a OPTIONEE to forfeit any unexercised or securities unpurchased
OPTIONS, any shares received or purchased pursuant to an OPTION, or any gains
realized by virtue of the receipt of an OPTION in the event that such OPTIONEE
competes against the CORPORATION, and (iii) to cancel or annul any grant of an
OPTION in the event of a OPTIONEE'S TERMINATION FOR CAUSE. For purposes of the
PROGRAM, "TERMINATION FOR CAUSE" shall include, but not be limited to,
termination because of dishonesty, criminal offense or violation of a work rule,
and shall be determined by, and in the sole discretion of, the COMMITTEE.

19.  Effective Date of the Plan and Duration

The PLAN first became effective as of January 1, 1992. It has since been amended
and restated. The amended and restated PLAN became effective as of January 1,
1996, upon approval by the shareholders of Pacific Gas and Electric Company at
its


Annual Meeting on April 17, 1996. Effective January 1, 1997, the PLAN was
assumed by PG&E CORPORATION. The PLAN was subsequently amended on October 21,
1998, April 21, 1999, February 16, 2000, and September 19, 2000. Effective May
16, 2001, the PLAN, and the PROGRAM of which the PLAN is a part, were amended to
add 15,000,000 shares of COMMON STOCK to the total number of shares of COMMON
STOCK reserved for use under the PLAN and the PROGRAM. Unless terminated sooner
pursuant to Section 18 hereof, the PLAN shall terminate on December 31, 2005.

20.  Definitions

(a)  BOARD OF DIRECTORS means the Board of Directors of PG&E CORPORATION.

(b)  CHANGE IN CONTROL has the meaning set forth in Section 16 hereof.

(c)  CHIEF EXECUTIVE OFFICER means the Chief Executive Officer of PG&E
CORPORATION.

(d)  CODE means the Internal Revenue Code of 1986, as amended from time to time.

(e)  COMMITTEE means the Nominating and Compensation Committee of the BOARD OF
DIRECTORS or any successor to such committee.

(f)  COMMON STOCK means common shares of PG&E CORPORATION with no par value and
any class of common shares into which such common shares hereafter may be
converted.

(g)  CONSULTANT means any person, including an advisor, who is engaged by the
CORPORATION to render services.

(h)  CORPORATION means PG&E CORPORATION, and any parent corporation (as defined
in Section 424(e) of the CODE) or subsidiary corporation (as defined in Section
424(f) of the CODE).

(i)  DEA means a Dividend Equivalent Account described in Section 9 hereof.

(j)  DIRECTOR means any person who is a member of the BOARD OF DIRECTORS or the
Board of Directors of any parent corporation (as defined in Section 424(e) of
the CODE) which may hereafter be established, including an advisory, emeritus or
honorary director.

(k)  DIVIDEND EQUIVALENT means a right that entitles the OPTIONEE to receive
cash or COMMON STOCK based on the dividends declared on the COMMON STOCK covered
by such right.

(l)  ELIGIBLE PARTICIPANT means any KEY EMPLOYEE. It also means, if so
identified by the COMMITTEE (or by the CHIEF EXECUTIVE OFFICER, in the case of
OPTIONS granted by the CHIEF EXECUTIVE OFFICER to certain ELIGIBLE PARTICIPANTS
pursuant to Section 2 hereof), other EMPLOYEES, DIRECTORS, CONSULTANTS,
employees or consultants of any affiliates of PG&E CORPORATION, and other
persons whose participation in the PROGRAM is deemed by the COMMITTEE (or by the
CHIEF EXECUTIVE OFFICER, in the case of OPTIONS granted by the CHIEF EXECUTIVE
OFFICER to certain ELIGIBLE PARTICIPANTS pursuant to Section 2 hereof) to be in
the best interests of the CORPORATION; provided, however, that DIRECTORS who are
not EMPLOYEES shall not be ELIGIBLE PARTICIPANTS for purposes of the PLAN.

(m)  EMPLOYEE means any person who is employed by the CORPORATION. The payment
of a director's fee or consulting fee by the CORPORATION shall not be sufficient
to constitute "employment" by the CORPORATION.

(n)  ERISA means the Employee Retirement Income Security Act of 1974, as
amended.

(o)  EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.

(p)  FAIR MARKET VALUE means the closing price of the COMMON STOCK reported on
the New York Stock Exchange Composite Transactions for the date specified for
determining such value.


(q)  ISO means an OPTION intended to qualify as an incentive stock option under
Section 422 of the CODE.

(r)  KEY EMPLOYEE means the Corporate Secretary, Treasurer, Vice Presidents and
other executive officers of PG&E CORPORATION above the rank of Vice President.
It also means, if so identified by the COMMITTEE (or by the CHIEF EXECUTIVE
OFFICER, in the case of OPTIONS granted by the CHIEF EXECUTIVE OFFICER to
certain ELIGIBLE PARTICIPANTS pursuant to Section 2 hereof), executive officers
of wholly-owned subsidiaries of PG&E CORPORATION (including subsidiaries which
become such after adoption of the PROGRAM) and any other key management employee
of PG&E CORPORATION or any wholly-owned subsidiary of PG&E CORPORATION.

(s)  NON-EMPLOYEE DIRECTOR means a DIRECTOR who is not an EMPLOYEE.

(t)  NON-QUALIFIED STOCK OPTION means any OPTION which is not an ISO.

(u)  OPTION means an option to purchase shares of COMMON STOCK granted under the
PLAN.

(v)  OPTIONEE means the ELIGIBLE PARTICIPANT receiving the OPTION, or his or her
legal representative, legatees, distributees or alternate payees, as the case
may be.

(w)  OPTION PRICE means the purchase price for the COMMON STOCK upon exercise of
an OPTION.

(x)  PG&E CORPORATION means PG&E CORPORATION, a California corporation.

(y)  PLAN means this Stock Option Plan as amended and restated herein and as may
be amended from time to time, or any successor plan which the COMMITTEE may
adopt from time to time with respect to the grant of OPTIONS under the PROGRAM.

(z)  PROGRAM means the PG&E Corporation Long-Term Incentive Program, as amended
effective as of May 16, 2001, and as may be amended from time to time, pursuant
to which the PLAN is adopted.

(aa) RETIREMENT means termination of employment with the CORPORATION at age 55
or later, provided that the ELIGIBLE PARTICIPANT was employed by the CORPORATION
for at least five consecutive years prior to the date of termination.

(bb) RULE 16b-3 means Rule 16b-3 under the EXCHANGE ACT or any successor to Rule
16b-3, as in effect when discretion is being exercised with respect to the PLAN.

(cc) SAR means a stock appreciation right whose value is based on the increase
in the FAIR MARKET VALUE of the COMMON STOCK covered by such right.

(dd) SECTION 16 OFFICER means any person who is designated by the BOARD OF
DIRECTORS as an executive officer of PG&E CORPORATION and any other person who
is designated as an officer of PG&E CORPORATION for purposes of Section 16 of
the EXCHANGE ACT.

(ee) TANDEM refers to a DIVIDEND EQUIVALENT or SAR (as the case may be) granted
in conjunction with an OPTION.

(ff) TERMINATION occurs when an EMPLOYEE ceases to be employed by the
CORPORATION as a common law employee, when a DIRECTOR ceases to be a member of
the BOARD OF DIRECTORS or the Board of Directors of any parent corporation which
may hereafter be established (as the case may be), or when the relationship
between the CORPORATION and a CONSULTANT or other ELIGIBLE PARTICIPANT
terminates, as the case may be.

(gg) TERMINATION FOR CAUSE has the meaning set forth in Section 12 hereof.


                                   EXHIBIT B

                               PG&E CORPORATION
                             PERFORMANCE UNIT PLAN

This is the controlling and definitive statement of the Performance Unit Plan
("PLAN") for ELIGIBLE EMPLOYEES of PG&E CORPORATION ("CORPORATION") and such
other companies, affiliates, subsidiaries, or associations as the BOARD OF
DIRECTORS may designate from time to time. The PLAN was first adopted by the
BOARD in 1989 and was effective January 1, 1990. It has since been amended from
time to time, most recently on September 19, 2000. Effective May 16, 2001, the
PLAN, and the PROGRAM of which the PLAN is a part, was amended to add 15,000,000
shares of COMMON STOCK to the total number of shares of COMMON STOCK reserved
for use under the PLAN and the PROGRAM.

                                   ARTICLE I

                                  DEFINITIONS

1.01 Board of Directors or Board shall mean the BOARD OF DIRECTORS of the
CORPORATION or, when appropriate, any committee of the BOARD which has been
delegated the authority to take action with respect to the PLAN.

1.02 Committee shall mean the Nominating and Compensation Committee of the BOARD
OF DIRECTORS.

1.03 Corporation shall mean PG&E CORPORATION, a California corporation.

1.04 Eligible Employee shall mean employees of the CORPORATION who are officers
at the vice presidential level or above, the corporate secretary, the
controller, and the treasurer of the CORPORATION, and such other employees of
the CORPORATION, other companies, affiliates, subsidiaries, or associations as
may be designated by the COMMITTEE.

1.05 Performance Targets shall mean the annual CORPORATION financial and
operational goals adopted by the COMMITTEE to be used in determining awards
under the PLAN.

1.06 Plan shall mean the Performance Unit Plan ("PUP") as set forth herein and
as may be amended from time to time.

1.07 Plan Administrator shall mean the COMMITTEE or such individual or
individuals as that COMMITTEE may appoint to handle the day-to-day affairs of
the PLAN.

1.08 Price shall mean the average market price of STOCK for the last 30-day
period of the YEAR preceding the YEAR in which UNITS are payable.

1.09 PUP Units shall mean the units granted to ELIGIBLE EMPLOYEES who
participate in the PLAN. A PUP UNIT has the equivalent value of the current
market price of a share of STOCK at the time of grant.

1.10 Retirement means termination of employment with the CORPORATION at age 55
or later, provided that the ELIGIBLE EMPLOYEE was employed by the CORPORATION
for at least five consecutive years prior to the date of termination.

1.11 Stock shall mean the common stock of the CORPORATION and any class of
common shares into which such STOCK hereafter may be converted.

1.12 Vesting Period shall mean the three calendar YEARS commencing with the YEAR
in which PUP UNITS are granted.

1.13 Year shall mean a calendar year.



                                  ARTICLE II

2.01 Prior to the beginning of each YEAR, the COMMITTEE shall determine whether
PUP UNITS will be granted for such YEAR, the ELIGIBLE EMPLOYEES to whom PUP
UNITS will be granted, and the number of PUP UNITS to be granted to each
ELIGIBLE EMPLOYEE. Employees who become ELIGIBLE EMPLOYEES after the beginning
of a YEAR shall be entitled to a prorata grant of PUP UNITS.

2.02 At the same time that the COMMITTEE makes its determination as to the
granting of PUP UNITS, it shall also establish PERFORMANCE TARGETS. Although it
is intended that PERFORMANCE TARGETS will not change in the course of the YEAR,
the COMMITTEE reserves the right to modify or adjust a previously set
PERFORMANCE TARGET if, in its sole discretion, extraordinary events warrant such
modification or adjustment; provided, however, that no such modification or
adjustment shall increase the amount of any payment that would otherwise be due
based upon performance as measured against the original PERFORMANCE TARGET.

2.03 Each grant of PUP UNITS shall have its own VESTING PERIOD. Subject to
modification as measured against a given YEAR's applicable PERFORMANCE TARGET,
each grant of PUP UNITS shall be payable as follows:

a. One-third after the end of the first YEAR of the VESTING PERIOD;

b. One-third after the end of the second YEAR of the VESTING PERIOD; and

c. One-third after the end of the third YEAR of the VESTING PERIOD.

2.04 To determine the number of PUP UNITS earned, the applicable PERFORMANCE
TARGET shall be the PERFORMANCE TARGET for the YEAR in which the PUP UNITS vest.
Performance as measured against the applicable PERFORMANCE TARGET for a YEAR
shall modify all PUP UNITS that vest at the end of such YEAR. The PERFORMANCE
TARGETS established by the COMMITTEE may modify the number of UNITS earned from
0% to 200% of the number of vested UNITS.

2.05 ELIGIBLE EMPLOYEES shall receive a cash payment as soon as practicable
following the YEAR PUP UNITS vest pursuant to the schedule set forth in Section
2.03. The amount of the payment shall be equal to the product of the number of
PUP UNITS earned multiplied by the PRICE of STOCK.

2.06 Each time that the CORPORATION declares a dividend on its STOCK, an amount
equal to the dividend multiplied by an ELIGIBLE EMPLOYEE's outstanding, but
unearned PUP UNITS, shall be accrued on behalf of each ELIGIBLE EMPLOYEE. As
soon as practicable following the end of each YEAR, ELIGIBLE EMPLOYEES shall
receive a cash payment of the dividends accrued for that YEAR, modified by
performance for that YEAR as measured under Section 2.04.

2.07 An ELIGIBLE EMPLOYEE may elect to defer the payment of PUP UNITS and/or
dividends paid on PUP UNITS by making a timely election under the Deferred
Compensation Plan. Deferrals of benefits payable under this Plan shall be
subject to the rules contained in the Deferred Compensation Plan governing
elections to defer and receipt of deferred amounts.

                                  ARTICLE III

3.01 Retirement. Upon RETIREMENT, all outstanding PUP UNITS continue to be
payable according to the terms of the PLAN. Thus, the number of UNITS eventually
earned by a retired employee is still subject to modification depending on the
extent to which applicable PERFORMANCE TARGETS are met during the YEAR preceding
the January in which UNITS become payable under the schedule of Section 2.03. A
retired employee is not entitled to receive grants of PUP UNITS after
RETIREMENT.

3.02 Disability. If an ELIGIBLE EMPLOYEE is both disabled and entitled to
receive benefits under Pacific Gas and Electric Company's Long Term Disability
Plan, UNITS granted prior to the date of disability shall continue to be payable
according to the terms of this PLAN. An ELIGIBLE EMPLOYEE is not entitled to
receive grants of PUP UNITS after the date of disability as determined under the
provisions of the Long Term Disability Plan. If an ELIGIBLE EMPLOYEE ceases to
be an ELIGIBLE EMPLOYEE because of disability and is not entitled to receive
benefits under Pacific Gas and Electric Company's Long Term Disability Plan, all
outstanding grants of PUP UNITS become vested and payable as soon as practicable
in the YEAR following


the YEAR in which the ELIGIBLE EMPLOYEE ceases to be an ELIGIBLE EMPLOYEE. All
of the UNITS payable shall be subject to modification based upon performance as
measured against the PERFORMANCE TARGET for the YEAR in which the ELIGIBLE
EMPLOYEE ceases to be an ELIGIBLE EMPLOYEE.

3.03 Death. In the event of the death of an ELIGIBLE EMPLOYEE, all outstanding
grants of PUP UNITS held by the ELIGIBLE EMPLOYEE at the date of death shall
become vested and payable as soon as practicable in the YEAR following the YEAR
of death. All of the UNITS payable after an ELIGIBLE EMPLOYEE's death shall be
subject to modification based upon performance as measured against the
PERFORMANCE TARGET for the YEAR in which the death of the ELIGIBLE EMPLOYEE
occurs.

3.04 Termination. If an ELIGIBLE EMPLOYEE ceases to be an ELIGIBLE EMPLOYEE for
any reason other than RETIREMENT, disability, or death, all outstanding grants
of PUP UNITS shall be canceled as of the date that the ELIGIBLE EMPLOYEE ceases
to be an ELIGIBLE EMPLOYEE unless otherwise provided in the PG&E Corporation
Officer Severance Policy.

3.05 Change in Control. Upon a Change in Control as defined in the PG&E
Corporation Long Term Incentive Program (Program) or upon a termination of
employment coincident with the sale of all or substantially all of the assets of
a subsidiary of PG&E Corporation, all PUP UNITS shall become vested and payable
as soon as practicable in the YEAR following the Change in Control in accordance
with Section 16 of the Program.

                                  ARTICLE IV

                           ADMINISTRATIVE PROVISIONS

4.01 Administration. The PLAN shall be administered by the PLAN ADMINISTRATOR
who shall have the authority to interpret the PLAN and make such rules as it
deems appropriate. The PLAN ADMINISTRATOR shall have the duty and responsibility
of maintaining records, making the requisite calculations, and disbursing
payments hereunder. The PLAN ADMINISTRATOR's interpretations, determinations,
rules, and calculations shall be final and binding on all persons and parties
concerned.

4.02 Amendment and Termination. The CORPORATION may amend or terminate the PLAN
at any time, provided, however, that no such amendment or termination shall
adversely affect PUP UNITS which an ELIGIBLE EMPLOYEE has earned prior to the
date of such amendment or termination. PUP UNITS outstanding but unearned at the
date of any such amendment or termination may, in the sole discretion of the
CORPORATION, be canceled, and the CORPORATION shall have no obligation to
provide a substitute benefit of lesser, equal, or greater value.

4.03 Nonassignability of Benefits. The benefits payable under this PLAN or the
right to receive future benefits under this PLAN may not be anticipated,
alienated, pledged, encumbered, or subject to any charge or legal process, and
if any attempt is made to do so, or a person eligible for any benefits becomes
bankrupt, the interest under the PLAN of the person affected may be terminated
by the PLAN ADMINISTRATOR which, in its sole discretion, may cause the same to
be held if applied for the benefit of one or more of the dependents of such
person or make any other disposition of such benefits that it deems appropriate.

4.04 No Guarantee of Employment. Nothing contained in this PLAN shall be
construed as a contract of employment between the CORPORATION or the ELIGIBLE
EMPLOYEE, or as a right of the ELIGIBLE EMPLOYEE to be continued in the employ
of the CORPORATION, to remain as an officer of the CORPORATION, or as a
limitation on the right of the CORPORATION to discharge any of its employees,
with or without cause.

4.05 Benefits Unfunded and Unsecured. The benefits under this PLAN are unfunded,
and the interest under this PLAN of any ELIGIBLE EMPLOYEE and such ELIGIBLE
EMPLOYEE's right to receive a distribution of benefits under this PLAN shall be
an unsecured claim against the general assets of the CORPORATION.

4.06 Applicable Law. All questions pertaining to the construction, validity, and
effect of the PLAN shall be determined in accordance with the laws of the United
States, and to the extent not preempted by such laws, by the laws of the State
of California.


                                   EXHIBIT C

                               PG&E CORPORATION
                  NON-EMPLOYEE DIRECTOR STOCK INCENTIVE PLAN
                   (As amended effective as of May 16, 2001)

1.  Purpose of the Plan

This is the controlling and definitive statement of the PG&E Corporation Non-
Employee Director Stock Incentive Plan (hereinafter called the PLAN). The
purpose of the PLAN is to advance the interests of the CORPORATION by providing
NON-EMPLOYEE DIRECTORS with financial incentives to promote the success of its
long-term (five to ten years) business objectives, and to increase their
proprietary interest in the success of the CORPORATION. Inasmuch as the PLAN is
designed to encourage financial performance and to improve the value of
shareholders' investment in PG&E CORPORATION, the costs of the PLAN will be
funded from corporate earnings.

2.  Formula Awards of Director Restricted Stock, Non-Qualified Stock Options and
Phantom Stock to Non-Employee Directors

All awards of DIRECTOR RESTRICTED STOCK, NON-QUALIFIED STOCK OPTIONS and PHANTOM
STOCK under the PLAN shall be automatic and non-discretionary, and shall be made
strictly in accordance with the provisions contained herein. No person shall
have any discretion to select which NON-EMPLOYEE DIRECTORS shall be granted
DIRECTOR RESTRICTED STOCK, NON-QUALIFIED STOCK OPTIONS or PHANTOM STOCK.
Further, no person shall have any discretion to determine the number of shares
of DIRECTOR RESTRICTED STOCK awarded to a NON-EMPLOYEE DIRECTOR, and, except as
otherwise provided in Section 4 with respect to a NON-EMPLOYEE DIRECTOR'S
election to allocate formula awards between NON-QUALIFIED STOCK OPTIONS and
PHANTOM STOCK, no person shall have any discretion to determine the number of
shares underlying NON-QUALIFIED STOCK OPTIONS and PHANTOM STOCK awarded to a
NON-EMPLOYEE DIRECTOR.

3.  Awards of Director Restricted Stock

(a)  On the first business day of each calendar year beginning on January 1,
1998, during the duration of the PLAN, each person who is a NON-EMPLOYEE
DIRECTOR on the first business day of the applicable calendar year shall receive
a grant of DIRECTOR RESTRICTED STOCK in an amount to be determined in accordance
with the formula set forth in this Section 3(a). The number of shares of
DIRECTOR

RESTRICTED STOCK to be granted to each NON-EMPLOYEE DIRECTOR each calendar year
shall be determined by (i) dividing ten thousand dollars ($10,000) by the FAIR
MARKET VALUE of the COMMON STOCK on the first business day of the applicable
calendar year, and (ii) rounding the resulting number down to the nearest whole
share. No person shall receive more than one (1) grant of DIRECTOR RESTRICTED
STOCK during any calendar year.

(b)  Shares of DIRECTOR RESTRICTED STOCK shall vest cumulatively as follows: (i)
twenty percent (20%) of such shares on the first anniversary of the date of
grant; (ii) forty percent (40%) of such shares on the second anniversary of the
date of grant; (iii) sixty percent (60%) of such shares on the third anniversary
of the date of grant; (iv) eighty percent (80%) of such shares on the fourth
anniversary of the date of grant; and (v) one hundred percent (100%) of such
shares on the fifth anniversary of the date of grant. Shares of DIRECTOR
RESTRICTED STOCK may not be resold or otherwise transferred by a GRANTEE until
such shares are vested in accordance with the provisions of this Section 3(b).

4.  Annual Election to Receive Non-Qualified Stock Options and Phantom Stock

By June 30 of each calendar year during the term of the Plan, each person who is
then a NON-EMPLOYEE DIRECTOR shall deliver to the Corporate Secretary a written
election to receive either NON-QUALIFIED STOCK OPTIONS or PHANTOM



STOCK, or both, with an aggregate value of $20,000, on the first business day of
the following calendar year, provided the person continues to be a NON-EMPLOYEE
DIRECTOR on the date the award would otherwise be made. A NON-EMPLOYEE DIRECTOR
may allocate between NON-QUALIFIED STOCK OPTIONS and PHANTOM STOCK in minimum
increments with a value equal to $5,000, as determined in accordance with
Section 5 below with respect to NON-QUALIFIED STOCK OPTIONS, and Section 6
below, with respect to PHANTOM STOCK. All awards of NON-QUALIFIED STOCK OPTIONS
and PHANTOM STOCK made to NON-EMPLOYEE DIRECTORS shall comply with Section 5 and
Section 6 below, respectively. A NON-EMPLOYEE DIRECTOR who has failed to make a
timely election or who became a NON-EMPLOYEE DIRECTOR after June 30 shall be
awarded NON-QUALIFIED STOCK OPTIONS and PHANTOM STOCK, each with a value of
$10,000 as determined in accordance with Section 5 and Section 6, respectively,
provided that the NON-EMPLOYEE DIRECTOR continues to be a NON-EMPLOYEE DIRECTOR
on the on the first business day of the following calendar year. Notwithstanding
the foregoing, elections for calendar year 1998 must be received by December 31,
1997, to be effective on the first business day of calendar year 1998.

5.  Grant of Non-Qualified Stock Options to Non-Employee Directors

(a)  On the first business day of each calendar year beginning on January 1,
1998, during the duration of the PLAN, each person who is then a NON-EMPLOYEE
DIRECTOR and who has elected to receive an award of NON-QUALIFIED STOCK OPTIONS
in accordance with Section 4, shall receive a grant of NON-QUALIFIED STOCK
OPTIONS with an aggregate value equal to $5,000, $10,000, $15,000, or $20,000,
as previously elected by the NON-EMPLOYEE DIRECTOR (or $10,000 in the case of a
NON-EMPLOYEE DIRECTOR who has failed to make a timely election in accordance
with Section 4 or who became a NON-EMPLOYEE DIRECTOR after June 30) (the
"Elected Option Value"). The number of shares subject to the NON-QUALIFIED STOCK
OPTIONS shall be determined by dividing the Elected Option Value by the value of
a NON-QUALIFIED STOCK OPTION to purchase a single share of PG&E Corporation
common stock as of the first business day of the applicable calendar year. The
per stock option value shall be calculated in accordance with the Black-Scholes
stock option valuation method using the average preceding November closing price
of PG&E Corporation stock and reducing the per option value so calculated by
twenty percent. The resulting number of NON-QUALIFIED STOCK OPTIONS shall be
rounded down to the nearest whole share. No person shall receive more than one
grant of NON-QUALIFIED STOCK OPTIONS during any calendar year.

(b)  The OPTION PRICE of the COMMON STOCK subject under each NON-QUALIFIED STOCK
OPTION shall be the FAIR MARKET VALUE of the COMMON STOCK on the date of grant.
The exercise of any NON-QUALIFIED STOCK OPTION shall be contingent upon receipt
by the CORPORATION of (i) cash, (ii) check, (iii) shares of COMMON STOCK, (iv)
an executed exercise notice together with irrevocable instructions to a broker
to either sell the shares subject to the NON-QUALIFIED STOCK OPTION or hold such
shares as collateral for a margin loan and to promptly deliver to the
CORPORATION the amount of sale or loan proceeds required to pay the OPTION
PRICE, or (v) any combination of the foregoing in an amount equal to the full
OPTION PRICE of the shares being purchased. For purposes of this paragraph,
shares of COMMON STOCK that are delivered in payment of the OPTION PRICE must
have been previously owned by the GRANTEE for a minimum of one year, and shall
be valued at their FAIR MARKET VALUE as of the date of the exercise of the NON-
QUALIFIED STOCK OPTION. The CORPORATION shall not make loans to any GRANTEE for
the purpose of exercising NON-QUALIFIED STOCK OPTIONS.

(c)  Each NON-QUALIFIED STOCK OPTION granted under the Plan shall
become exercisable and vested cumulatively as follows: (i) up to
thirty-three percent (33%) of the NON-QUALIFIED STOCK OPTION may
be exercised on or after the second anniversary of the date of
grant; (ii) up to sixty-six percent (66%) of the NON-QUALIFIED
STOCK OPTION may be exercised on or after the third anniversary
of the date of grant; and (iii) up to one hundred percent (100%)
of the NON-QUALIFIED STOCK OPTION may be exercised on or after
the fourth anniversary of the date of grant.

(d)  The term of each NON-QUALIFIED STOCK OPTION shall be ten years and one day
from the date of grant, subject to earlier termination as provided in Section 9
hereof. Any provision of the PLAN to the contrary notwithstanding, no NON-
QUALIFIED STOCK OPTION shall be exercised after the time limitations stated in
this Section 5(d).

6.  Awards of Phantom Stock to Non-Employee Directors

(a)  On the first business day of each calendar year beginning on January 1,
1998, during the duration of the PLAN, each person who is then a NON-EMPLOYEE
DIRECTOR and who has elected to receive an award of PHANTOM STOCK


in accordance with Section 4, shall be credited with an amount of PHANTOM STOCK
with a value (as determined by the FAIR MARKET VALUE of the COMMON STOCK on the
first business day of the applicable calendar year) equal to $5,000, $10,000,
$15,000, or $20,000, as previously elected by the NON-EMPLOYEE DIRECTOR (the
"Elected Phantom Stock Value"). The number of shares of PHANTOM STOCK (including
fractions computed to three decimal places) to be granted to each NON-EMPLOYEE
DIRECTOR each calendar year shall be determined by dividing the Elected Phantom
Stock Value (or $10,000 in the case of a NON-EMPLOYEE DIRECTOR who has failed to
make a timely election in accordance with Section 4 or who became a NON-EMPLOYEE
DIRECTOR after June 30) by the FAIR MARKET VALUE of the COMMON STOCK on the
first business day of the applicable calendar year. No person shall receive more
than one grant of PHANTOM STOCK during any calendar year. The shares of PHANTOM
STOCK awarded to a NON-EMPLOYEE DIRECTOR shall be credited to a newly
established PHANTOM STOCK account for the NON-EMPLOYEE DIRECTOR. Each share of
PHANTOM STOCK shall be deemed to be equal to one share (or fraction thereof) of
COMMON STOCK on the date of grant, and shall thereafter fluctuate in value in
accordance with the FAIR MARKET VALUE of the COMMON STOCK.

(b)  Each NON-EMPLOYEE DIRECTOR'S PHANTOM STOCK account shall be credited
quarterly on each dividend payment date with additional shares of PHANTOM STOCK
(including fractions computed to three decimal places) determined by dividing
(i) the aggregate amount of dividends, i.e,. the dividend multiplied by the
number of shares of PHANTOM STOCK credited to the participant's account as of
the dividend record date, by (ii) by the FAIR MARKET VALUE of the COMMON STOCK
on the dividend payment date.

(c)  Payment of the shares of PHANTOM STOCK credited to a NON-EMPLOYEE
DIRECTOR'S PHANTOM STOCK account shall only be made after the NON-EMPLOYEE
DIRECTOR'S RETIREMENT or MANDATORY RETIREMENT from the BOARD OF DIRECTORS.
Payment shall be made only in the form of shares of COMMON STOCK equal to the
number of shares of PHANTOM STOCK credited to the NON-EMPLOYEE DIRECTOR'S
PHANTOM STOCK account on the date of distribution, rounded down to the nearest
whole share. The NON-EMPLOYEE DIRECTOR may elect to receive the number of shares
of COMMON STOCK to which he is entitled in a lump sum distribution of the entire
amount or in a series of ten or less approximately equal annual installments,
provided that distribution shall commence no later than January of the year
following the year in which the NON-EMPLOYEE DIRECTOR'S RETIREMENT or MANDATORY
RETIREMENT occurred.

7.  Shares of Stock Subject to the Plan

There shall be reserved for use under the PLAN and for the grant of any other
INCENTIVE AWARDS pursuant to the PROGRAM (subject to the provisions of Section
10 hereof) a total of 49,389,230 shares of COMMON STOCK, which shares may be
authorized but unissued shares of COMMON STOCK or issued shares of COMMON STOCK
which shall have been reacquired by PG&E CORPORATION.

8.  Dividend, Voting and Other Shareholder Rights

Except as otherwise provided in the PLAN, each GRANTEE shall have all of the
rights of a shareholder of PG&E CORPORATION with respect to all outstanding
shares of DIRECTOR RESTRICTED STOCK registered in his or her name, whether or
not such shares are vested, including the right to receive dividends and other
distributions paid or made with respect to such shares and the right to vote
such shares. No GRANTEE shall have any of the rights of a shareholder of PG&E
CORPORATION with respect to a NON-QUALIFIED STOCK OPTION until the shares
acquired upon exercise of such NON-QUALIFIED STOCK OPTION have been issued and
registered in his or her name. No GRANTEE shall have any of the rights of a
shareholder of PG&E CORPORATION with respect to PHANTOM STOCK credited to the
NON-EMPLOYEE DIRECTOR'S PHANTOM STOCK account under the Plan.

9.  Termination of Status as a Non-Employee Director

(a)  In the event of a TERMINATION by reason of disability or death,
(i) all shares of DIRECTOR RESTRICTED STOCK held by the GRANTEE shall become
fully vested, notwithstanding the provisions of Section 3(b) hereof, and the
GRANTEE (or the GRANTEE'S estate or a person who acquired the shares of DIRECTOR
RESTRICTED STOCK by bequest or inheritance) shall have the right to resell or
transfer such shares at any time, (ii) all NON-QUALIFIED STOCK OPTIONS held by
the GRANTEE, to the extent that such NON-QUALIFIED STOCK OPTIONS have not


previously expired or been exercised, shall become fully vested and exercisable,
notwithstanding the provisions of Section 5(c) hereof, and the GRANTEE (or the
GRANTEE'S estate or a person who acquired the right to exercise the NON-
QUALIFIED STOCK OPTION by bequest or inheritance) shall have the right to
exercise the NON-QUALIFIED STOCK OPTIONS at any time within their respective
terms or within one (1) year after the date of the GRANTEE'S death or
disability, whichever is shorter, and (iii) all shares of PHANTOM STOCK credited
to the NON-EMPLOYEE DIRECTOR'S PHANTOM STOCK account shall immediately become
payable to the GRANTEE (or the GRANTEE'S estate or a person who acquired the
shares of PHANTOM STOCK by bequest or inheritance) in the form of a number of
shares of COMMON STOCK equal to the number of shares of PHANTOM STOCK credited
to the NON-EMPLOYEE DIRECTOR'S PHANTOM STOCK account, rounded down to the
nearest whole share. The term "disability" shall, for the purposes of the PLAN,
be defined in Section 22(e)(3) of the CODE.

(b)  In the event of a TERMINATION by reason of MANDATORY RETIREMENT,
(i) all shares of DIRECTOR RESTRICTED STOCK held by the GRANTEE shall become
fully vested, notwithstanding the provisions of Section 3(b) hereof, and the
GRANTEE shall have the right to resell or transfer such shares at any time, (ii)
the NON-QUALIFIED STOCK OPTIONS then held by the GRANTEE, to the extent that
such NON-QUALIFIED STOCK OPTIONS have not previously expired or been exercised,
shall become fully vested and exercisable, notwithstanding the provisions of
Section 5(c) hereof, and the GRANTEE shall have the right to exercise the NON-
QUALIFIED STOCK OPTIONS at any time within their respective terms or within five
(5) years after such MANDATORY RETIREMENT, whichever is shorter; and (iii) all
shares of PHANTOM STOCK credited to the NON- EMPLOYEE DIRECTOR'S PHANTOM STOCK
account shall become payable to the GRANTEE in accordance with Section 6(c)
hereof.

(c)  In the event of a TERMINATION for any reason other than those specified in
subparagraphs (a) and (b) above, (i) any unvested shares of DIRECTOR RESTRICTED
STOCK granted hereunder shall be forfeited and the GRANTEE shall return to the
CORPORATION for cancellation any stock certificates representing such forfeited
shares which forfeited shares shall be deemed to be canceled and no longer
outstanding as of the date of TERMINATION; and from and after the date of
TERMINATION, the GRANTEE shall cease to be a shareholder with respect to such
forfeited shares and shall have no dividend, voting or other rights with respect
thereto, (ii) any NON-QUALIFIED STOCK OPTIONS granted hereunder that have not
yet vested and become exercisable shall terminate, (iii) the GRANTEE shall have
the right to exercise NON-QUALIFIED STOCK OPTIONS, to the extent that such NON-
QUALIFIED STOCK OPTIONS have vested and become exercisable as of the date of
TERMINATION, at any time within their respective terms or within three months
after such TERMINATION, whichever is shorter, after which the NON-QUALIFIED
STOCK OPTIONS shall terminate, and (iv) all shares of PHANTOM STOCK credited to
the NON-EMPLOYEE DIRECTOR'S PHANTOM STOCK account shall be forfeited on the date
of TERMINATION; provided, however, that if the TERMINATION results from the NON-
EMPLOYEE DIRECTOR'S RETIREMENT, then the PHANTOM STOCK credited to the NON-
EMPLOYEE DIRECTOR'S PHANTOM STOCK account shall become payable in accordance
with Section 6(c) hereof.

(d)  Notwithstanding the provisions of subparagraphs (a) through (c) above, the
BOARD OF DIRECTORS may, in its sole discretion, establish different terms and
conditions pertaining to the effect of TERMINATION, to the extent permitted by
applicable federal and state law.

10.  Adjustments Upon Changes in Number or Value of Shares of Common Stock

If there are any changes in the number or value of shares of COMMON STOCK by
reason of stock dividends, stock splits, reverse stock splits,
recapitalizations, mergers, consolidations or other events that materially
increase or decrease the number or value of issued and outstanding shares of
COMMON STOCK, the BOARD OF DIRECTORS or COMMITTEE may make such adjustments as
it shall deem appropriate, in order to prevent dilution or enlargement of
rights.

11.  Non-Transferability

NON-QUALIFIED STOCK OPTIONS, PHANTOM STOCK, and shares of DIRECTOR RESTRICTED
STOCK that have not vested in accordance with the provisions of Section 3(b)
hereof, shall not be transferable by the GRANTEE otherwise than by will or the
laws of descent and distribution, or pursuant to a qualified domestic relations
order as defined by the CODE, Title I of ERISA or the rules thereunder.

12.  Change in Control


Upon the occurrence of a CHANGE IN CONTROL (as defined below), (i) any time
periods relating to the vesting of any shares of DIRECTOR RESTRICTED STOCK
granted hereunder shall be accelerated so that all such shares immediately
become fully vested, (ii) any time periods relating to the vesting of NON-
QUALIFIED STOCK OPTIONS granted hereunder shall be accelerated so that all such
NON-QUALIFIED STOCK OPTIONS immediately become fully vested and exercisable for
the remainder of their terms, and (iii) all shares of PHANTOM STOCK credited to
the NON-EMPLOYEE DIRECTORS' PHANTOM STOCK accounts shall become payable in
accordance with Section 6(c) hereof as if the CHANGE IN CONTROL constituted a
RETIREMENT.

A "CHANGE IN CONTROL" shall be deemed to have occurred if:

(a)  any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the
EXCHANGE ACT, 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 twenty percent (20%) or more of the combined
voting power of PG&E CORPORATION's then outstanding securities;

(b)  during any two consecutive years, individuals who at the beginning of such
a 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 (2/3) of the DIRECTORS
then still in office who were DIRECTORS at the beginning of the period; or

the shareholders of the CORPORATION shall have approved (i) any consolidation or
merger of the CORPORATION other than a merger or consolidation which 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; (ii) 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
(iii) any plan or proposal for the liquidation or dissolution of the
CORPORATION. For purposes of this paragraph, the term Combined Voting Power
shall mean the combined voting power of the CORPORATION's or other relevant
entity's then outstanding voting securities.

13.  Amendment and Termination of the Plan

The BOARD OF DIRECTORS or the COMMITTEE may at any time suspend, terminate,
modify or amend the PLAN in any respect; provided, however, that, to the extent
necessary and desirable to comply with the CODE (or any other applicable law or
regulation, including the requirements of any stock exchange on which the COMMON
STOCK is listed or quoted), shareholder approval of any PLAN amendment shall be
obtained in such a manner and to such a degree as is required by the applicable
law or regulation.

No suspension, termination, modification or amendment of the PLAN may, without
the consent of the GRANTEE, adversely affect his or her rights with respect to
DIRECTOR RESTRICTED STOCK, NON-QUALIFIED STOCK OPTIONS or PHANTOM STOCK
theretofore granted to such GRANTEE.

Except as provided in Section 2 hereof, the BOARD OF DIRECTORS or COMMITTEE may
make such amendments or modifications in the terms and conditions of any grant
of DIRECTOR RESTRICTED STOCK, NON-QUALIFIED STOCK OPTIONS or PHANTOM STOCK as it
may deem advisable, or cancel or annul any grant of DIRECTOR RESTRICTED STOCK,
NON-QUALIFIED STOCK OPTIONS or PHANTOM STOCK; provided, however, that no such
amendment, modification, cancellation or annulment may, without the consent of
the GRANTEE, adversely affect his or her rights with respect to such grant.

14.  Effective Date of the Plan and Duration

This PLAN became effective as of January 1, 1996, upon approval by the
shareholders of Pacific Gas and Electric Company at its Annual Meeting on April
17, 1996. Effective January 1, 1997, the PLAN was assumed by PG&E CORPORATION.
At its


meeting on December 17, 1997, the BOARD OF DIRECTORS amended and restated the
PLAN effective January 1, 1998, to (i) reflect the adoption of new RULE 16B-3
which became effective November 1, 1996, and (ii) provide automatic formula
awards of NON-QUALIFIED STOCK OPTIONS and PHANTOM STOCK to NON-EMPLOYEE
DIRECTORS within the limits of the PROGRAM as previously approved by
shareholders in 1996. The PLAN was subsequently amended on October 21, 1998 and
April 21, 1999.

Effective May 16, 2001, the PLAN, and the PROGRAM of which the PLAN is a part,
were amended to add 15,000,000 shares of COMMON STOCK to the total number of
shares of COMMON STOCK reserved for use under the PLAN and the PROGRAM. Unless
terminated sooner pursuant to Section 13 hereof, the PLAN shall terminate on
December 31, 2005.

15.  Definitions

(a)  BOARD OF DIRECTORS means the Board of Directors of PG&E CORPORATION.

(b)  CHANGE IN CONTROL has the meaning set forth in Section 12 hereof.

(c)  CODE means the Internal Revenue Code of 1986, as amended from time to time.

(d)  COMMITTEE means the Nominating and Compensation Committee of the BOARD OF
DIRECTORS or any successor to such committee.

(e)  COMMON STOCK means common shares of PG&E CORPORATION with no par value and
any class of common shares into which such common shares hereafter may be
converted.

(f)  CORPORATION means PG&E CORPORATION, and any parent corporation (as defined
in Section 424(e) of the CODE) or subsidiary corporation (as defined in Section
424(f) of the CODE).

(g)  DIRECTOR means any person who is a member of the BOARD OF DIRECTORS or the
Board of Directors of any parent corporation (as defined in Section 424(e) of
the CODE) which may hereafter be established, including an advisory, emeritus or
honorary director.

(h)  DIRECTOR RESTRICTED STOCK means RESTRICTED STOCK granted to a NON-EMPLOYEE
DIRECTOR under the PLAN.

(i)  EMPLOYEE means any person who is employed by the CORPORATION. The payment
of a director's fee or consulting fee by the CORPORATION shall not be sufficient
to constitute "employment" by the CORPORATION.

(j)  ERISA means the Employee Retirement Income Security Act of 1974, as
amended.

(k)  EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.

(l)  FAIR MARKET VALUE means the closing price of the COMMON STOCK reported on
the New York Stock Exchange Composite Transactions for the date specified for
determining such value.

(m)  GRANTEE means the NON-EMPLOYEE DIRECTOR receiving the DIRECTOR RESTRICTED
STOCK, NON-QUALIFIED STOCK OPTIONS and PHANTOM STOCK or his or her legal
representative, legatees, distributees or alternate payees, as the case may be.

(n)  MANDATORY RETIREMENT means retirement as a DIRECTOR at age 70 or at such
other age as may be specified in the retirement policy for the BOARD OF
DIRECTORS or the Board of Directors of any parent corporation which may
hereafter be established (as the case may be), as in effect at the time of a
NON-EMPLOYEE DIRECTOR'S TERMINATION.

(o)  NON-EMPLOYEE DIRECTOR means a DIRECTOR who is not an EMPLOYEE.

(p)  NON-QUALIFIED STOCK OPTION means a option to purchase shares of COMMON
STOCK which is not intended to qualify as an incentive stock option under
Section 422 of the CODE.

(q)  PG&E CORPORATION means PG&E CORPORATION, a California corporation.

(r)  PHANTOM STOCK means allocated hypothetical shares of COMMON STOCK that can
be converted at a future date into stock.

(s)  PLAN means this Non-Employee Director Stock Incentive Plan, as may be
amended from time to time, or any successor plan which the COMMITTEE or BOARD OF
DIRECTORS may adopt from time to time with respect to the grant of DIRECTOR
RESTRICTED STOCK, NON-QUALIFIED STOCK OPTIONS, PHANTOM STOCK or other stock-
based incentive awards under the PROGRAM.

(t)  PROGRAM means the PG&E Corporation Long-Term Incentive Program, as amended
effective May 16, 2001, and as may be amended from time to time, pursuant to
which this PLAN is adopted.

(u)  RESTRICTED STOCK means COMMON STOCK that is subject to forfeiture by the
GRANTEE to the CORPORATION under such circumstances as may be specified by the
COMMITTEE.

(v)  RETIREMENT means TERMINATION of service on the BOARD OF DIRECTORS after
serving continuously for five consecutive years.

(w)  RULE 16b-3 means Rule 16b-3 under the EXCHANGE ACT or any successor to Rule
16b-3, as in effect when discretion is being exercised with respect to the PLAN.

TERMINATION occurs when a NON-EMPLOYEE DIRECTOR ceases to be a member of the
BOARD OF DIRECTORS or the Board of Directors of any parent corporation which may
hereafter be established (as the case may be).