ex1026.htm

On February 17, 2009, the Compensation Committee of the PG&E Corporation Board of Directors (“Committee”) approved the specific performance targets for each component of the 2009 Short-Term Incentive Plan (“STIP”). The Committee previously approved the STIP structure and the weighting of each component in December 2008. Officers of PG&E Corporation and the Utility are eligible to receive cash incentives under the STIP based on the extent to which the adopted 2009 performance targets are met. The Committee will continue to retain full discretion as to the determination of final officer STIP payments.

The corporate financial performance target, with a weighting of 50%, is based on PG&E Corporation’s budgeted earnings from operations that were previously approved by the Board of Directors, consistent with the basis for reporting and guidance to the financial community. As with previous earnings performance scales, unbudgeted items impacting comparability such as changes in accounting methods, workforce restructuring, and one-time occurrences will be excluded.

The Committee also approved the 2009 performance targets for each of the four other measures set forth in the table below. The 2008 performance results for each of these measures are included for comparative purposes.

Measure	Relative Weight			2008 Results			2009 Target
Customer Satisfaction and Brand Health Index (Residential & Business)(2)		17.5	%		76.1			76.1
Reliable Energy Delivery Index(3)		17.5	%		1.443			1.0
Employee Survey (Premier) Index(4)		5	%		68.57	%		69.5	%
Occupational Safety and Health Administration (OSHA) Recordable Injury Rate(5)		10	%		3.241			2.755

The Customer Satisfaction and Brand Health Index is the result of a quarterly survey performed by an independent research firm, Research International, and is a combination of a customer satisfaction score, which has a 75% weighting, as well as a brand favorability score (measuring the relative strength of the PG&E brand against a select group of companies), which has a 25% weighting. The customer satisfaction score will measure overall satisfaction with the Utility’s operational performance in delivering its services. The brand favorability score will measure residential, small business and medium business customer perceptions.

The Reliable Energy Delivery Index is a composite index score that measures leading indicators of electric and gas reliability performance, including electric outage frequency and duration (System Average Interruption Frequency Index (SAIFI), Customer Average Interruption Duration Index (CAIDI)) and performance improvement in the resurvey of the Utility’s gas system.

The Premier Survey is the primary tool used to measure employee engagement at PG&E Corporation and the Utility. The employee index is designed around 15 key drivers of employee engagement and organizational health. The average overall employee survey index score provides a comprehensive metric that is derived by adding the percent of favorable responses from all 40 core survey items (all of which fall into one of 15 broader topical areas), and then dividing the total sum by 40.

An “OSHA Recordable” is an occupational (job-related) injury or illness that requires medical treatment beyond first aid, or results in work restrictions, death or loss of consciousness. The “OSHA Recordable Rate” is the number of OSHA Recordables for every 200,000 hours worked, or for approximately 100 employees. This metric measures the percentage reduction in the PG&E Corporation’s and the Utility’s OSHA Recordable rate from the prior year and is used to monitor the effectiveness of the companies’ safety programs, which are intended to significantly reduce the number and degree of employee injuries and illnesses.

Cash awards under the STIP may range from 30 percent to 100 percent of base salary depending on officer level, with a maximum payout of 200 percent of the officer’s targeted award, as determined by the Committee.