Exhibit 10.26

2009 OFFICER SHORT-TERM INCENTIVE PLAN

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.

2009 STIP Operational Performance Targets(1)

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  

1.
As explained above, 50% of the STIP award will be based on achievement of
corporate earnings from operations targets.

 
2.
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.

 
3.
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.

 
4.
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.

 
5.
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.

 
 

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