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SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934

(AMENDMENT NO.___)

Filed by the Registrant [ü]

Filed by a Party other than the Registrant [   ]

Check the appropriate box:

PG&E Corporation

Payment of Filing Fee (Check the appropriate box):

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		PG&E Corporation and Pacific Gas and Electric Company Joint Notice of 2003 Annual Meetings • Joint Proxy Statement

To the Shareholders of PG&E Corporation and Pacific Gas and Electric Company:

	Sincerely,
	Robert D. Glynn, Jr.
	Chairman of the Board, Chief Executive Officer,
	and President of PG&E Corporation
	Chairman of the Board of
	Pacific Gas and Electric Company

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March 21, 2003

To the Shareholders of PG&E Corporation and Pacific Gas and Electric Company:

      The annual meetings of shareholders of PG&E Corporation and Pacific Gas and Electric Company will be held concurrently on Wednesday, April 16, 2003, at 10:00 a.m., in the Masonic Auditorium, 1111 California Street, San Francisco, California, for the purpose of considering the following matters:

      The Boards of Directors have fixed the close of business on February 18, 2003, as the record date for the purpose of determining shareholders who are entitled to receive notice of and to vote at the annual meetings.

	By Order of the Boards of Directors of
	PG&E Corporation and Pacific Gas and Electric Company,
	Linda Y.H. Cheng
	Corporate Secretary
	PG&E Corporation and
	Pacific Gas and Electric Company

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Joint Proxy Statement

        This Joint Proxy Statement provides information concerning the Joint Annual Meetings of PG&E Corporation and Pacific Gas and Electric Company, which will be held concurrently on Wednesday, April 16, 2003. The Joint Proxy Statement and proxy cards, together with the PG&E Corporation and Pacific Gas and Electric Company 2002 Annual Report to shareholders, were mailed beginning on or about March 21, 2003.

      The Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company (Boards) are soliciting proxies for use at their respective annual meetings, including any adjournments or postponements. This Joint Proxy Statement and a proxy card were sent to anyone who owned shares of common stock of PG&E Corporation and/or shares of preferred stock of Pacific Gas and Electric Company at the close of business on February 18, 2003. This date is the record date set by the Boards to determine which shareholders may vote at the Joint Annual Meetings. This Joint Proxy Statement describes certain matters that management expects will be voted on at the annual meetings, gives you information about PG&E Corporation and Pacific Gas and Electric Company and their respective Boards and managements, and provides general information regarding the voting process and attendance at the annual meetings.

Questions and Answers

How do I vote?

      You can attend and vote at the Joint Annual Meetings, or the proxyholders will vote your shares as you indicate on your proxy. There are three ways to submit your proxy.

                    Over the Internet at http://www.eproxy.com/pcg

      If you submit your proxy over the Internet or by telephone, your vote must be received by 11:00 p.m., Eastern time, on Tuesday, April 15, 2003. These Internet and telephone voting procedures comply with California law.

What am I voting on and what are the Board’s voting recommendations?

      PG&E Corporation shareholders will be voting on the following items:

      Pacific Gas and Electric Company shareholders will be voting on the following items:

What vote is required to approve each item?

      To elect directors:

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What is a broker non-vote?

      If you hold your shares indirectly through a broker, bank, trustee, nominee, or other third party, that party is the registered holder of your shares and submits the proxy to vote your shares. You are the beneficial owner of the shares and typically you will be asked to provide the registered holder with instructions as to how your shares should be voted.

      Broker non-votes occur when brokers or nominees have voted on some of the matters to be acted on at a meeting, but do not vote on certain other matters because, under the rules of the New York Stock Exchange, they are not permitted to vote on those other matters without instructions from the beneficial owners of the shares.

Will shareholders be asked to vote on matters other than those described in the Joint Proxy Statement?

      If other matters are raised during the Joint Annual Meetings, shareholders will vote on those matters only if PG&E Corporation or Pacific Gas and Electric Company, as appropriate, determines that those other matters satisfy advance notice requirements in the appropriate Bylaws and otherwise properly come before the Joint Annual Meetings. If other matters properly come before the Joint Annual Meetings, the proxyholders named on the enclosed proxy card will vote the shares for which they hold proxies at their discretion, to the extent permitted by law.

What shares are included on my proxy card?

      For PG&E Corporation registered shareholders, the shares included on your proxy card represent all the shares of PG&E Corporation common stock in your account, including shares in the PG&E Corporation Dividend Reinvestment Plan. For Pacific Gas and Electric Company registered shareholders, the shares included on your card represent all the shares of Pacific Gas and Electric Company preferred stock in your account.

      If you are a registered shareholder of both PG&E Corporation common stock and Pacific Gas and Electric Company preferred stock, you will receive a separate proxy card for each company. If you receive more than one proxy card for either company, it means your shares are held in more than one account. You should vote the shares on all your proxy cards. If you would like to consolidate your accounts, please contact our transfer agent, Mellon Investor Services LLC, toll-free at 1-800-719-9056.

How many copies of the Joint Proxy Statement and annual report will I receive?

      If you are a registered shareholder of PG&E Corporation common stock and/or Pacific Gas and Electric Company preferred stock, you will receive one Joint Proxy Statement and one annual report for each account.

      If you are a beneficial owner of PG&E Corporation common stock and/or Pacific Gas and Electric Company preferred stock and receive your proxy materials through ADP Investor Communication Services (ADP), and there are multiple beneficial owners at the same address, you may receive fewer Joint Proxy Statements and annual reports than the number of beneficial owners at that address. Securities and Exchange Commission regulations permit ADP to deliver only one Joint Proxy Statement and annual report to multiple beneficial owners sharing an address, unless we receive contrary instructions from any beneficial owner at that same address. If you receive your proxy materials through ADP and wish to receive a separate proxy statement or annual report in the future, please contact the office of the Corporate Secretary of PG&E Corporation or Pacific Gas and Electric Company, as appropriate, at One Market, Spear Tower, Suite 2400, San Francisco, CA 94105, or by calling 1-415-267-7070.

What if I return my proxy but do not specify how I want my shares voted?

      The PG&E Corporation proxyholders will vote those shares “For” Items 1 and 2 and “Against” Items 4 through 10. The Pacific Gas and Electric Company proxyholders will vote those shares “For” Items 1 through 3.

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What if I do not submit my proxy?

      Your shares will not be voted if you do not provide a proxy or vote at the annual meetings.

Can I change my proxy vote?

      Yes. You can change your proxy vote or revoke your proxy any time before the Joint Annual Meetings by (1) returning a signed proxy card with a later date, (2) entering a new vote over the Internet or by telephone, (3) notifying the Corporate Secretary in writing, or (4) submitting a written ballot at the meetings.

Is my vote confidential?

      Yes. Each company has adopted a confidential voting policy under which shareholder votes are revealed only to a non-employee proxy tabulator or an independent inspector of election, except (1) as necessary to meet legal requirements, (2) in a dispute regarding authenticity of proxies and ballots, (3) in the event of a proxy contest if the other party does not agree to comply with the confidential voting policy, and (4) where disclosure may be necessary for either company to assert or defend claims.

Who will count the votes?

      Mellon Investor Services LLC (MIS) will act as the proxy tabulators and the inspectors of election for the 2003 Joint Annual Meetings. MIS is independent of PG&E Corporation and Pacific Gas and Electric Company and their respective directors, officers, and employees.

How many shares are eligible to vote at the annual meetings?

      On February 18, 2003, there were 383,955,953 shares of PG&E Corporation common stock, without par value, outstanding and entitled to vote. Each share is entitled to one vote.

      On February 18, 2003, there were 17,258,280 shares of Pacific Gas and Electric Company preferred stock, $25 par value, and 321,314,760 shares of Pacific Gas and Electric Company common stock, $5 par value, outstanding and entitled to vote. Each share is entitled to one vote. PG&E Corporation and a subsidiary hold 100 percent of the issued and outstanding shares of Pacific Gas and Electric Company common stock. Together they own approximately 95 percent of the total outstanding voting stock of Pacific Gas and Electric Company. Holders of Pacific Gas and Electric Company’s preferred stock hold approximately 5 percent of the Company’s total outstanding voting stock.

May I attend the annual meetings?

      All shareholders of record as of the close of business on February 18, 2003, may attend the Joint Annual Meetings of PG&E Corporation and Pacific Gas and Electric Company. You must have an admission ticket to attend the annual meetings. Also, shareholders will be asked to present valid photo identification, such as a driver’s license or passport, before being admitted to the meetings. Cameras, recording devices, and other electronic devices will not be permitted at the meetings, other than for PG&E Corporation and Pacific Gas and Electric Company purposes. No items will be allowed into the meetings that might pose a concern for the safety of those attending.

      If you are a registered shareholder, you will receive an admission ticket along with your proxy card. Please bring the admission ticket to the meetings.

      If a broker, bank, trustee, nominee, or other third party holds your shares, please inform that party that you plan to attend the annual meetings and ask for a legal proxy. Bring the legal proxy to the shareholder registration area when you arrive at the meetings and we will issue an admission ticket to you. If you cannot get a legal proxy in time, we will issue you an admission ticket if you bring a copy of your brokerage or bank account statement showing that you owned PG&E Corporation or Pacific Gas and Electric Company stock as of February 18, 2003.

      Real-time captioning services and assistive listening devices will be available at the meetings for the hearing impaired. Please contact an usher if you wish to be seated in the real-time captioning section or require an assistive listening device. Audio cassette recordings of the meetings may be requested by calling the office of the Corporate Secretary at 1-415-267-7070.

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May I bring a guest to the annual meetings?

      Each registered shareholder and beneficial owner may bring up to a total of three of the following individuals to the annual meetings: (1) a spouse or domestic partner, (2) legal proxies, (3) qualified representatives presenting the shareholder’s proposal, or (4) financial or legal advisors. A shareholder must notify the Corporate Secretary that he or she intends to bring any proxy, qualified representative, or advisor to the annual meetings. The notification must include the name and address of the proxy, representative, or advisor, and must be received at the principal executive office of the appropriate company by 5:00 p.m., Pacific time, on April 9, 2003, in order to allow enough time for issuance and delivery of additional admission tickets. We recommend that shareholders submit notification by a means that allows them to determine when the notification was received at the principal executive office of the appropriate company.

How will the annual meetings be conducted?

      The Chairman of the meetings has the authority necessary to preside over the meetings and to make any and all determinations with respect to the conduct of the meetings.

      After introduction of each of the official items of business on the agenda, there will be an opportunity for discussion concerning that particular item. Questions or comments must relate specifically to the item being considered. If the item being considered is a shareholder proposal described in the Joint Proxy Statement, the proponent or the proponent’s qualified representative may make a statement regarding that proposal.

Will I be able to ask questions during the annual meetings?

      After consideration of the official items of business, there will be a general question and answer period. Questions and comments should pertain to corporate performance or matters of interest to shareholders generally and should not relate to items of business already introduced and discussed. The meetings are not a forum to present general economic, political, or other views that are not directly related to the business of PG&E Corporation or Pacific Gas and Electric Company.

      Shareholders will be recognized on a rotating basis. If you wish to speak, please raise your hand and wait to be recognized. When you are called upon, please direct your questions and comments to the Chairman of the meetings. Each shareholder who is called upon will have a maximum of three minutes on any one question or comment.

How do I recommend someone to be a director?

      You may recommend any person to be a director of PG&E Corporation or Pacific Gas and Electric Company by writing to the Corporate Secretary. The Nominating, Compensation, and Governance Committee will consider nominees recommended by shareholders for election to the Boards of Directors.

      If you would like to nominate a candidate for director, you must provide timely and proper written notice of the nomination in the manner described in the Bylaws of the appropriate company. Notice of director nominations proposed to be brought before the 2004 annual meetings of PG&E Corporation or Pacific Gas and Electric Company must be received at the principal executive office of the appropriate company no later than 5:00 p.m., Pacific time, on February 5, 2004. If you wish to submit a nomination for a director candidate, we recommend that you use a means that allows you to determine when the nomination was received at the principal executive office of the appropriate company. For a copy of either company’s Bylaws, send a written request to that company’s Corporate Secretary.

When are shareholder proposals due for the 2004 annual meetings?

      If you would like to submit a proposal for inclusion in the proxy statement for either company’s 2004 annual meeting, the company’s Corporate Secretary must receive your proposal by 5:00 p.m., Pacific time, on November 21, 2003.

      If you would like to introduce any other business at either company’s 2004 annual meeting of shareholders, you must provide timely and proper written notice of the matter in the manner described in the Bylaws of the appropriate company. For a copy of either company’s Bylaws, send a written request to that company’s Corporate Secretary.

      Notice of other business proposed to be brought before the 2004 annual meeting of PG&E Corporation or Pacific Gas and Electric Company must be received at the principal executive office of the appropriate company

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      If you wish to submit a shareholder proposal or notice of other business to be brought before the 2004 annual meetings, we recommend that you use a means that allows you to determine when the shareholder proposal or notice of other business was received at the principal executive office of the appropriate company.

How much did this proxy solicitation cost?

      PG&E Corporation and Pacific Gas and Electric Company hired D.F. King & Co., Inc. to assist in the distribution of proxy materials and solicitation of votes. The estimated fee is $11,500 plus reasonable out-of-pocket expenses. In addition, PG&E Corporation and Pacific Gas and Electric Company will reimburse brokerage houses and other custodians, nominees, and fiduciaries for reasonable out-of-pocket expenses for forwarding proxy and solicitation material to shareholders.

What is the address of the principal executive office?

      Correspondence may be addressed to:

Your vote is important.

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Corporate Governance Commitment

      PG&E Corporation and Pacific Gas and Electric Company have a commitment to good corporate governance practices. These practices provide a framework within which the Boards of Directors and management of PG&E Corporation and Pacific Gas and Electric Company can pursue the business objectives of those companies. Their foundation is the independent nature of the Board and its fiduciary responsibility to the company’s shareholders.

      Our corporate governance practices are documented in Corporate Governance Guidelines that are adopted by the Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company and that are updated from time to time as appropriate.

      The PG&E Corporation Corporate Governance Guidelines are reprinted below. The Pacific Gas and Electric Company Corporate Governance Guidelines are identical to the PG&E Corporation Corporate Governance Guidelines in all material respects.

Corporate Governance Guidelines

All members of the Board of Directors of PG&E Corporation (the “Corporation”) are elected each year and serve one-year terms. Directors are not elected for multiple-year, staggered terms.

The Board’s membership is composed of qualified, dedicated, and highly regarded individuals who have experience relevant to the Corporation’s operations and understand the complexities of the Corporation’s business environment. The Board seeks to include a diversity of backgrounds, perspectives, and skills among its members.

All members of the Board have a fiduciary responsibility to represent the best interests of the Corporation and all of its shareholders.

At least 75 percent of the Board is composed of independent directors, defined as directors who are neither current nor former officers or employees of nor consultants to the Corporation or its subsidiaries, and who also are neither current nor former officers or employees of any other corporation on whose board of directors any officer of the Corporation serves as a member. As provided in Article III, Section 1 of the Corporation’s Bylaws, the Chairman of the Board and the President are members of the Board.

The Board nominates directors for election at the annual meeting of shareholders and selects directors to fill vacancies which occur between annual meetings. The Nominating, Compensation, and Governance Committee, in consultation with the Chairman of the Board and the Chief Executive Officer (CEO), reviews the qualifications of the directors and presents recommendations to the full Board for action.

The Nominating, Compensation, and Governance Committee annually reviews with the Board the appropriate skills and characteristics required of Board members in the context of the current composition of the Board. In conducting this assessment, the Committee considers diversity, age, skills, and such other factors as it deems appropriate given the current needs of the Board and the Corporation.

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The Chairman of the Board is elected by the Board.

The Board does not have a policy as to whether the role of Chief Executive Officer should be separate from that of Chairman of the Board, nor, if the roles are separate, whether the Chairman should be selected from the independent directors or should be an employee of the Corporation. This is a matter to be considered each time a new Chief Executive Officer is selected, based upon the circumstances existing at that time.

The Nominating, Compensation, and Governance Committee conducts an annual assessment of the performance of the Board, including Board committees, and provides the results to the full Board for discussion. The assessment includes evaluation of the Board’s contribution as a whole and specific areas in which the Board and/or management believes a better contribution could be made. The purpose of the review is to increase the effectiveness of the Board as a whole, not to discuss the performance of individual directors.

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

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

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

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

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

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

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

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

Pursuant to proxy disclosure rules, the Corporation’s proxy statement identifies each director who during the last fiscal year attended fewer than 75 percent of the aggregate of the total number of meetings of the Board and each Board committee on which the director served.

The independent directors meet at each regularly scheduled Board meeting in executive session. These executive session meetings are chaired by the Chair of the Nominating, Compensation, and Governance Committee, who shall be the lead director for these meetings. Each such meeting includes a subsequent discussion with the Chief Executive Officer.

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

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

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

The agenda for each meeting is provided in advance of the meeting, together with written materials on matters to be presented for consideration, for the directors’ review prior to the meeting. As a general rule, written materials are provided in advance on all matters requiring Board action. Written materials are concise summaries of the relevant information, designed to provide a foundation for the Board’s discussion of key issues and make the most efficient use of the Board’s meeting time. Directors may request from the Chief Executive Officer any additional information they believe to be necessary to perform their duties.

Members of management, as designated by the Chief Executive Officer, attend each meeting of the Board.

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

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

All permanent Board committees, other than the Executive Committee, are chaired by independent directors.

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

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

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

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

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

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

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

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

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

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

The Chief Executive Officer reports annually to the Board on management development and succession planning. This report includes the CEO’s recommendation for a successor should the CEO become unexpectedly disabled.

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

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

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

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          Nine and ten directors will be elected to serve on the Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company, respectively, to hold office until the next annual meetings or until their successors shall be elected and qualified, except in the case of death, resignation, or removal of a director. The nine nominees for director of PG&E Corporation and the ten nominees for director of Pacific Gas and Electric Company whom the respective Boards propose for election are the same, except for Gordon R. Smith, who is a nominee for the Pacific Gas and Electric Company Board only.

      The composition of these slates of nominees is consistent with the policy stated in the Corporate Governance Guidelines of PG&E Corporation and Pacific Gas and Electric Company that at least 75 percent of their Boards shall be composed of “independent” directors, defined as directors who are neither current nor former officers or employees of nor consultants to PG&E Corporation, Pacific Gas and Electric Company, or any of their respective subsidiaries, and who also are neither current nor former officers or employees of any other corporation on whose board of directors any officer of PG&E Corporation or Pacific Gas and Electric Company (as the case may be) serves as a member.

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

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

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

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Nominees for Directors of PG&E Corporation and

		David R. Andrews Mr. Andrews is Senior Vice President Government Affairs, General Counsel, and Secretary of PepsiCo, Inc. (food and beverage businesses), and has held that position since February 2002. Prior to joining PepsiCo, Inc., Mr. Andrews was a partner in the law firm of McCutchen, Doyle, Brown & Enersen, LLP from May 2000 to January 2002 and from 1981 to July 1997. From August 1997 to April 2000, he served as the legal advisor to the U.S. Department of State and former Secretary Madeleine Albright. Mr. Andrews, 61, has been a director of PG&E Corporation and Pacific Gas and Electric Company since 2000. He also is a director of UnionBanCal Corporation.
		David A. Coulter Mr. Coulter is Vice Chairman of J.P. Morgan Chase & Co. (financial services and retail banking), and has held that position since January 2001. Prior to the merger with J.P. Morgan & Co. Incorporated, he was Vice Chairman of The Chase Manhattan Corporation (bank holding company) from August 2000 to December 2000. He was a partner in the Beacon Group, L.P. (investment banking firm) from January 2000 to July 2000, and was Chairman and Chief Executive Officer of BankAmerica Corporation and Bank of America NT&SA from May 1996 to October 1998. Mr. Coulter, 55, has been a director of PG&E Corporation and Pacific Gas and Electric Company since 1996. He also is a director of Strayer Education, Inc.
		C. Lee Cox Mr. Cox is retired Vice Chairman of AirTouch Communications, Inc. and retired President and Chief Executive Officer of AirTouch Cellular (cellular telephone and paging services). He was an executive officer of AirTouch Communications, Inc. and its predecessor, PacTel Corporation, from 1987 until his retirement in April 1997. Mr. Cox, 61, has been a director of PG&E Corporation and Pacific Gas and Electric Company since 1996.
		William S. Davila Mr. Davila is President Emeritus of The Vons Companies, Inc. (retail grocery). He was President of The Vons Companies, Inc. from 1986 until his retirement in May 1992. Mr. Davila, 71, has been a director of Pacific Gas and Electric Company since 1992 and a director of PG&E Corporation since 1996. He also is a director of The Home Depot, Inc. and Hormel Foods Corporation.
		Robert D. Glynn, Jr. Mr. Glynn is Chairman of the Board, Chief Executive Officer, and President of PG&E Corporation and Chairman of the Board of Pacific Gas and Electric Company. He has been an officer of PG&E Corporation since December 1996 and an officer of Pacific Gas and Electric Company since January 1988. Mr. Glynn, 60, has been a director of Pacific Gas and Electric Company since 1995 and a director of PG&E Corporation since 1996.

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		David M. Lawrence, MD Dr. Lawrence is retired Chairman and Chief Executive Officer of Kaiser Foundation Health Plan, Inc. and Kaiser Foundation Hospitals, and was an executive officer of those companies from 1991 until his retirement in 2002. Dr. Lawrence, 62, has been a director of Pacific Gas and Electric Company since 1995 and a director of PG&E Corporation since 1996. He also is a director of Agilent Technologies Inc.
		Mary S. Metz Dr. Metz is President of S. H. Cowell Foundation, and has held that position since January 1999. Prior to that date, she was Dean of University Extension, University of California, Berkeley from July 1991 to June 1998. Dr. Metz, 65, has been a director of Pacific Gas and Electric Company since 1986 and a director of PG&E Corporation since 1996. She also is a director of Longs Drug Stores Corporation, SBC Communications Inc., and UnionBanCal Corporation.
		Carl E. Reichardt Mr. Reichardt is Vice Chairman of Ford Motor Company, and has held that position since October 2001. He is retired Chairman of the Board and Chief Executive Officer of Wells Fargo & Company (bank holding company) and Wells Fargo Bank, N.A. He was an executive officer of Wells Fargo Bank, N.A. from 1978 until his retirement in December 1994. Mr. Reichardt, 71, has been a director of Pacific Gas and Electric Company since 1985 and a director of PG&E Corporation since 1996. He also is a director of ConAgra Foods, Inc., Ford Motor Company, HCA, Inc., McKesson Corporation, and Newhall Management Corporation.
		Gordon R. Smith* Mr. Smith is President and Chief Executive Officer of Pacific Gas and Electric Company, and has been an officer of Pacific Gas and Electric Company since 1980. Mr. Smith, 55, has been a director of Pacific Gas and Electric Company since 1997.
		Barry Lawson Williams Mr. Williams is President of Williams Pacific Ventures, Inc. (business investment and consulting), and has held that position since 1987. He also served as interim President and Chief Executive Officer of the American Management Association (management development organization) from November 2000 to June 2001. Mr. Williams, 58, has been a director of Pacific Gas and Electric Company since 1990 and a director of PG&E Corporation since 1996. He also is a director of CH2M Hill Companies, Ltd., Newhall Management Corporation, R.H. Donnelley Corporation, The Simpson Manufacturing Company Inc., SLM Corporation, and Synavant Inc.

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Board Committees

      The committees of the PG&E Corporation Board of Directors are the Executive Committee, the Audit Committee, the Finance Committee, the Nominating, Compensation, and Governance Committee, and the Public Policy Committee. The Pacific Gas and Electric Company Board of Directors has an Executive Committee and an Audit Committee. All committee members are directors of PG&E Corporation or Pacific Gas and Electric Company, as appropriate. To ensure that all committee members can perform their duties in an intelligent and fully informed manner, committee members and other directors have access to all of PG&E Corporation’s and Pacific Gas and Electric Company’s books, records, and other documents. The current membership and duties of these committees are described below.

Executive Committees

      Each Executive Committee, subject to the provisions of law and certain limits imposed by the PG&E Corporation Board or the Pacific Gas and Electric Company Board (as the case may be), may exercise any of the powers and perform any of the duties of the PG&E Corporation Board or the Pacific Gas and Electric Company Board, respectively. The Executive Committees meet as needed. No PG&E Corporation Executive Committee meetings and no Pacific Gas and Electric Company Executive Committee meetings were held in 2002.

Audit Committees

      The Audit Committees of PG&E Corporation (five meetings were held in 2002) and Pacific Gas and Electric Company (five meetings were held in 2002) advise and assist the Boards of Directors of those entities in fulfilling their responsibilities in connection with financial and accounting practices, internal controls, external and internal auditing programs, business ethics, and compliance with laws, regulations, and policies that may have a material impact on the consolidated financial statements of PG&E Corporation, Pacific Gas and Electric Company, and their respective subsidiaries. The Audit Committees satisfy themselves as to the independence and competence of PG&E Corporation’s and Pacific Gas and Electric Company’s independent public accountants, and review and discuss with the independent public accountants and with PG&E Corporation’s and Pacific Gas and Electric Company’s officers and internal auditors the scope and results of the independent public accountants’ audit work, consolidated quarterly and annual financial statements, the quality and effectiveness of internal controls, and compliance with laws, regulations, policies, and programs. The Audit Committees also select and appoint the firm of independent public accountants to audit PG&E Corporation’s and Pacific Gas and Electric Company’s accounts, pre-approve all auditing and non-audit services that the independent public accountants provide to PG&E Corporation and Pacific Gas and Electric Company, and make further inquiries as they deem necessary or desirable to inform themselves as to the conduct of the affairs of PG&E Corporation, Pacific Gas and Electric Company, and their respective subsidiaries. The Audit Committees are responsible for the compensation and oversight of the work of the independent public accountants that PG&E Corporation and Pacific Gas and Electric Company employ for the purpose of preparing or issuing audit reports or related work, and such independent public accountants report directly to the Audit Committees.

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      The members of the Audit Committees of PG&E Corporation and Pacific Gas and Electric Company are identical. The Audit Committees are composed entirely of directors who are (1) financially knowledgeable, including at least one member who has accounting or related financial management expertise, and (2) independent directors, as that term is defined in the Corporate Governance Guidelines of PG&E Corporation and Pacific Gas and Electric Company (see page 6). The members of the Audit Committees are independent as defined in the listing standards of the New York Stock Exchange and the American Stock Exchange. One member of each Committee is appointed by the appropriate Board of Directors as the Committee’s Chair.

Finance Committee

      The Finance Committee of PG&E Corporation (eight meetings were held in 2002) advises and assists the Board with respect to the financial and capital investment policies and objectives of PG&E Corporation and its subsidiary companies, including specific actions required to achieve those objectives. The Finance Committee reviews long-term financial and investment plans and strategies, annual financial plans, dividend policy, short-term and long-term financing plans, proposed capital expenditures, proposed divestitures, major commercial banking, investment banking, financial consulting, and other financial relations of PG&E Corporation or its subsidiaries, and risk management activities. Each year, the Finance Committee presents for the Board of Directors’ review and approval (1) a five-year financial plan for PG&E Corporation and its subsidiaries that incorporates, among other things, the Corporation’s business strategy goals, and (2) an annual budget that reflects elements of the approved five-year plan. Members of the Board of Directors receive a monthly report that compares the Corporation’s performance to the budget and provides other information regarding financial performance.

      One member of the Committee who is an independent director, as defined in the Corporate Governance Guidelines, is appointed by the Board of Directors as the Committee’s Chair.

Nominating, Compensation, and Governance Committee

      The Nominating, Compensation, and Governance Committee of PG&E Corporation (six meetings were held in 2002) advises and assists the Boards of PG&E Corporation and Pacific Gas and Electric Company with respect to the selection and compensation of directors. It also advises and assists PG&E Corporation and its subsidiaries on employment, compensation, and benefits policies and practices, and the development, selection, and compensation of policy-making officers. In addition, it advises and assists the Boards of PG&E Corporation and Pacific Gas and Electric Company with respect to corporate governance matters, including the performance and effectiveness of the Boards and the corporate governance principles and practices of PG&E Corporation and Pacific Gas and Electric Company. The Nominating, Compensation, and Governance Committee reviews and acts upon the compensation of officers of PG&E Corporation and its subsidiaries, except that the compensation of the Chief Executive Officers of PG&E Corporation and Pacific Gas and Electric Company is established by the full Board of Directors of PG&E Corporation or Pacific Gas and Electric Company (as the case may be) upon recommendation of the Committee, and the Committee has delegated to the PG&E Corporation Chief Executive Officer the authority to approve compensation for certain officers of PG&E Corporation and its subsidiaries. The Committee also reviews long-range planning for executive development and succession, the composition and performance of the Boards of PG&E Corporation and Pacific Gas and Electric Company, and the Corporate Governance Guidelines of those companies.

      The Nominating, Compensation, and Governance Committee is composed entirely of independent directors, as defined in the Corporate Governance Guidelines. One member of the Committee is appointed by the Board of Directors as the Committee’s Chair.

Public Policy Committee

      The Public Policy Committee of PG&E Corporation (three meetings were held in 2002) advises and assists the Board of Directors with respect to public policy issues that could affect significantly the interests of the customers, shareholders, or employees of PG&E Corporation, Pacific Gas and Electric Company, and their respective subsidiaries. The Public Policy Committee reviews the policies and practices of PG&E Corporation and its subsidiaries with respect to protection and improvement of the quality of the environment, charitable and community service organizations and activities, equal opportunity in hiring and promoting employees, and development of minority-owned and women-owned businesses as suppliers to PG&E Corporation, Pacific Gas and Electric Company, and their respective subsidiaries. The Committee also reviews significant societal, governmental, and environmental trends and issues that may affect the operations of PG&E Corporation, Pacific Gas and Electric Company, or their subsidiaries.

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      One member of the Committee who is an independent director, as defined in the Corporate Governance Guidelines, is appointed by the Board of Directors as the Committee’s Chair.

Attendance at Board and Committee Meetings

      Eleven meetings of the PG&E Corporation Board of Directors and 22 meetings of the PG&E Corporation Board committees were held in 2002. Overall attendance of incumbent directors at such meetings was 89%. Individual attendance at meetings of the PG&E Corporation Board of Directors and Board committees was as follows: D. R. Andrews 92%, D. A. Coulter 80%, C. L. Cox 100%, W. S. Davila 95%, R. D. Glynn, Jr. 100%, D. M. Lawrence 75%, M. S. Metz 89%, C. E. Reichardt 80%, and B. L. Williams 100%.

      Five meetings of the Pacific Gas and Electric Company Board of Directors and five meetings of the Pacific Gas and Electric Company Board committees were held in 2002. Overall attendance of incumbent directors at such meetings was 92%. Individual attendance at meetings of the Pacific Gas and Electric Company Board of Directors and Board committees was as follows: D. R. Andrews 80%, D. A. Coulter 80%, C. L. Cox 100%, W. S. Davila 100%, R. D. Glynn, Jr. 100%, D. M. Lawrence 80%, M. S. Metz 90%, C. E. Reichardt 80%, G. R. Smith 100%, and B. L. Williams 100%.

Compensation of Directors

      Each director who is not an officer or employee of PG&E Corporation or Pacific Gas and Electric Company receives a quarterly retainer of $7,500 plus a fee of $1,000 for each Board or Board committee meeting attended. Non-employee directors who chair Board committees receive an additional quarterly retainer of $625. Under the Deferred Compensation Plan for Non-Employee Directors, directors of PG&E Corporation or Pacific Gas and Electric Company may elect to defer all or part of such compensation for varying periods. Directors who participate in the Deferred Compensation Plan may convert their deferred compensation into a number of common stock equivalents, the value of which is tied to the market value of PG&E Corporation common stock. Alternatively, participating directors may direct that their deferred compensation earn interest.

      No director who serves on both the PG&E Corporation and Pacific Gas and Electric Company Boards and corresponding committees is paid additional compensation for concurrent service on Pacific Gas and Electric Company’s Board or its committees, except that separate meeting fees are paid for each meeting of the Pacific Gas and Electric Company Board, or a Pacific Gas and Electric Company Board committee, that is not held concurrently or sequentially with a meeting of the PG&E Corporation Board or a corresponding PG&E Corporation Board committee. It is the usual practice of PG&E Corporation and Pacific Gas and Electric Company that meetings of the respective Boards and corresponding committees are held concurrently and, therefore, that a single meeting fee is paid to each director for each set of meetings.

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

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

      Under the Non-Employee Director Stock Incentive Plan, a component of the PG&E Corporation Long-Term Incentive Program, on the first business day of January of each year, each non-employee director of PG&E Corporation is entitled to receive stock-based grants with a total aggregate equity value of $30,000, composed of (1) restricted shares of PG&E Corporation common stock valued at $10,000 (based on the closing price of PG&E Corporation common stock on the first business day of the year), and (2) a combination, as elected by the director, of non-qualified stock options and common stock equivalents with a total equity value of $20,000, based on equity value increments of $5,000. The exercise price of stock options is equal to the market value of PG&E Corporation common stock (i.e., the closing price) on the date of grant. Restricted stock and stock options vest over the five-year period following the date of grant, except that restricted stock and stock options will vest immediately upon mandatory retirement from the Board, upon a director’s death or disability, or in the event of a change in control. Common stock equivalents awarded are payable in the form of PG&E Corporation common

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      On January 2, 2002, each non-employee director received 514 restricted shares of PG&E Corporation common stock. In addition, directors who were granted stock options received options to purchase 945 shares of PG&E Corporation common stock for each $5,000 increment of equity value (subject to the aggregate $20,000 limit) at an exercise price of $19.45 per share, and directors who were granted common stock equivalents received 257 common stock equivalent units for each $5,000 increment of equity value (subject to the aggregate $20,000 limit).

Legal Proceedings

Proofs of Claims Filed in the Bankruptcy Case

      On April 6, 2001, Pacific Gas and Electric Company filed a voluntary petition for relief under the provisions of Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of California (Bankruptcy Court). Pursuant to Chapter 11 of the U.S. Bankruptcy Code, Pacific Gas and Electric Company retains control of its assets and is authorized to operate its business as a debtor in possession while being subject to the jurisdiction of the Bankruptcy Court.

      J.P. Morgan Trust Co. of Delaware submitted a proof of claim for approximately $1.45 million dollars relating to its ownership interest in shares of Pacific Gas and Electric Company’s preferred stock. J.P. Morgan Chase Bank submitted a proof of claim for approximately $173 million, related to its provision of a stand-by letter of credit which provides credit and liquidity support for certain of Pacific Gas and Electric Company’s Pollution Control Bonds. Both entities are subsidiaries of J.P. Morgan Chase & Co. Mr. David Coulter, a director of both PG&E Corporation and Pacific Gas and Electric Company, is a Vice Chairman of J.P. Morgan Chase & Co. and J.P. Morgan Chase Bank, responsible for its investment bank, investment management, and private banking businesses.

Federal Securities Lawsuit

      On April 16, 2001, a complaint was filed against PG&E Corporation and Pacific Gas and Electric Company in the U.S. District Court for the Central District of California entitled Jack Gillam; DOES 1 TO 5, Inclusive, and All Persons similarly situated vs. PG&E Corporation, Pacific Gas and Electric Company; and DOES 6 to 10, Inclusive. Pacific Gas and Electric Company was subsequently dismissed, due to its Chapter 11 bankruptcy filing. In May 2001, the case was transferred to the U.S. District Court for the Northern District of California.

      On August 9, 2001, plaintiff filed a first amended complaint entitled Jack Gillam, et al. vs. PG&E Corporation, Robert D. Glynn, Jr., and Peter A. Darbee, in the U.S. District Court for the Northern District of California. The first amended complaint, purportedly brought on behalf of all persons who purchased PG&E Corporation common stock or certain shares of the Pacific Gas and Electric Company’s preferred stock between July 20, 2000, and April 9, 2001, claims that defendants caused PG&E Corporation’s Condensed Consolidated Financial Statements for the second and third quarters of 2000 to be materially misleading in violation of federal securities laws by recording as a deferred cost and capitalizing as a regulatory asset the under-collections that resulted when escalating wholesale energy prices caused Pacific Gas and Electric Company to pay far more to purchase electricity than it was permitted to collect from customers.

      The defendants filed a motion to dismiss the first amended complaint, based largely on public disclosures by PG&E Corporation, Pacific Gas and Electric Company, and others regarding the under-collections, the risk that they might not be recoverable, the financial consequences of non-recovery, and other information from which analysts and investors could assess for themselves the probability of recovery. On January 14, 2002, the District Court granted the defendants’ motion to dismiss the plaintiffs’ complaint with leave to amend the complaint. On February 4, 2002, the plaintiffs filed a second amended complaint in the District Court entitled Jack Gillam, et al. vs. PG&E Corporation, and Robert D. Glynn, Jr. In addition to containing many of the same allegations as were contained in the prior complaint, the complaint contains allegations similar to the allegations made in the California Attorney General’s complaint against PG&E Corporation discussed below. On March 11, 2002, the defendants filed a motion to dismiss the second amended complaint. After a hearing on June 24, 2002, the District Court issued an order granting the defendants’ motion to dismiss the second amended complaint. The dismissal is with prejudice, prohibiting the plaintiffs from filing a further amended complaint.

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      On November 15, 2002, plaintiffs filed an appeal of the District Court’s order with the U.S. Court of Appeals for the Ninth Circuit, advancing substantially the same arguments that the District Court had rejected previously. The defendants filed an answering brief on January 2, 2003, and anticipate that oral argument may occur as early as the fall of 2003.

California Attorney General Complaint and Related Litigation

California Attorney General Complaint

      This complaint, filed January 10, 2002, in San Francisco Superior Court against PG&E Corporation and its directors, directors of Pacific Gas and Electric Company, and other parties, alleges unfair or fraudulent business acts or practices in violation of California Business and Professions Code Section 17200. Among other claims, the Attorney General alleged that past transfers of money from Pacific Gas and Electric Company to PG&E Corporation, and from PG&E Corporation to its other affiliates, violated various conditions established by the California Public Utilities Commission (CPUC) in decisions approving formation of PG&E Corporation as the holding company.

      The Attorney General also alleged that the December 2000 and January and February 2001 ringfencing transactions, by which PG&E Corporation subsidiaries complied with credit rating agency criteria to establish independent credit ratings, violated the holding company conditions. The Attorney General alleged that these ringfencing transactions included conditions that restricted PG&E National Energy Group’s ability to provide any funds to PG&E Corporation, through dividends, capital distributions, or similar payments, reducing PG&E Corporation’s cash and thereby impairing PG&E Corporation’s ability to comply with the capital requirements condition and subordinating Pacific Gas and Electric Company’s interests to the interests of PG&E Corporation and its other affiliates. (On January 9, 2002, the CPUC issued a decision interpreting the capital requirements condition (which it terms the “first priority condition”) and concluded that the condition, at least under certain circumstances, includes the requirement that each of the holding companies “infuse the utility with all types of capital necessary for the utility to fulfill its obligation to serve.” The three major California investor-owned energy utilities and their parent holding companies had opposed the broader interpretation as being inconsistent with the prior 15 years’ understanding of that condition as applying more narrowly to a priority on capital needed for investment purposes. The three major California investor-owned energy utilities and their parent holding companies appealed the CPUC’s interpretation of the capital requirements condition to various state appellate courts. The CPUC moved to consolidate all proceedings in the San Francisco state appellate court. The CPUC’s request for consolidation was granted and all the petitions are now before the First Appellate District in San Francisco, California.)

      The complaint seeks injunctive relief, the appointment of a receiver, restitution in an amount according to proof, civil penalties of $2,500 against each defendant for each violation of California Business and Professions Code Section 17200, that the total penalty not be less than $500 million, and costs of the lawsuit.

      In addition, the Attorney General alleged that, through Pacific Gas and Electric Company’s bankruptcy proceedings, PG&E Corporation and Pacific Gas and Electric Company engaged in unlawful, unfair, and fraudulent business practices by seeking to implement the transactions proposed in the proposed Plan of Reorganization filed in Pacific Gas and Electric Company’s bankruptcy proceeding. The Attorney General’s complaint also seeks restitution of assets allegedly wrongfully transferred to PG&E Corporation from Pacific Gas and Electric Company. In PG&E Corporation’s view, the U.S. Bankruptcy Court for the Northern District of California (Bankruptcy Court) has original and exclusive jurisdiction of these claims. Therefore, on February 8, 2002, PG&E Corporation filed a notice of removal in the Bankruptcy Court to transfer the Attorney General’s complaint to the Bankruptcy Court.

      After removing the Attorney General’s complaint to the Bankruptcy Court, on February 15, 2002, PG&E Corporation filed a motion to dismiss or, in the alternative, to stay the Attorney General’s complaint with the Bankruptcy Court. Subsequently, the Attorney General filed a motion to remand the action to state court. In June 2002, the Bankruptcy Court held that federal law preempted the Attorney General’s allegations concerning PG&E Corporation’s participation in Pacific Gas and Electric Company’s bankruptcy proceedings. The Bankruptcy Court directed the Attorney General to file an amended complaint omitting these allegations and remanded the amended complaint to the San Francisco Superior Court. Both parties have appealed the Bankruptcy Court’s remand order. The appeal and cross-appeal are pending in the U.S. District Court for the Northern District of California.

      On August 9, 2002, the Attorney General filed its amended complaint in the San Francisco Superior Court omitting the allegations concerning PG&E Corporation’s participation in Pacific Gas and Electric Company’s

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Cynthia Behr v. PG&E Corporation, et al.

      On February 14, 2002, this complaint was filed by a private plaintiff in Santa Clara Superior Court against PG&E Corporation and its directors, Pacific Gas and Electric Company’s directors, and other parties, also alleging a violation of California Business and Professions Code Section 17200. The allegations of the complaint are similar to the allegations contained in the Attorney General’s complaint but also include allegations of fraudulent transfer and violation of the California bulk sales laws. Plaintiff requests the same remedies as the Attorney General’s case and in addition requests damages, attachment, and restraints upon the transfer of defendants’ property. On March 8, 2002, PG&E Corporation filed a notice of removal in the Bankruptcy Court to transfer the complaint to the Bankruptcy Court. Subsequently, the plaintiff filed a motion to remand the action to state court.

      In the June 2002 ruling referred to above regarding the Attorney General’s case, the Bankruptcy Court also retained jurisdiction over Behr’s fraudulent transfer claim and bulk sales claim, finding them to belong to Pacific Gas and Electric Company’s estate. The Bankruptcy Court remanded Behr’s Section 17200 claim to the Santa Clara Superior Court. Both parties have appealed the Bankruptcy Court’s remand order. The appeal and cross-appeal are pending in the U.S. District Court for the Northern District of California.

Board of Directors Retirement Policy

      Due to the current financial and business situation, the Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company elected to adopt a one-year waiver of the retirement policy for purposes of nominating candidates for re-election at the 2003 Joint Annual Meetings of shareholders. The Boards may determine whether to waive the retirement policy on a year-to-year basis in light of the current business climate.

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Security Ownership of Management

      The following table sets forth the number of shares of PG&E Corporation common stock beneficially owned (as defined in the rules of the Securities and Exchange Commission) as of January 31, 2003, by the respective directors of PG&E Corporation and Pacific Gas and Electric Company, the nominees for director, the executive officers of PG&E Corporation and Pacific Gas and Electric Company named in the Summary Compensation Table on pages 42-43, and all directors and executive officers of PG&E Corporation and Pacific Gas and Electric Company as a group. As of January 31, 2003, no director, nominee for director, or executive officer owned shares of any class of Pacific Gas and Electric Company securities. The table also sets forth common stock equivalents credited to the accounts of directors and executive officers under PG&E Corporation’s deferred compensation and equity plans.

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          The Audit Committees of PG&E Corporation and Pacific Gas and Electric Company have selected and appointed Deloitte & Touche LLP as the independent public accountants to examine the consolidated financial statements of PG&E Corporation and Pacific Gas and Electric Company for the year 2003. Deloitte & Touche LLP is a major national accounting firm with substantial expertise in the energy and utility businesses. Deloitte & Touche LLP has been employed to perform this function for PG&E Corporation and Pacific Gas and Electric Company since 1999.

      In addition, the Audit Committees have reviewed non-audit fees that PG&E Corporation, Pacific Gas and Electric Company, and their respective subsidiaries have paid to the independent auditors, including amounts for information technology services, for purposes of considering whether such fees are compatible with maintaining the auditor’s independence.

      Audit Fees. For the year ended December 31, 2002, estimated fees for services rendered by Deloitte & Touche LLP for the reviews of Forms 10-Q and for the audits of the financial statements of PG&E Corporation and its subsidiaries are $8.6 million. This amount includes fees for stand-alone audits of various subsidiaries, including estimated fees of $4.0 million for Pacific Gas and Electric Company and its subsidiaries.

      Financial Information Systems Design and Implementation Fees.  For the year ended December 31, 2002, Deloitte & Touche LLP and its affiliates did not render any services related to the design and implementation of financial information systems for PG&E Corporation or Pacific Gas and Electric Company.

      All Other Fees. For the year ended December 31, 2002, aggregate fees for all other services rendered by Deloitte & Touche LLP and its affiliates to PG&E Corporation and its subsidiaries consisted of $2.2 million of fees for services relating to financings, regulatory filings, and accounting consultations that should be performed only by the Corporation’s independent auditor (“audit related fees”), $2.2 million of fees for tax services, and $1.1 million of other non-audit related fees. These amounts include $495,000 of audit related fees and $4,000 of other non-audit related fees for Pacific Gas and Electric Company and its subsidiaries.

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

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

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

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To be Voted on by Pacific Gas and Electric Company Shareholders Only

       On September 20, 2001, PG&E Corporation and Pacific Gas and Electric Company jointly filed a proposed Plan of Reorganization in U.S. Bankruptcy Court that would enable Pacific Gas and Electric Company to pay all valid creditor claims in full and emerge from Chapter 11 bankruptcy proceedings. The proposed Plan reorganizes Pacific Gas and Electric Company and PG&E Corporation into two separate stand-alone companies no longer affiliated with one another. The common shares of the reorganized Pacific Gas and Electric Company will be distributed to PG&E Corporation shareholders (spin-off).

      As a stand-alone company, Pacific Gas and Electric Company (Company) will need to have its own Long-Term Incentive Program under which it can provide employees and other eligible participants with Company stock and stock-based incentive awards. The Company’s Board of Directors has approved adoption of a Long-Term Incentive Program (LTIP) to become effective after the spin-off. Adoption of the LTIP also is subject to approval by the shareholders and receipt of required regulatory approvals.

Purpose

      The purpose of the LTIP is to advance the interests of the Company and its shareholders by providing officers, key management employees, and other eligible participants with financial incentives tied directly to the Company’s long-term business objectives.

      The adoption of the LTIP was recommended by the Nominating, Compensation, and Governance Committee of the PG&E Corporation Board of Directors (Corporation Committee), a committee composed entirely of independent directors, as that term is defined in the Company’s Corporate Governance Guidelines (see page 6). The Corporation Committee reviews and makes recommendations to the Board of Directors of Pacific Gas and Electric Company with respect to the establishment or amendment of executive compensation and benefits plans and arrangements.

Types of Incentive Awards

      The LTIP contains a number of optional forms of incentive awards which may be used at the sole discretion of a committee designated by the Board of Directors to oversee the LTIP (Committee). Incentive awards under the LTIP may take the form of stock options, stock appreciation rights (SARs), dividend equivalents, stock units, restricted stock, or other stock-based awards. The stock options may be incentive stock options (ISOs) intended to qualify for special tax treatment or non-qualified stock options (NQSOs).

      The type of incentive award being granted, as well as the terms and conditions of the award, is determined by the Committee at the time of grant, except that, as described below, non-employee directors are not eligible to receive any form of incentive award under the LTIP other than formula grants. (See “Formula Awards for Non-Employee Directors” below.) Specific awards will be reflected in a stock option agreement, SAR agreement, stock unit agreement, restricted stock agreement, or other applicable agreement between the Company and the participant. Such awards shall be subject to all applicable terms and conditions of the LTIP and may be subject to any other terms and conditions that are not inconsistent with the LTIP and that the Committee deems appropriate for inclusion in the applicable agreement. The provisions of the various agreements entered into under the LTIP need not be identical.

Eligibility

      All officers of the Company will be eligible to participate in the LTIP. Also eligible to participate, if so identified by the Committee or by the Company’s Chief Executive Officer, to the extent authorized by the LTIP, are officers of wholly-owned subsidiaries of the Company, other key management employees of the Company or any wholly-owned subsidiary of the Company, other employees or consultants of the Company or any subsidiary or affiliate of the Company, and other persons whose participation in the LTIP is deemed by the Committee to be in the best interests of the Company. Non-employee directors are eligible to receive formula awards under the proposed LTIP. As of December 31, 2002, the Company had approximately 520 directors and employees eligible to participate in PG&E Corporation’s LTIP.

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Administration

      The Committee will determine the eligible participants who will be granted incentive awards, determine the amount and type of award, determine the terms and conditions of awards, construe and interpret the LTIP, and make all other determinations with respect to the LTIP, to the extent permitted by applicable law and subject to certain restrictions specified in the LTIP. The Chief Executive Officer of the Company has authority to grant incentive awards to eligible participants who are neither officers nor directors of the Company and, in the case of employees, whose annual salaries are below the level that requires Committee approval. Grants by the Chief Executive Officer must conform to the guidelines approved by the Committee. Formula grants to non-employee directors of the Company or any parent corporation will be made strictly in accordance with the terms and conditions specified in the LTIP.

Effective Date and Duration of the LTIP

      After its approval by the Company’s shareholders, the LTIP will become effective as of spin-off, and will terminate ten years after adoption by the Board, to the extent required by law, unless terminated sooner according to the terms of the LTIP.

Shares Subject to the LTIP

      A maximum of 10,000,000 shares of Pacific Gas and Electric Company common stock (subject to adjustment for stock splits and similar transactions) will be reserved for use under the LTIP. Shares of the Company’s common stock covered by previously granted incentive awards may be reused or added back to the LTIP under certain circumstances set forth in the LTIP and to the extent permitted by applicable law.

Stock Options

      The Committee may grant ISOs, NQSOs, tandem SARs, and tandem dividend equivalents to eligible participants (see “Eligibility” above), subject to the terms and conditions of the LTIP.

      Stock Options. Stock options allow the optionee to buy a certain number of shares of Company common stock at an option price equal to the market price at the time the option is granted. Specific terms of the option will be set by the Committee and set forth in a stock option agreement between the optionee and the Company.

      Tandem SARs. At the discretion of the Committee, options may be granted with or without tandem SARs, which permit an optionee to surrender an option or a portion thereof in exchange for a cash payment equal to the difference between the current market value of Company common stock and the option price. A tandem SAR is subject to the same terms and conditions as the related option, except that it may be exercised only when the market value exceeds the option price. Certain restrictions also exist with respect to the payment of the dividend equivalent account to the optionee (see “Tandem Dividend Equivalents below”). In addition, executive officers of the Company and other participants who are subject to Section 16 of the Securities Exchange Act of 1934 may exercise SARs only during certain quarterly window periods.

      Tandem Dividend Equivalents. Options may be granted with or without tandem dividend equivalents. When an option is granted with tandem dividend equivalents, a dividend equivalent account is established for the optionee. On each dividend record date for the Company’s common stock, the optionee’s account is credited with an amount equal to the dividend on Company common stock subject to the unexercised portion of the option.

      Payment for Shares Upon Exercise of Stock Options. At the time an option is exercised, shares of Company common stock may be purchased using, to the extent permitted by law, (1) cash (including any dividend equivalent account funds), (2) shares of Company common stock owned by the optionee for at least six months, (3) a “cashless exercise” procedure (whereby a broker sells the shares or holds them as collateral for a margin loan, and delivers the option sale or loan proceeds to the optionee), or (4) any combination of the foregoing or any other method of payment which the Committee may allow. Any LTIP shares used to satisfy the exercise price of stock options may be added back to the LTIP.

      Term of Options and Tandem SARs. The term of each ISO and related tandem SAR is ten years and the term of each NQSO and related tandem SAR is ten years and one day, subject to earlier termination, as described below.

      Termination of Employment or Service Relationships with the Company. Upon termination of the optionee’s employment or other service relationship with the Company, (1) any unexercised options shall generally be

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      Limitation on Options and SARs Awarded to Any Optionee. The LTIP provides that, during any calendar year, an eligible participant may be granted options and SARs covering no more than 2 percent of the total number of shares reserved for use under the LTIP.

Restricted Stock and Stock Units

      The Committee may grant awards in the form of restricted stock or in the form of stock units, or any combination of both, to eligible participants (see “Eligibility” above) subject to the terms and conditions of the LTIP. Restricted stock or stock units also may be awarded in combination with NQSOs or SARs, and such an award may provide that the restricted stock or stock units will be forfeited in the event that the related NQSOs or SARs are exercised. Specific terms of the restricted stock or stock unit award will be set by the Committee and set forth in a restricted stock agreement or stock unit agreement between the participant and the Company.

      Restricted Stock. Restricted stock includes shares of Company common stock awarded under the LTIP that are subject to vesting and other restrictions. Restricted stock may be issued with or without cash consideration under the LTIP. No more than one million shares reserved under the LTIP (subject to adjustment for stock splits and similar transactions) may be issued as restricted stock.

      Stock Units. Stock units are a bookkeeping entry representing the equivalent number of shares of Company common stock as awarded under the LTIP. Stock units may be issued with or without cash consideration under the LTIP.

      Settlement of Stock Units. Settlement of vested stock units may be made in the form of cash, shares, or any combination of both. The actual number of stock units eligible for settlement may be larger or smaller than the number included in the original award, based on predetermined performance factors. Methods of converting stock units into cash may include (without limitation) a method based on the average fair market value of Company common stock over a series of trading days. Vested stock units may be settled in a lump sum or in installments. The distribution may occur or commence when all vesting conditions applicable to the stock units have been satisfied or have lapsed, or it may be deferred to any later date. The amount of a deferred distribution may be increased by an interest factor or by dividend equivalents. Until an award of stock units is settled, the number of such stock units shall be subject to adjustment pursuant to antidilution provisions.

      Death of Stock Unit Recipient. Any stock units that become payable after the award recipient’s death shall be distributed to the recipient’s beneficiary or beneficiaries. Each recipient of stock units under the LTIP shall designate one or more beneficiaries for this purpose by filing the prescribed form with the Company. A beneficiary designation may be changed by filing the prescribed form with the Company at any time before the recipient’s death. If no beneficiary was designated or if no designated beneficiary survives the recipient, then any stock units that become payable after the recipient’s death shall be distributed to the recipient’s estate.

      Trusts. The LTIP shall not preclude a participant from transferring or assigning restricted stock to (1) the trustee of a trust that is revocable by such participant alone, both at the time of the transfer or assignment and at all times thereafter prior to such participant’s death, or (2) the trustee of any other trust to the extent approved in advance by the Committee in writing. A transfer or assignment of restricted stock from such trustee to any person other than such participant shall be permitted only to the extent approved in advance by the Committee in writing, and restricted stock held by such trustee shall be subject to all of the conditions and restrictions set forth in the LTIP and in the applicable restricted stock agreement, as if such trustee were a party to such agreement.

      Restricted Stock Voting and Dividend Rights. The holders of restricted stock awarded under the LTIP shall have the same voting, dividend, and other rights as the Company’s other shareholders. A restricted stock agreement, however, may require that the holders of restricted stock invest any cash dividends received in additional restricted stock. Such additional restricted stock shall be subject to the same conditions and restrictions as the award with respect to which the dividends were paid. Such additional restricted stock shall not reduce the number of shares available under the LTIP.

      Stock Units Voting and Dividend Rights. The holders of stock units shall have no voting rights. Prior to settlement or forfeiture, any stock unit awarded under the LTIP may, at the Committee’s discretion, carry with it a

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      Creditors’ Rights. A holder of stock units shall have no rights other than those of a general creditor of the Company. Stock units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable stock unit agreement.

Stock Appreciation Rights (SARs)

      Under the LTIP, the Committee may grant awards in the form of SARs. Specific terms of the SAR award (including number of SARs awarded, exercise price, and term) will be set by the Committee and set forth in an SAR agreement between the participant and the Company, and shall be subject to all applicable terms of the LTIP and may be subject to any other terms that are not inconsistent with the LTIP. The provisions of the various SAR agreements entered into under the LTIP need not be identical.

      Exercisability and Term. Each SAR agreement shall specify the date when all or any part of the SAR is to become exercisable. The SAR agreement also shall specify the term of the SAR. An SAR agreement may provide for accelerated exercisability in the event of the participant’s death, disability, retirement, or other events and may provide for expiration prior to the end of its term in the event of termination of the participant’s service. SARs also may be awarded in combination with options, restricted stock, or stock units, and such an award may provide that the SARs will not be exercisable unless the related options, restricted stock, or stock units are forfeited. An SAR may be included in an ISO only at the time of grant but may be included in an NQSO at the time of grant or at any subsequent time, but not later than six months before the expiration of such NQSO.

      Exercise of SARs. If, on the date when an SAR expires, the exercise price under such SAR is less than the fair market value on such date but any portion of such SAR has not been exercised or surrendered, then such SAR shall automatically be deemed to be exercised as of such date with respect to such portion. Upon exercise of an SAR, the participant (or any person having the right to exercise the SAR after the participant’s death) shall receive from the Company shares, cash, or a combination of shares and cash, as the Committee shall determine. The amount of cash and/or the fair market value of Company common stock received upon exercise of SARs shall, in the aggregate, be equal to the amount by which the fair market value (on the date of surrender) of the shares subject to the SARs exceeds the exercise price.

      Modification or Assumption of SARs. Within the limitations of the LTIP, the Committee may modify, extend, or assume outstanding SARs or may accept the cancellation of outstanding SARs (whether granted by the Company or by another issuer) in return for the grant of new SARs for the same or a different number of shares and at the same or a different exercise price. Notwithstanding the foregoing, no modification of an SAR shall, without the consent of the participant, adversely affect the participant’s rights or obligations under such SAR.

Formula Awards For Non-Employee Directors

      On the first business day of each calendar year during the term of the LTIP, each director who is not an employee of the Company will automatically receive incentive awards with an aggregate fair market value (as determined in accordance with the LTIP) of $30,000. The incentive awards will be composed of restricted stock having an aggregate fair market value as of the first business day of each calendar year of $10,000, and a combination of stock options and stock units in $5,000 increments, as designated by the directors, having an aggregate value (as is determined in accordance with the LTIP) of $20,000 as of the first business day of the calendar year.

      Restricted Stock. Shares of restricted stock may be forfeited to the Company to the extent that they are not vested. Such shares generally will vest at the rate of 20 percent on each anniversary of the grant date. Non-employee directors will have all of the rights of a Company shareholder with respect to all outstanding shares of restricted stock, including the right to vote and receive dividends, whether or not such shares are vested. Upon termination of service as a Company director, any unvested shares of restricted stock will be forfeited. In the event of a termination by reason of mandatory retirement at the age specified in the Pacific Gas and Electric Company Board of Directors retirement policy, by reason of death or disability, or by reason of a change in control, all shares of restricted stock will become fully vested.

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      Stock Options. The number of stock options to purchase shares of Company common stock is determined by dividing the equity value increment (subject to aggregate $20,000 limit) by the per-option value on the first business day of the year. (The per-option value is based on the Black-Scholes stock option valuation method, discounting the resulting value by 20 percent.) Stock options awarded under the LTIP to non-employee directors become exercisable as to one-third of the options on or after the second anniversary of the date of grant, as to two-thirds of the options on or after the third anniversary, and as to 100 percent on or after the fourth anniversary. The option exercise price is equal to the fair market value of Company common stock on the date of grant. Dividend equivalents are not granted in connection with the options. The term of each option will be ten years and one day from the date of grant. Upon termination of a director’s service on the Board by reason of death, disability, mandatory retirement, or retirement after five years of continuous service on the Board, all options will become fully exercisable. Options will be exercisable for the longer of the remainder of the option term or five years in the case of termination by reason of mandatory retirement, or one year in the case of termination by reason of death or disability. If termination is for any other reason, unvested options shall terminate and vested options shall remain exercisable for three months after termination or the remainder of the option term, whichever is shorter.

      Stock Units. Each stock unit awarded under the Plan to non-employee directors will be equal to one share of Company common stock. The number of stock units is determined by dividing the equity value increment (subject to the aggregate $20,000 limit) by the closing price of Company common stock on the first business day of the year. On each dividend payment date, additional stock units are credited to a director’s account determined by dividing the aggregate amount of the dividends (the dividend multiplied by the number of stock units on the dividend record date) by the closing price of Company common stock on the dividend payment date. Stock units are distributed to the director in the form of an equal number of shares of Company common stock upon the director’s retirement from the Board after five years of continuous service or upon a director’s mandatory retirement. Stock units also become payable immediately in the event of the director’s death or disability. If a director’s service on the Board terminates for any other reason, all stock units are forfeited on the date of termination.

Other Incentive Awards

      The Committee also may grant other types of incentive awards, including stock grants and limited SARs (SARs which are exercisable only in the event of a change in control).

Tax Withholding

      To the extent that a recipient of an incentive award incurs any tax liability in connection with the exercise or receipt of an award, the recipient’s withholding obligation may be satisfied through payroll deductions or a direct cash payment to the Company. In addition, the Committee may allow the recipient to satisfy the withholding obligation by allowing the Company to withhold a portion of the shares to be issued to the recipient. Such shares may be added back to the LTIP.

Deferral of Payments

      The Committee may allow the deferral of any cash payments that may become due under the LTIP.

Adjustment Upon Changes in Number or Value of Shares of Stock

      In order to prevent enlargement or dilution of rights resulting from stock dividends, stock splits, recapitalizations, mergers, consolidations, or other events that materially increase or decrease the number or value of shares of Company common stock, the Committee may make such adjustments as it deems appropriate.

Non-Transferability of Incentive Awards

      Except as may otherwise be provided in the applicable award agreement, incentive awards shall not be transferable other than by will or by the laws of descent and distribution, and generally may be exercised during the lifetime of the recipient only by the recipient.

Amendment and Termination of the LTIP and Incentive Awards

      The Company’s Board of Directors or the Committee may at any time suspend, terminate, modify, or amend the LTIP in any respect. However, shareholder approval of amendments shall be obtained in the manner and to

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Funding

      Inasmuch as the LTIP is designed to encourage financial performance and to improve the value of shareholders’ investment in the Company, the costs of the LTIP will be funded from corporate earnings.

Federal Income Tax Consequences

      The following is a brief description of the federal income tax consequences of stock options, tandem SARs, tandem dividend equivalents, stock units, and restricted stock granted under the LTIP under present tax laws.

      Non-Qualified Stock Options. There will be no federal income tax consequences to either the optionee or the Company upon the grant of a NQSO. Upon the exercise of a NQSO, the optionee generally will have taxable ordinary income equal to the difference between the current market value of the shares and the option price, and the Company will be entitled to a federal income tax deduction of that amount.

      Incentive Stock Options. There will be no federal income tax consequences to either the optionee or the Company upon the grant or exercise of an ISO. However, unless the holding period requirements discussed below are violated, upon exercise of an ISO, an optionee will be deemed to have a tax preference item (equal to the difference between the current market value of the shares on the date of exercise and the option price) that may result in alternative minimum tax liability. If an optionee exercises an ISO and does not dispose of the shares within two years from the date of grant or within one year from the date the shares are transferred to the optionee, any gain realized upon disposition will be taxable to the employee as long-term capital gain, and the Company will not be entitled to any deduction. If an optionee violates the holding period requirements, the optionee will realize ordinary income in the year of disposition, and the Company will be entitled to a corresponding deduction, in an amount equal to the excess of (1) the lesser of (a) the amount realized on the sale or exchange or (b) the fair market value of the shares on the date of exercise, over (2) the option price.

      An ISO which is exercised more than three months after the optionee terminates employment with the Company will be treated as a NQSO for federal income tax purposes.

      Tandem Stock Appreciation Rights. There will be no federal income tax consequences to either the optionee or the Company upon the grant of a tandem SAR or during the period that the unexercised right remains outstanding. Upon the exercise of a tandem SAR, the amount received will be taxable to the optionee as ordinary income and the Company will be entitled to a corresponding deduction.

      Tandem Dividend Equivalents. There will be no federal income tax consequences to either the optionee or the Company upon the establishment of a dividend equivalent account or during the period that funds accrue in the account. Amounts paid from the account will be taxable to the optionee as ordinary income and the Company will be entitled to a corresponding deduction.

      Stock Units. There will be no federal income tax consequences to either the recipient or the Company upon the grant of stock units. Dividend equivalents paid on stock units will be taxable to the recipient as ordinary income and the Company will be entitled to a corresponding deduction. Upon the payment of stock units, the amount received will be taxable to the recipient as ordinary income and the Company will be entitled to a corresponding deduction.

      Restricted Stock. Upon the grant of restricted stock subject to a vesting schedule, the recipient will be deemed to receive taxable ordinary income equal to the fair market value of the shares at the time they vest. Upon the sale or disposition of the shares, the recipient will realize capital gain or loss in an amount equal to the difference between the fair market value of the shares on each vesting date and the sale or disposition price.

      Section 83(b) of the Internal Revenue Code permits a recipient to elect, within 30 days after the grant of any shares of restricted stock subject to a vesting schedule, to be taxed at ordinary income rates on the fair market value of all shares received, based on the fair market value of the shares on the date of grant, ignoring restrictions or limitations on the shares disposition. If the recipient makes a Section 83(b) election, any later appreciation in

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      At the time the recipient elects to be taxed on the grant of restricted stock, the Company will be entitled to a federal income tax deduction in an amount equal to the ordinary income recognized by the recipient.

Benefits Under the LTIP

      Subject to certain limitations, the Committee has full discretion to determine the number, type, and value of incentive awards to be granted to eligible participants under the LTIP. Thus, the benefits and amounts that will be received by or allocated to the officers, directors, employees, and consultants of the Company are not determinable.

      The proposed LTIP will not become effective until (1) it is approved by the holders of Pacific Gas and Electric Company common and preferred stock (voting together as one class), (2) the Company becomes a stand-alone entity, as contemplated in the Plan of Reorganization, and (3) all required regulatory approvals have been acquired.

The Board of Directors of Pacific Gas and Electric Company Unanimously Recommends a Vote FOR the Proposal to Adopt a Long-Term Incentive Program.

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To Be Voted on by PG&E Corporation Shareholders Only

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

Item No. 4: Shareholder Proposal Regarding Cumulative Voting

      Mr. Simon Levine, 960 Shorepoint Court, No. 306, Alameda, California 94501, holder of 5,000 shares of PG&E Corporation common stock, has given notice of his intention to present the following proposal for action at the PG&E Corporation annual meeting:

“4 – Cumulative Voting

Shareholders believe that recent events demonstrate increasing need for a minority voice on the Board.

Shareholders also believe that there is a need for an independent perspective because the board did not take steps to adopt a proposal approved by a substantial majority (66%) of shareholders who cast yes or no votes at the 2002 annual meeting. The proposal called for a shareholder vote on a poison pill.

Cumulative voting allows a significant group of shareholders to elect a director or directors of its choice – bringing independent perspectives to board decisions.

Safeguard your investment. Vote for:

Cumulative Voting

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

      PG&E Corporation believes that cumulative voting would erode shareholders’ ability to elect directors who represent the interests of the shareholders as a whole. Under cumulative voting, the total number of votes that each shareholder may cast in an election for directors is determined by multiplying the number of directors to be elected by the number of votes to which the shareholder’s shares are entitled. Each shareholder may “cumulate” his or her votes by giving them all to one candidate, or may distribute his or her votes among as many candidates

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      Cumulative voting would give a disproportionate and unfair weight to the votes cast by a minority shareholder or shareholders. Not adopting cumulative voting ensures that all directors are elected or removed by a majority vote of shareholders voting in the election.

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

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

“5 – Independent Directors for Key Board Committees

The standard of independence is the standard of the Council of Institutional Investors www.cii.org. “A director is deemed independent if his or her only non-trivial professional, familial or financial connection to the corporation or its CEO is his or her directorship.” This proposal calls for our company’s governing documents to be amended accordingly, including the bylaws – adopting this criteria even if companies can legally have a lesser standard of independence.

          PG&E has a serious lack of independent directors.

“At least two-thirds of a corporation’s directors should be independent,” according to the Council of Institutional Investors. Institutional shareholders own a majority of PG&E stock.

This proposal topic won 45% of the yes-no vote at our company in 2001 and a 56%-yes vote at EMC Corporation ($5 billion software and electronics company) in 2002.

          Serious about good governance

A look back at Business Week’s inaugural ranking of the best and worst boards in 1996 tells the story. For the 3 years after the list appeared, the stocks of companies with the best boards outperformed those with the worse boards by 2 to 1. Increasingly, institutional investors are flocking to stocks of companies perceived as being well governed and punishing stocks of companies seen as having lax oversight.

      To protect our investment money at risk:

Independent Directors for Key Board Committees

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

      The Board of Directors believes this proposal is unnecessary. Institutional Shareholder Services, a leading proxy analysis firm, determined in a 2002 corporate governance report that PG&E Corporation’s key Board committees are comprised solely of independent directors. With respect to the Board of Directors as a whole, 89 percent of its members are independent, the only exception being the CEO and President of PG&E Corporation.

      Further, every member of the Audit Committee is considered independent under rules of the New York Stock Exchange, the American Stock Exchange, and the Pacific Exchange.

      The Corporation’s Corporate Governance Guidelines provide that all members of the PG&E Corporation Audit Committee and Nominating, Compensation, and Governance Committee are “independent directors” as defined in the Corporation’s Corporate Governance Guidelines. The Corporate Governance Guidelines also require that 75 percent of the Board be composed of independent directors. Independent directors are defined in the guidelines as directors (1) who are neither current nor former employees of nor consultants to PG&E Corporation or its subsidiaries, and (2) who also are neither current nor former officers or employees of any other corporation on whose board of directors any officer of PG&E Corporation serves as a member. Currently, all members of the Audit Committee and the Nominating, Compensation, and Governance Committee are “independent directors.” In addition, 89 percent of the members of the Board of Directors are independent, the only exception being the CEO and President of PG&E Corporation.

      The PG&E Corporation Board of Directors believes that the composition of PG&E Corporation’s Audit Committee and its Nominating, Compensation, and Governance Committee, each consisting solely of independent outside directors, and the presence of a majority of independent directors on the Board pursuant to the Board’s corporate governance policies ensure independent oversight of management. The Board of Directors also believes that no member of the Audit Committee and Nominating, Compensation, and Governance Committee has a “non-trivial professional, familial or financial connection to the corporation or its CEO” other than his or her directorship.

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

Item No. 6: Shareholder Proposal Regarding Poison Pills (Shareholder Rights Plan)

      Mr. Nick Rossi, P.O. Box 249, Boonville, California 95415, beneficial owner of 600 shares of PG&E Corporation common stock, has given notice of his intention to present the following proposal for action at the PG&E Corporation annual meeting:

“6 – Shareholder Vote regarding Poison Pills

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Shareholder Vote regarding Poison Pills

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

      The Board of Directors adopted the Corporation’s Shareholder Rights Plan on December 15, 2000, in order to protect the Corporation’s shareholders in the event the Corporation is confronted with an inadequate offer or with coercive or unfair takeover tactics. Plans similar to the Corporation’s Shareholder Rights Plan have been adopted by more than 2,000 U.S. corporations, including about half of the Fortune 500 companies and an increasing number of publicly traded utilities. The Board considers the Shareholder Rights Plan to be invaluable in protecting the right of shareholders to realize the full value of their investment in the Corporation.

      The Shareholder Rights Plan is designed to safeguard shareholders from abusive tactics that have been used by certain bidders against other companies and that the Board of Directors believes are not in the best interest of the Corporation’s shareholders. These tactics may unfairly pressure shareholders, squeeze them out of their investment without giving them any real choice, and deprive them of the full value of their shares. The Shareholder Rights Plan is intended to give the Board of Directors negotiating leverage in such situations, and help protect the interests of all shareholders.

      Several studies have shown that companies with shareholder rights plans have received higher premiums than companies without shareholder rights plans. A 2001 study published by J.P. Morgan examined takeover data from 1997 through 2000 where the purchase price exceeded $1 billion, and found that the median takeover premium for companies with shareholder rights plans was 35.9 percent as compared to 31.9 percent for companies without shareholder rights plans. A 1997 study prepared by the nationally recognized proxy solicitation and investor relations firm, Georgeson & Company, Inc. (Georgeson), examined 319 takeover transactions over $250 million between 1992 and 1997, and found that the premiums paid to acquire companies with shareholder rights plans in place at least six months prior to the first bid were on average eight percentage points higher than premiums for companies without shareholder rights plans. The Georgeson study also found that the presence of a shareholder rights plan did not reduce the likelihood of a company becoming a takeover target or increase the likelihood of defeat of an unsolicited takeover proposal.

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

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Item No. 7: Shareholder Proposal Regarding Radioactive Wastes

      Mr. Ron Rattner, 1998 Broadway, #1204, San Francisco, California 94109, beneficial owner of 1,975 shares of PG&E Corporation common stock, has given notice of his intention to present the following proposal for action at the PG&E Corporation annual meeting:

“RADIOACTIVE WASTES: RISK REDUCTION POLICY

RESOLUTION:

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

      The Board of Directors believes this proposal is unnecessary. Pacific Gas and Electric Company’s Diablo Canyon Power Plant (Diablo Canyon) is in compliance with detailed regulations of the U.S. Nuclear Regulatory Commission (NRC), which has established comprehensive requirements including the monitoring and review of the safety, radiological, and environmental aspects of these facilities, the comprehensive and mandatory quality controls used in the operation of the plant, and the storage and disposal of spent nuclear fuel. These regulations also require that nuclear power plants take adequate measures to protect the public from the possibility of exposure to radioactive release caused by acts of sabotage.

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      Pacific Gas and Electric Company has applied to the NRC for a license to construct and use “dry” steel and concrete storage containers for spent fuel storage after the existing spent fuel pools capacity is depleted. Pacific Gas and Electric Company will comply with NRC requirements regarding use of these containers, including requirements that the containers be designed to withstand earthquakes and other natural disasters. Currently there is no transportation of spent fuel to or from Diablo Canyon and no existing plans to commence such transportation in the future. However, any such transportation would be subject to a number of NRC procedures, specifications, and regulations designed to protect containers transporting used nuclear fuel from attack as well as accident.

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

Item No. 8: Shareholder Proposal Regarding Auditor Conflicts

      The Sheet Metal Workers’ National Pension Fund, 601 North Fairfax Street, Suite 500, Alexandria, Virginia 22314-2075, beneficial owner of 10,300 shares of PG&E Corporation common stock, has given notice of its intention to present the following proposal for action at the PG&E Corporation annual meeting:

“Auditor Conflicts Proposal

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

      The Board of Directors believes in the importance of auditor independence. However, this proposal is unnecessary because the Corporation already limits the types of non-audit services that can be obtained from the Corporation’s independent public accountant, and monitors the independence of the public accountant.

      In June 2002, the Corporation adopted a practice of only engaging Deloitte & Touche LLP (the current independent public accountant) or its affiliates to provide two types of non-auditing services to the Corporation and its subsidiaries: (1) audit-related and attest services and (2) tax services. Subsequently, the Securities and Exchange Commission approved regulations implementing the Sarbanes-Oxley Act of 2002, which restrict auditing firms from providing to their audit clients nine enumerated categories of non-audit services. The Corporation’s practices comply with, and are more restrictive than, those regulations.

      The Audit Committee also oversees the Deloitte & Touche LLP relationship with the Corporation. As of November 2002, the Audit Committee must pre-approve all services that Deloitte & Touche LLP or its affiliates provide to the Corporation and its subsidiaries and affiliates. The Committee also periodically reviews the independent auditor’s formal written statement delineating all relationships between them and PG&E Corporation and its subsidiaries and affiliates.

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

Item No. 9: Shareholder Proposal Regarding Option Expensing

      The United Brotherhood of Carpenters on behalf of the Massachusetts Carpenters Pension & Annuity Funds, 350 Fordham Road, Wilmington, Massachusetts 01887, beneficial owner of 11,200 shares of PG&E Corporation common stock, has given notice of its intention to present the following proposal for action at the PG&E Corporation annual meeting:

“Option Expensing Proposal

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

      The Corporation prominently discloses the potential impact of employee stock options on earnings in its annual report to shareholders/ Form 10-K report and in quarterly Form 10-Q reports that are filed with the Securities and Exchange Commission. Information regarding the impact of options on earnings per share can be found in Note 1 of the Notes to the Consolidated Financial Statements, which directly follow the financial statements. We believe that reporting the impact of stock options on earnings in this transparent manner provides our shareholders with the information they need to make sound investment decisions.

      The potential impact of expensing options on the Corporation’s earnings per share is not material. As reported in the Corporation’s 2001 Form 10-K report, the Corporation’s earnings per share for 2001 would have decreased by approximately 2 percent had the Corporation expensed options. If the Corporation’s financial statements reflected stock options as an expense, our financial performance would appear artificially low as compared to competitors that did not expense stock options, and investors would find it more difficult to compare our financial performance to that of comparable companies. Currently, we fully comply with accounting standards regarding treatment of stock options. Should regulations change regarding the accounting treatment of stock options, we will fully comply with them, as we do now.

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

Item No. 10: Shareholder Proposal Regarding Greenhouse Gas Emissions

      General Board of Pensions and Health Benefits of the United Methodist Church, 1201 Davis Street, Evanston, Illinois 60201, beneficial owner of 89,000 shares of PG&E Corporation common stock, Ms. Jane K. Bright, 3 Bridge Street, Marblehead, MA 01945, beneficial owner of 1 share of PG&E Corporation common stock, Ms. Lori A. Ehrlich, custodian for the benefit of Casey A. Ehrlich, 46 Gerald Road, Marblehead, MA 01945, beneficial owner of 3 shares of PG&E Corporation common stock, and Ms. Gail McCormick, 281 Lynn Shore Drive, Lynn, MA 01902, beneficial owner of 2 shares of PG&E Corporation common stock, have given notice of their intention to present the following proposal for action at the PG&E Corporation annual meeting:

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

      PG&E Corporation is committed to being an environmental leader by providing safe, economical, and reliable products and services in a responsible and environmentally sensitive manner. The Corporation’s commitment to continuous improvement not only raises the bar on environmental performance, but also strengthens our competitive position within our industry by driving innovation. Since 1991, the Corporation has published an annual Environmental Report that lays out our goals and aspirations and describes our performance.

      The most recent (2001) Environmental Report, which is available on our website, compares the Corporation’s emissions of compounds listed in the proposal with the United States Environmental Protection Agency’s (EPA) national data, as well as the Corporation’s operations from previous years (see http://www.pgecorp.com/news /environment). As shown in the report, PG&E Corporation is an industry leader in terms of its emissions profile. In another report published by the Natural Resources Defense Council and others that compared emissions of the 100 largest power generators, PG&E Corporation’s emissions of CO₂, NOx, and SO₂ were ranked among the lowest (14th lowest for CO₂ emissions, 19th lowest for NOx emissions, and 32nd lowest for SO₂ emissions).

      With respect to the Brayton Point and Salem Harbor plants in Massachusetts, both plants are in compliance with state and federal emission regulations. Massachusetts has recently adopted the most stringent power plant emission regulations in the United States, and pursuant to those new regulations, the Corporation’s subsidiary, PG&E National Energy Group, has proposed emission reduction plans for both power plants to comply with those new regulations. Completion of the emission reduction plans would reduce SO₂ and NOx emissions at both power plants well below the national average.

      In addition, PG&E Corporation has undertaken, and continues to undertake, actions and initiatives that go beyond compliance and the status quo with regard to emissions of these pollutants and is actively engaged in the public policy arena to advance legislation and regulations that would provide additional environmental benefits in a cost-effective and comprehensive manner. Examples include:

      Given the Corporation’s environmental record described above, and these ongoing efforts towards continuous improvement, we believe that an additional report of the type requested by the proponents is unnecessary.

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

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Nominating, Compensation, and Governance Committee Report on Compensation

       The Nominating, Compensation, and Governance Committee of the PG&E Corporation Board of Directors (Committee) is responsible for overseeing and establishing executive compensation policies for PG&E Corporation and its subsidiaries, including Pacific Gas and Electric Company. The Committee also oversees the PG&E Corporation Long-Term Incentive Program and other employee benefit plans.

      This report relates to the compensation paid to executive officers of PG&E Corporation and Pacific Gas and Electric Company during the fiscal year ended December 31, 2002. Compensation for the Chief Executive Officers of PG&E Corporation and Pacific Gas and Electric Company is approved by their respective Board of Directors based on the recommendation of the Committee, which is composed of independent non-employee directors. In establishing the 2002 compensation of the Chief Executive Officers of PG&E Corporation and Pacific Gas and Electric Company, each Board of Directors ratified the recommendations of the Committee. Compensation for all other PG&E Corporation and subsidiary officers is approved by the Committee, except that the Committee has delegated to the PG&E Corporation Chief Executive Officer the authority to approve compensation for certain officers of PG&E Corporation and its subsidiaries.

      The Committee established compensation programs for 2002 to meet four objectives:

      In addition, the Committee defined the following specific compensation objectives for officers:

      In order to provide compensation that is competitive with companies similar to PG&E Corporation in 2002, the Committee selected a group consisting of 11 other major energy companies (the comparator group) that were comparable to PG&E Corporation in size and all of which were included in the Standard & Poor’s 500 Stock Index. During 2002, the Committee reviewed and altered the composition of the comparator group in order to reflect changes in the financial status and corporate structure of companies in the previous comparator group and the energy industry as a whole. The revised group consists of 15 other major energy companies that are comparable to PG&E Corporation in size, scope, business mix, and other characteristics. All of the companies in the revised comparator group are included in the Dow Jones Utility Index.

      In evaluating compensation program alternatives, the Committee considers the potential impact on PG&E Corporation of Section 162(m) of the Internal Revenue Code. Section 162(m) eliminates the deductibility of compensation over $1 million paid to the five highest paid executive officers of public corporations, excluding “performance-based compensation.” Compensation programs generally will qualify as performance-based if (1) the compensation is based on pre-established objective performance targets, (2) the programs’ material features have been approved by shareholders, and (3) there is no discretion to increase payments after the performance targets have been established for the performance period.

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      To the extent consistent with the Committee’s overall policy of maintaining a competitive, performance-based compensation program, it is PG&E Corporation’s intent to maintain the tax deductibility of the compensation which it pays. The Committee endeavors to maximize deductibility of compensation under Section 162(m) of the Internal Revenue Code to the extent practicable while maintaining competitive compensation. However, tax consequences, including but not limited to tax deductibility, are subject to many factors (such as changes in the tax laws and regulations or interpretations thereof and the timing and nature of various decisions by executives regarding options and other rights) that are beyond the control of either the Committee or PG&E Corporation. In addition, the Committee believes that it is important for it to retain maximum flexibility in designing compensation programs that meet its stated objectives. For all of the foregoing reasons, the Committee, while considering tax deductibility as one of its factors in determining compensation, will not limit compensation to those levels or types of compensation that will be deductible. The Committee will, of course, consider alternative forms of compensation, consistent with its compensation goals, that preserve deductibility.

      The principal components of executive compensation at PG&E Corporation and Pacific Gas and Electric Company are: base salary, short-term incentives, long-term incentives, benefits, and retention mechanisms. The considerations underlying 2002 executive compensation are as follows.

Base Salary

      Executive salaries at PG&E Corporation and Pacific Gas and Electric Company are reviewed annually by the Committee based on (1) the results achieved by each individual, (2) expected corporate financial performance, measured by combined earnings per share, dividends, and stock price performance, and (3) changes in the salaries paid to comparable executives by companies in a group of comparable companies.

      In setting the 2002 salary levels for the executive officers of PG&E Corporation and Pacific Gas and Electric Company, the Committee’s objective was to make the salary paid to each executive officer (including the respective Chief Executive Officers) approximately equal to the average of the salaries paid to the comparable officers of companies in the comparator group.

      The overall average of the base salaries received by all PG&E Corporation officers (including Mr. Glynn) for 2002 was comparable to the average base salaries paid to the officers of the comparator group.

Short-Term Incentives

      The PG&E Corporation and Pacific Gas and Electric Company Short-Term Incentive Plans for 2002 were designed to provide annual incentives to all executive officers based on success in achieving corporate financial objectives, and where appropriate, line of business results.

      At the beginning of the year, target awards are set based on each executive’s responsibilities and salary level. Final awards are determined by the Committee and may range from zero to twice the target, depending on performance against objectives. The Committee has discretion to adjust or modify any of the performance measures.

      For 2002, the Committee exercised its discretion to modify the corporate performance measure to provide a final award, in light of external industry events and the company’s actual performance. For 2000, the Committee exercised its discretion to modify the performance measures to eliminate Short-Term Incentive Plan awards for PG&E Corporation officers (whose principal responsibilities are corporate in nature) and Pacific Gas and Electric Company officers, in light of company and industry events.

      For 2002, PG&E Corporation executive officers received Short-Term Incentive Plan awards that ranged from 17 percent to 47 percent of their total maximum awards.

      For 2002, Pacific Gas and Electric Company executive officers received Short-Term Incentive Plan awards that ranged from 47 percent to 58 percent of their total maximum awards.

Long-Term Incentives

      PG&E Corporation Long-Term Incentive Program. The PG&E Corporation Long-Term Incentive Program permits various stock-based incentive awards to be granted to executive officers and other employees of the Corporation and its subsidiaries. The Stock Option Plan and the Performance Unit Plan (each of which is a component of the Long-Term Incentive Program) provide incentives based on PG&E Corporation’s financial performance over time.

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      PG&E Corporation Stock Option Plan. The Stock Option Plan provides incentives based on PG&E Corporation’s ability to sustain financial performance. Under the Plan, officers, and other key employees of PG&E Corporation and its subsidiaries receive stock options based on their responsibilities. These options allow them to purchase a certain number of shares of PG&E Corporation common stock at the market price on the date of grant. In making stock option grants, the size of each executive officer’s grant was determined primarily based on the compensation objectives for officers described above. Generally, optionees must hold the options for at least two full years and exercise them within ten years. In 2002, the Committee changed the option vesting schedule such that stock options granted in 2003 will vest in annual increments of 25 percent on the first, second, third, and fourth anniversaries of the date of award.

      PG&E Corporation Performance Unit Plan. The Performance Unit Plan provides incentives based on a comparison of PG&E Corporation’s total returns for shareholders (dividends plus stock price appreciation) with returns provided by a group of comparator companies over a three-year period. Under the Plan, officers of PG&E Corporation and its subsidiaries receive performance units reflecting their level of responsibility. One-third of the units vest each year. At the end of each year, the number of vested performance units (adjusted for any dividends declared on PG&E Corporation common stock) is increased or decreased based on PG&E Corporation’s three-year total return for shareholders (dividends plus stock price appreciation) as ranked against a group of comparator companies. Each officer receives an incentive payment equal to the final number of vested units multiplied by the average market price of PG&E Corporation common stock during the 30 calendar day period prior to the end of the year.

      In determining Performance Unit Plan results for units granted in 2000, 2001, and 2002, PG&E Corporation’s performance is compared with that of the comparator group. Performance is based on a three-year cumulative total shareholder return, which provides a gauge of sustained multi-year performance and focuses on performance relative to select industry peers.

      For the three years ended December 31, 2002, PG&E Corporation’s total shareholder return had a cumulative ranking of 8th among the companies in the comparator group for vested units granted in 2000, 2001, and 2002. Based on these rankings, officers received awards which were based on 50 percent of the number of vesting units.

      Restricted Stock. In 2002, the Committee decided that it would award restricted stock to eligible executives, effective for 2003, in lieu of the incentives that have been historically awarded under the Performance Unit Plan. These restricted stock awards were made on January 2, 2003. The restrictions lapse in annual increments of up to 25 percent on the first business day of 2004, 2005, 2006, and 2007, subject to the recipient’s continued employment. In general, 20 percent of each year’s increment is subject to forfeiture if PG&E Corporation fails to be in the top quartile of its comparator group as measured by relative annual total shareholder return (TSR) at the end of the prior year. With respect to the Chairman, Chief Executive Officer, and President of PG&E Corporation, 25 percent of each year’s increment is subject to forfeiture if PG&E Corporation fails to be in the top quartile of its comparator group as measured by TSR at the end of the prior year, and an additional 25 percent is subject to forfeiture if PG&E Corporation fails to be in the top half of its comparator group.

Retention Mechanisms

      In an effort to retain certain key personnel to ensure a continued workforce of experienced and knowledgeable employees in light of the current uncertainties in the energy sector, in 2002 the Committee approved the PG&E National Energy Group Management Retention/Performance Award Program. Under this program, key employees of PG&E National Energy Group, some of whom also are executive officers of PG&E Corporation, are eligible to receive financial incentives to continue their employment through certain key dates, or the accomplishment of specific performance objectives.

CEO Compensation

      The Committee followed the same philosophy described above in determining 2002 compensation for Robert D. Glynn, Jr., Chief Executive Officer of PG&E Corporation, and Gordon R. Smith, Chief Executive Officer of Pacific Gas and Electric Company.

      Mr. Glynn received an annual base salary of $1,050,000 in 2002. The salary level for Mr. Glynn is comparable to the average salary of chief executive officers of the companies in the comparator group. As noted in the accompanying compensation tables, during 2002, Mr. Glynn also received stock options and performance units under the Performance Unit Plan. These grants were made based on the same factors and criteria as apply to similar grants for other PG&E Corporation executive officers.

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      Mr. Smith received an annual base salary of $735,000 in 2002. The salary level for Mr. Smith is above the average salary of senior executives in comparable positions at the companies in the comparator group. As noted in the accompanying compensation tables, during 2002, Mr. Smith also received performance units under the Performance Unit Plan. These grants were made based on the same factors and criteria as apply to similar grants for other Pacific Gas and Electric Company executive officers.

Summary

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

March 21, 2003

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

Carl E. Reichardt, Chair

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Summary Compensation Table

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

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Option/ SAR Grants in 2002

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

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Aggregated Option/ SAR Exercises in 2002 and Year-End Option/ SAR Values

[This table summarizes exercises of stock options and tandem stock appreciation rights (granted in prior years) by the executive officers named in the Summary Compensation Table during the past year, as well as the number and value of all unexercised options held by such named executive officers at the end of 2002.]