Exhibit 10

SEPARATION AGREEMENT

 
This Separation Agreement (this �Agreement�) is made and entered into by and
between William T. Morrow (the �Executive�) and Pacific Gas and Electric Company
(the �Company�) (collectively the �Parties�) and sets forth the terms and
conditions of the Executive�s separation from employment with the Company.  The
�Effective Date� of this Agreement is defined in paragraph 18(a).
 
1.  Resignation.  Effective August 31, 2008 (the �Resignation Date�), the
Executive hereby resigns from his positions as Chief Executive Officer and
President and a member of the Board of Directors of the Company, and resigns
from employment with the Company and from each other position he holds with any
of its affiliates, including as a director of any such entity.  Promptly after
his Resignation Date, he will be paid all salary or wages and vacation accrued,
unpaid and owed to him as of the Resignation Date, he will remain entitled to
any other benefits to which he is otherwise entitled as of the Resignation Date
under the provisions of the Company�s plans and programs, and he will receive
notice of the right to continue his existing health-insurance coverage pursuant
to COBRA.  The Executive shall make a diligent search for, and deliver to the
Company, by the Resignation Date (i) any document, materials, files or computer
files, or copies, reproductions, duplicates, transcriptions or replicas thereof
relating to the Company�s business or affairs or belonging to the Company or any
of its affiliates, which are in his possession or control and (ii) all other
Company property (including, without limitation, laptop computer, blackberry,
identification cards, security access cards, etc.), which are in his possession
or control.
 
The continuation of wages and other compensation set forth in paragraph 2 below
is conditioned upon the Executive�s acceptance of this Agreement.
 
2.  Continued pay and service credit.  To induce the Executive to resign as of
the Resignation Date and for other consideration set forth herein, the Company
will provide to the Executive, or his estate, the following compensation
benefits conditioned upon the occurrence of the Effective Date of this Agreement
as set forth in paragraph 18(a) below:
 
a.  Salary continuation and bonus payment.  Subject to his compliance with the
terms and conditions of this Agreement, from the Resignation Date and continuing
until January 31, 2009, the Company shall continue to pay the Executive monthly
payments equal to the same monthly base salary that it would have paid him had
he continued to be employed through January 31, 2009, at the same time and on
the same conditions as though he had continued to be employed by the
Company.  In addition, the Company will pay the Executive his target
participation in PG&E Corporation�s Short-Term Incentive Plan (�STIP�) of
$584,375 for 2008, multiplied by the final 2008 STIP rate as determined by the
PG&E Corporation�s Compensation Committee of the Board of Directors, less
applicable withholdings and deductions, payable in or about March 2009 in
accordance with the Company�s current pay practices.
 
b.  Continued Service Credit for Equity Awards.  Subject to his
 

 
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compliance with the terms and conditions of this Agreement, the Company shall
provide the Executive service credit from the Resignation Date to January 31,
2009 for purposes of vesting in restricted stock grants and performance share
grants provided to the Executive under PG&E Corporation�s 2006 Long-Term
Incentive Plan (�LTIP�) (including, without limitation, the restricted stock
grants vesting on January 2, 2009 and January 29, 2009) in accordance with the
terms of the restricted stock agreements and performance share agreements
relating to such grants, provided, however, that all restricted stock grants and
performance share grants that would not have vested as of January 31, 2009 based
upon the vesting schedules set forth in such restricted stock agreements and
performance share agreements shall be forfeited effective as of the Effective
Date.  The Executive shall not be eligible to receive (i) any incentive
compensation for any period after December 31, 2008 or (ii) any additional
equity awards from and after the Resignation Date.
 
 c.      Other benefits.  Any benefits accrued under the PG&E Corporation
Supplemental Executive Retirement Plan (�SERP�) as of the Resignation Date shall
be paid in accordance with the terms of such plan, and no additional benefits
shall accrue under SERP after the Resignation Date.  In accordance with the
terms of the PG&E Corporation�s Executive Stock Ownership Program, the Executive
will not be entitled to any Special Incentive Stock Ownership Premiums
(�SISOPs�) and therefore will not be awarded any SISOPs.  The Executive will be
eligible for COBRA continuation coverage from the Resignation Date to the extent
available to him at law.  The Company will pay all COBRA premiums on behalf of
the Executive and his family through January 31, 2009, provided that the
Executive makes a COBRA election to continue said benefits on a timely
basis.  The Company further agrees to promptly reimburse the Executive for all
out-of-pocket expenses incurred in the performance of his responsibilities as an
officer or director of the Company pursuant to the Company�s reimbursement
policies in effect as of the time of submission.  The Executive shall not be
eligible for any benefits under the PG&E Corporation Officer Severance Policy
not otherwise specifically provided for herein.
 
d.     Other employment or consulting.  Provided that the Executive does not
take a position with or perform services for a direct competitor of the Company
prior to January 31, 2009, the Executive shall not lose any of the benefits set
forth in this Agreement based on the fact that he provides consulting services
or accepts a job with a different employer after the Resignation Date, but
before January 31, 2009.  This paragraph 2(d) shall not affect the Executive�s
obligations under paragraph 7.
 
3.  Defense and indemnification in third-party claims.  The Company and/or its
parent, affiliate, or subsidiary will provide the Executive with legal
representation and indemnification protection in any legal proceeding in which
he is a party or is threatened to be made a party by reason of the fact that he
is or was an employee or officer of the Company and/or its parent, affiliate or
subsidiary, in accordance with the terms of the resolution of the Board of
Directors of the Company dated July 19, 1995, as well as otherwise required by
law.
 
4.  Cooperation.
 
a.           The Executive will, upon reasonable notice, furnish information and
proper assistance to the Company and/or its parent, affiliate or subsidiary
(including truthful
 
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testimony and document production) as may reasonably be required by them or any
of them in connection with any legal, administrative or regulatory proceeding or
investigation (internal or external) in which they or any of them is, or may
become, a party, or in connection with any filing or similar obligation imposed
by any taxing, administrative or regulatory authority having jurisdiction,
provided, however, that the Company and/or its parent, affiliate or subsidiary
will pay all reasonable out-of-pocket expenses incurred by the Executive in
complying with this paragraph.
 
b.           Until the Resignation Date, the Executive will, as requested by the
Company or Chairman, Chief Executive Officer and President of PG&E Corporation,
(i) continue to devote his best skill and perform his duties as Chief Executive
Officer and President and a member of the board of directors of the Company
(including, without limitation, in connection with fulfilling the Company�s
reporting obligations to the Securities and Exchange Commission), (ii) cooperate
and participate in employee meetings, and (iii) cooperate in communications with
media, investment community, regulators, elected officials, other policymakers,
government officials and other stakeholders.
 
5.  Release of claims and covenant not to sue.
 
a.   In consideration of the payments and other benefits the Company is
providing under this Agreement, the Executive, on behalf of himself and his
representatives, agents, heirs and assigns, waives, releases, discharges and
promises never to assert any and all claims, liabilities or obligations of every
kind and nature, whether known or unknown, suspected or unsuspected that he ever
had, now has or might have as of the Effective Date against the Company or its
predecessors, parent, affiliates, subsidiaries, shareholders, owners, directors,
officers, employees, agents, attorneys, successors, or assigns.  These released
claims include, without limitation, any claims arising from or related to the
Executive�s employment with the Company, its parent or any of its affiliates and
subsidiaries, and the termination of that employment.  These released claims
also specifically include, but are not limited, any claims arising under any
federal, state and local statutory or common law, such as (as amended and as
applicable) Title VII of the Civil Rights Act, the Age Discrimination in
Employment Act, the Americans With Disabilities Act, the Employee Retirement
Income Security Act, the California Fair Employment and Housing Act, the
California Labor Code, any other federal, state or local law governing the terms
and conditions of employment or the termination of employment, and the law of
contract and tort; and any claim for attorneys� fees.
 
b.   The Executive acknowledges that there may exist facts or claims in addition
to or different from those which are now known or believed by him to
exist.  Nonetheless, this Agreement extends to all claims of every nature and
kind whatsoever, whether known or unknown, suspected or unsuspected, past or
present, and the Executive specifically waives all rights under Section 1542 of
the California Civil Code which provides that:
 
 
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN TO HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR

 
 
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HER SETTLEMENT WITH THE DEBTOR.

 
c.   With respect to the claims released in the preceding paragraphs, the
Executive will not initiate or maintain any legal or administrative action or
proceeding of any kind against the Company or its predecessors, parent,
affiliates, subsidiaries, shareholders, owners, directors, officers, employees,
agents, attorneys, successors, or assigns, for the purpose of obtaining any
personal relief, nor (except as otherwise required or expressly permitted by
law) assist or participate in any such proceedings, including any proceedings
brought by any third parties.
 
d.            The Executive agrees to reconfirm the release and covenants set
forth herein by executing and returning the attached Exhibit A within 30 days
after the Resignation Date.  The Company shall be under no obligation to pay any
obligation to the Executive accruing after the Resignation Date absent the
Executive�s signature and return of the Exhibit A to the Company, unless
otherwise required by law.  In the event the Executive should die or become
legally incapacitated prior to executing and returning the attached Exhibit A, a
release similar to that set forth in Exhibit A executed by the Executive�s
estate or legal representative will be sufficient to obligate the Company to pay
all remaining obligations or benefits.
 
6.  Non-disclosure.  The Executive will not use, disclose, publicize, or
circulate any confidential, non-public or proprietary information concerning the
Company or its subsidiaries or affiliates, which has come to his attention
during his employment with the Company, unless doing so is expressly authorized
in writing by the PG&E Corporation�s Chief Legal Officer, or is otherwise
required or expressly permitted by law.  Before making any legally-required
disclosure, the Executive will give the Company notice at least ten (10)
business days in advance.
 
7.  No unfair competition.
 
a.   The Executive will not engage in any unfair competition against the
Company, its parent or any of its subsidiaries or affiliates.
 
b.   For a period of one year after the Effective Date, the Executive will not,
directly or indirectly, solicit or contact for the purpose of diverting or
taking away or attempt to solicit or contact for the purpose of diverting or
taking away:
 
(1)  
any existing customer of the Company or its parent, affiliates or subsidiaries;

 
(2)  
any prospective customer of the Company or its parent, affiliates or
subsidiaries about whom the Executive acquired information as a result of any
solicitation efforts by the Company or its parent, affiliates or subsidiaries,
or by the prospective customer, during the Executive�s employment with the
Company;

 
(3)  
any existing vendor of the Company or its parent, affiliates or subsidiaries;

 

 
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(4)  
any prospective vendor of the Company or its parent, affiliates or subsidiaries,
about whom the Executive acquired information as a result of any solicitation
efforts by the Company or its parent, affiliates or subsidiaries, or by the
prospective vendor, during the Executive�s employment with the Company;

 
(5)  
any existing employee, agent or consultant of the Company or its parent,
affiliates or subsidiaries, to terminate or otherwise alter, or interfere with,
the person�s or entity�s employment, agency or consultant relationship with the
Company or its parent, affiliates or subsidiaries; or

 
(6)  
any existing employee, agent or consultant of the Company or its parent,
affiliates or subsidiaries, to work in any capacity for or on behalf of any
person, company or other business enterprise that is in competition with the
Company or its parent, affiliates or subsidiaries.

 
8.  Material breach by Employee.  In the event that the Executive breaches any
material provision of this Agreement, including but not necessarily limited to
paragraphs 4, 5, 6,  and/or 7, the Company may cease paying or providing any
unpaid amounts or benefits (including, without limitation, continued salary
payments and vesting of restricted stock grants and performance share grants)
specified in this Agreement, except as otherwise required by law or subsequently
determined to be due and owing pursuant to arbitration and a determination of an
appropriate offset, if any, based on established liability and damages.  Subject
to the Company�s establishment of breach and proof of damages, the Company shall
also be entitled to the return of any and all amounts or benefits (including,
without limitation, continued salary payments and vesting of restricted stock
grants and performance share grants) previously paid or provided to him under
this Agreement not otherwise required by law.  Despite any breach by the
Executive, his other duties and obligations under this Agreement, including his
waivers and releases, will remain in full force and effect.  In the event of a
breach or threatened breach by the Executive of any of the provisions in
paragraphs 4, 5, 6, and/or 7, the Company will, in addition to any other
remedies provided in this Agreement, be entitled to equitable and/or injunctive
relief and, because the damages for such a breach or threatened breach will be
difficult to determine and will not provide a full and adequate remedy, the
Company will also be entitled to specific performance by the Executive of his
obligations under paragraphs 4, 5, 6, and/or 7, without any requirement to post
any bond, which is hereby expressly waived by the Executive.
 
9.  Material breach by the Company.  The Executive will be entitled to recover
actual damages in the event of any material breach of this Agreement by the
Company, including any unexcused late or non-payment of any amounts owed under
this Agreement, or any unexcused failure to provide any other benefits specified
in this Agreement.  In the event of a breach or threatened breach by the Company
of any of its material obligations to him under this Agreement, the Executive
will be entitled to seek, in addition to any other remedies provided in this
Agreement, specific performance of the Company�s obligations and any other
applicable equitable or injunctive relief.  Despite any breach by the Company,
its other duties and
 
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obligations under this Agreement will remain in full force and effect.
 
10.      No admission of liability.  This Agreement is not, and will not be
considered, an admission of liability or a violation of any applicable contract,
law, rule, regulation, or order of any kind.
 
11.  Non-Disparagement.  The Executive agrees to refrain from performing any
act, engaging in any conduct or course of action or making or publishing any
statements, claims, allegations or assertions, which have or may reasonably have
the effect of demeaning the name or business reputation of  PG&E Corporation or
any of its subsidiaries or affiliates, or any of their respective employees,
officers, directors, agents or advisors in their capacities as such or which
adversely affects (or may reasonably be expected adversely to affect) the best
interests (economic or otherwise) of any of them.  The Company agrees to refrain
from performing any act, engaging in any conduct or course of action or making
or publishing any statements, claims, allegations or assertions in any print,
electronic or television media or in investor conference calls or webcasts,
which have or may reasonably have the effect of demeaning the name or business
reputation of the Executive.  The Company further agrees to instruct the members
of the Company�s Board of Directors, Peter Darbee, and all of the Company�s
Chief Executive Officers, Chief Operating Officers, Presidents, Senior Vice
Presidents and Vice Presidents (in each case, while such person remains a Board
member or employee of the Company) to comply with the Company�s obligations
under this paragraph.   In the event that Peter Darbee, or the Company�s Chief
Legal Officer or Head of Human Resources acquires actual knowledge that a
violation of the Company�s obligations under this paragraph 11 has occurred, the
Company shall take reasonable action to reprimand and further discourage such
behavior in violation of this paragraph 11.   Each Party agrees that nothing in
this paragraph 11 shall preclude the other Party from fulfilling any duty or
obligation that he or it may have at law, from responding to any subpoena or
official inquiry from any court or government agency, including providing
truthful testimony, documents subpoenaed or requested or otherwise cooperating
in good faith with any proceeding or investigation, or from taking any
reasonable actions to enforce such party�s rights under this Agreement in
accordance with the dispute resolution provisions specified in paragraph 14
hereof. Each Party shall continue to comply with its or his obligations under
this Paragraph 11 regardless of any alleged breach by the other Party of  its or
his agreements contained in this paragraph 11 unless and until there has been a
final determination by a court or an arbitration panel that the other Party has
breached its or his obligations under this paragraph 11.
 
12.  Complete agreement.  This Agreement sets forth the entire agreement between
the Parties pertaining to the subject matter of this Agreement and fully
supersedes any prior or contemporaneous negotiations, representations,
agreements, or understandings between the Parties with respect to any such
matters, whether written or oral (including any that would have provided the
Executive with any different benefits or payments).  The Parties acknowledge
that they have not relied on any promise, representation or warranty, express or
implied, not contained in this Agreement.  Parol evidence will be inadmissible
to show agreement by and among the Parties to any term or condition contrary to
or in addition to the terms and conditions contained in this Agreement.
 
13.  Severability.  If any provision of this Agreement is determined to be
invalid,
 
 
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 void, or unenforceable, the remaining provisions will remain in full force and
effect except that, should paragraphs 4, 5, 6, and/or 7 be held invalid, void or
unenforceable, either jointly or separately, the Company will be entitled to
rescind the Agreement and/or recover from the Executive any payments made and
benefits provided to him under this Agreement.
 
14.  Dispute Resolution.  With the exception of any request for specific
performance, injunctive or other equitable relief, any dispute or controversy of
any kind arising out of or related to this Agreement, the Executive�s employment
with the Company, the separation of the Executive from that employment and from
his positions as an officer and/or director of the Company or any subsidiary or
affiliate, or any claims for benefits, will be resolved exclusively by final and
binding arbitration using a one-member arbitration panel selected by mutual
agreement, or if the Parties fail to agree on an arbitrator, then in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
currently in effect, provided, however, that the arbitrator will be limited to
awarding the award requested by the Executive or the Company and shall not
determine an alternative or compromise remedy.  The only claims not covered by
this paragraph are any non-waivable claims for benefits under workers�
compensation or unemployment insurance laws, which will be resolved under those
laws.  Any arbitration pursuant to this paragraph will take place in San
Francisco, California.  The Parties may be represented by legal counsel at the
arbitration but must bear their own fees for such representation in the first
instance, subject to a claim for subsequent reimbursement under paragraph
17.  The Parties will equally share the costs of the arbitration, including the
arbitrator�s fees, administrative costs and filing fees, unless otherwise
prohibited by law.  To the extent properly split, said arbitration costs will be
subject to a claim for subsequent reimbursement under paragraph 17.  The Parties
agree that the arbitrator will have the power to decide any motions brought by
any party to the arbitration, including discovery motions, motions for summary
judgment and/or adjudication and motions to dismiss and demurrers, prior to any
arbitration hearing.  The arbitrator will issue a written decision on the
merits.  The Parties specifically waive any right to a jury trial on any dispute
or controversy covered by this paragraph.  Judgment may be entered on the
arbitrator�s award in any court of competent jurisdiction.  Subject to the
arbitration provisions of this paragraph, the sole jurisdiction and venue for
any action for injunctive or declaratory relief related to the subject matter of
this Agreement will be the California state and federal courts in the City and
County of San Francisco, and both Parties hereby consent to the jurisdiction of
such courts for any such action.
 
15.  Governing law.  This Agreement will be governed by and construed under the
laws of the United States and, to the extent not preempted by such laws, by the
laws of the State of California, without regard to their conflicts of laws
provisions.
 
16.  No waiver.  The failure of either Party to exercise or enforce, at any
time, or for any period of time, any of the provisions of this Agreement will
not be construed as a waiver of that provision, or any portion of that
provision, and will in no way affect that party�s right to exercise or enforce
such provisions.  No waiver or default of any provision of this Agreement will
be deemed to be a waiver of any succeeding breach of the same or any other
provisions of this Agreement.
 
17.  Attorney�s Fees and Costs.  The prevailing party in any dispute or
controversy
 
 
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over the terms of this Agreement will be entitled to recover, in addition to any
other available remedies specified in this Agreement, (i) such party�s
reasonable attorneys� fees, except as otherwise set forth herein and (ii) such
party�s all other litigation expenses and costs incurred in litigation or
arbitration, including any arbitrator, administrative or filing fees except to
the extent that the recovery of such costs is prohibited or limited by law.
 
18.      Acceptance of Agreement.
 
a.   The Executive was provided up to 21 days to consider and accept the terms
of this Agreement and was advised to consult with an attorney about the
Agreement before signing it.  After signing the Agreement, the Executive will
have an additional seven (7) days in which to revoke in writing acceptance of
this Agreement.  To revoke, the Executive will submit a signed statement to that
effect to PG&E Corporation�s Chief Legal Officer before the close of business on
the seventh day.  If the Executive does not submit a timely revocation, the
Effective Date of this Agreement will be the eighth day after he has signed it.
 
b.   The Executive acknowledges reading and understanding the contents of this
Agreement, being afforded the opportunity to review carefully this Agreement
with an attorney of his choice, not relying on any oral or written
representation not contained in this Agreement, signing this Agreement knowingly
and voluntarily, and, after the Effective Date of this Agreement, being bound by
all of its provisions.
 

 
Dated:  July 8, 2008              .                               PACIFIC GAS
AND ELECTRIC COMPANY
 
By:             JOHN R. SIMON                              
                                                                                               
                   JOHN R. SIMON
 

 

 
Dated:  July 8, 2008                                                     William
T. Morrow
                                                      3:00pm
 
      WILLIAM T. MORROW                            
 

 
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EXHIBIT A

EMPLOYMENT TERMINATION CERTIFICATE

I entered into a SEPARATION AGREEMENT (�Separation Agreement�) with Pacific Gas
& Electric Company (�Company�) dated July __, 2008 (�Effective Date�).  I hereby
acknowledge that:

(1)        A blank copy of this Employment Termination Certificate was attached
as Exhibit A to the Separation Agreement when the Company gave it to me for
review.  I have been given sufficient and reasonable time to consider signing
this Certificate.  I have discussed the Separation Agreement and this
Certificate with an attorney before executing either document.

(2)        The benefits payable under paragraph 2(a)-(c) of the Separation
Agreement are only payable to me if I sign this Certificate after the
Resignation Date (as defined in the Separation Agreement).

(3)        I executed the Separation Agreement prior to my last day of
employment. In exchange for the remaining benefits provided for in paragraph
2(a)-(c) of the Separation Agreement, I hereby agree that this Certificate will
be a part of my Separation Agreement such that the release of claims and the
covenants that I provided under paragraph 5 of the Separation Agreement will, by
my signature below, extend to and cover any other claims that arose after the
Effective Date, up to and including the Resignation Date and the date this
Certificate is signed, provided, however, by signing the Employment Termination
Certificate I am not releasing any claim I have to receive any and all benefits
otherwise due to me under the terms of the Separation Agreement, or otherwise
required by law. 

(4)        Nothing in this Certificate alters, diminishes, or mitigates the
scope and breadth of the releases and covenants that I previously provided to
the Company under the Separation Agreement, which shall remain in full force and
effect regardless of whether I sign this Certificate. 

(5)        By signing below, I hereby extend the release of claims and the
covenants that I provided to the Company and other released parties under the
Separation Agreement to cover any other claims (as more fully described in
paragraph 5 of the Separation Agreement) that arose or may have arisen at any
time after the Effective Date, up to and including the Resignation Date and the
date this Certificate is signed.  I knowingly and voluntarily waive any and all
rights or benefits which I may have had, may now have or in the future may have
under the terms of Section 1542 of the California Civil Code, which provides as
follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE WHICH,
IF KNOWN BY HIM OR HER MUST
 
 
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HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.
 
I understand that section 1542 gives me the right not to release existing claims
of which I am not now aware, but I expressly and voluntarily choose to waive my
rights under California Civil Code Section 1542, as well as under any other
federal or state statute or common law principles of similar effect.

I UNDERSTAND THAT I HAVE A RIGHT TO CONSULT WITH AN ATTORNEY OF MY OWN CHOOSING
AND TO HAVE THE TERMS OF THIS CERTIFICATE FULLY EXPLAINED TO ME PRIOR TO
SIGNING, AND THAT I AM GIVING UP ANY LEGAL CLAIMS I HAVE AGAINST THE PARTIES
RELEASED IN THE SEPARATION AGREEMENT BY SIGNING THIS CERTIFICATE. I AM SIGNING
THIS CERTIFICATE KNOWINGLY, WILLINGLY AND VOLUNTARILY IN EXCHANGE FOR THE
BENEFITS DESCRIBED IN THE SEPARATION AGREEMENT.
 

______________________________      
William T. Morrow

Date: _______________________               

 

 
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