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Exhibit 10.3

EXECUTION COPY

GOLDMAN SACHS & CO. -- 85 BROAD STREET -- NEW YORK, NEW YORK 10004 -- TEL:
212-902-1000

        Opening Transaction

To:   PG&E Corporation
One Market Spear Tower
Suite 2400
San Francisco, CA 94105
From:
 
Goldman, Sachs & Co.
Subject:
 
Accelerated Share Repurchase Transaction—VWAP Pricing
(Non-Collared)
Ref. No:
 
EN41JA000000000
Date:
 
December 15, 2004

        This master confirmation ("Master Confirmation") dated as of
December 15, 2004, is intended to supplement the terms and provisions of certain
Transactions (each, a "Transaction") entered into from time to time between
Goldman, Sachs & Co. ("GS&Co.") and PG&E Corporation ("Counterparty"). This
Master Confirmation, taken alone, is neither a commitment by either party to
enter into any Transaction nor evidence of a Transaction. The terms of any
particular Transaction shall be set forth in a Supplemental Confirmation in the
form of Annex A, which references this Master Confirmation, in which event the
terms and provisions of this Master Confirmation shall be deemed to be
incorporated into and made a part of each such Supplemental Confirmation. This
Master Confirmation and each Supplemental Confirmation together shall constitute
a "Confirmation" as referred to in the Agreement specified below.

        The definitions and provisions contained in the 2002 ISDA Equity
Derivatives Definitions (the "Equity Definitions"), as published by the
International Swaps and Derivatives Association, Inc., are incorporated into
this Master Confirmation. This Master Confirmation and each Supplemental
Confirmation evidences a complete binding agreement between the Counterparty and
GS&Co. as to the terms of each Transaction to which this Master Confirmation and
the related Supplemental Confirmation relates.

        This Master Confirmation and each Supplemental Confirmation, together
with all other documents referring to the 1992 ISDA Master Agreement
(Multicurrency-Cross Border) (the "ISDA Form" or the "Agreement), confirming
Transactions entered into between GS&Co. and Counterparty, shall supplement,
form a part of, and be subject to the ISDA Form as if GS&Co. and Counterparty
had executed the Agreement (but without any Schedule) except that the following
elections and modifications shall be made: (i) the election of Loss and Second
Method, New York law (without regard to conflicts of law principles) as the
governing law and US Dollars ("USD") as the Termination Currency, (ii) the
election that subparagraph (ii) of Section 2(c) will not apply to Transactions,
(iii) the replacement of the word "third" in the last line of
Section 5(a)(i) with the word "first", (iv) the election that the "Cross
Default" provisions of Section 5(a)(vi) shall apply to Counterparty, with a
"Threshold Amount" of USD 75 million) and (v) the replacement of clause (1) in
Section 6(d)(i) with the clause "(1) showing in reasonable detail such
calculations and specifying any amount payable under Section 6(e) (including,
without limitation, providing all relevant quotations and assumptions and
specifying the methodologies used in sufficient detail so as to enable the other
party to replicate the calculation)". Further, for purposes of determining
whether an Event of Default pursuant to Section 5(a)(vi) of the Agreement has
occurred, notwithstanding anything to the contrary stated in that

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provision, clause (1) of Section 5(a)(vi) will apply only to Specified
Indebtedness that is actually declared to be due and payable before it would
otherwise be due and payable under the relevant agreement or instrument, and not
to Specified Indebtedness that is merely "capable at such time of being
declared" so due and payable.

        All provisions contained in the Agreement shall govern this Master
Confirmation and the related Supplemental Confirmation relating to a Transaction
except as expressly modified herein or in the related Supplemental Confirmation.
With respect to any relevant Transaction, the Agreement, this Master
Confirmation and the related Supplemental Confirmation shall represent the
entire agreement and understanding of the parties with respect to the subject
matter and terms of such Transaction and shall supersede all prior or
contemporaneous written or oral communications with respect thereto.

        If, in relation to any Transaction to which this Master Confirmation and
related Supplemental Confirmation relate, there is any inconsistency between the
Agreement, this Master Confirmation, any Supplemental Confirmation and the
Equity Definitions that are incorporated into this Master Confirmation or any
Supplemental Confirmation, the following will prevail for purposes of such
Transaction in the order of precedence indicated: (i) such Supplemental
Confirmation; (ii) this Master Confirmation; (iii) the Agreement; and (iv) the
Equity Definitions.

        1.     Each Transaction constitutes a Share Forward Transaction for the
purposes of the Equity Definitions. Set forth below are the terms and conditions
which, together with the terms and conditions set forth in each Supplemental
Confirmation (in respect of each relevant Transaction), shall govern each such
Transaction.

General Terms:    
 
 
Trade Date:
 
For each Transaction, as set forth in the Supplemental Confirmation.
 
 
Seller:
 
Counterparty
 
 
Buyer:
 
GS&Co.
 
 
Shares:
 
Common Stock of PG&E Corp. (Ticker: PCG)
 
 
Number of Shares:
 
For each Transaction, as set forth in the Supplemental Confirmation.
 
 
Forward Price:
 
For each Transaction, as set forth in the Supplemental Confirmation.
 
 
Prepayment:
 
Not Applicable
 
 
Variable Obligation:
 
Not Applicable
 
 
Exchange:
 
New York Stock Exchange
 
 
Related Exchange(s):
 
All Exchanges
 
 
Market Disruption Event:
 
The definition of "Market Disruption Event" in Section 6.3(a) of the Equity
Definitions is hereby amended by inserting the words "at any time on any
Scheduled Trading Day during the Valuation Period or" after the word "material,"
in the third line thereof.              

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Valuation:
 
 
 
 
Valuation Period:
 
Each Scheduled Trading Day during the period commencing on and including the
Valuation Period Start Date to and including the Valuation Date (but excluding
any day(s) on which the Valuation Period is suspended in accordance with Section
5 herein and including any day(s) by which the Valuation Period is extended
pursuant to the provision below).
 
 
 
 
 
 
Notwithstanding anything to the contrary in the Equity Definitions, to the
extent that any Scheduled Trading Day in the Valuation Period is a Disrupted
Day, the Valuation Date shall be postponed and the Calculation Agent in its sole
discretion shall extend the Valuation Period and make adjustments to the
weighting of each Relevant Price for purposes of determining the Settlement
Price, with such adjustments based on, among other factors, the duration of any
Market Disruption Event and the volume, historical trading patterns and price of
the Shares. To the extent that there are 9 consecutive Disrupted Days during the
Valuation Period, then notwithstanding the occurrence of a Disrupted Day, the
Calculation Agent shall have the option in its sole discretion to either
determine the Relevant Price using its good faith estimate of the value for the
Share on such 9th consecutive day or elect to further extend the Valuation
Period as it deems necessary.
 
 
Valuation Period Start Date:
 
For each Transaction, as set forth in the Supplemental Confirmation.
 
 
Valuation Date:
 
For each Transaction, as set forth in the Supplemental Confirmation (as the same
may be postponed in accordance with the provisions of "Valuation Period" and
Section 5 herein).
Settlement Terms:
 
 
 
 
Settlement Currency:
 
USD (all amounts shall be converted to the Settlement Currency in good faith and
in a commercially reasonable manner by the Calculation Agent).
 
 
Settlement Method Election:
 
Applicable; provided that (a) Section 7.1 of the Equity Definitions is hereby
amended by deleting the word "Physical" in the sixth line thereof and replacing
it with the words "Net Share" and deleting the word "Physical" in the last line
thereof and replacing it with word "Cash" and (b) in the event that GS&Co. would
deliver to the Counterparty an amount of Shares under Net Share Settlement, Cash
Settlement shall be applicable in lieu of Net Share Settlement.
 
 
Electing Party:
 
Counterparty              

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Settlement Method Election Date:
 
10 Scheduled Trading Days prior to the originally scheduled Valuation Date.
 
 
Default Settlement Method:
 
Cash Settlement
 
 
Forward Cash Settlement Amount:
 
An amount in the Settlement Currency equal to the product of (a) the Number of
Shares multiplied by (b) an amount equal to (i) the Settlement Price minus (ii)
the Forward Price.
 
 
Settlement Price:
 
The arithmetic mean of the Relevant Prices of the Shares for each Exchange
Business Day in the Valuation Period.
 
 
Relevant Price:
 
The New York 10b-18 Volume Weighted Average Price per share of the Shares for
the regular trading session (including any extensions thereof) of the Exchange
on the related Exchange Business Day (without regard to pre-open or after hours
trading outside of such regular trading session) as published by Bloomberg at
4:15 p.m. New York time on such date.
 
 
Cash Settlement Payment Date:
 
3 Currency Business Days after the Valuation Date.
 
 
Counterparty's Contact Details for Purpose of Giving Notice:
 
To be provided by Counterparty
 
 
GS&Co.'s Contact Details for Purpose of Giving Notice:
 
Telephone No.:    (212) 902-8996
Facsimile No.:    (212) 902-0112
Attention: Equity Operations: Options and Derivatives

With a copy to:
Jim Ziperski
Equity Capital Markets
One New York Plaza
New York, NY 10004
Telephone No.:    (212) 902-8557
Facsimile No.:    (212) 346-2126
Net Share Settlement:
 
 
 
 
Net Share Settlement Procedures:
 
Net Share Settlement shall be made in accordance with the procedures attached
hereto as Annex B.
 
 
Net Share Settlement Price:
 
The Net Share Settlement Price shall be the price per Share as of the Valuation
Time on the Net Share Valuation Date as reported in the official real-time price
dissemination mechanism for the Exchange. The Net Share Settlement Price shall
be reduced by the per Share amount of the underwriting discount and/or
commissions agreed to pursuant to the equity underwriting or agency agreement
contemplated by the Net Share Settlement Procedures.              

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Valuation Time:
 
As provided in Section 6.1 of the Equity Definitions; provided that Section 6.1
of the Equity Definitions is hereby amended by inserting the words "Net Share,"
before the words "Valuation Date" in the first and third lines thereof.
 
 
Net Share Valuation Date:
 
The Exchange Business Day immediately following the Valuation Date.
 
 
Net Share Settlement Date:
 
The third Exchange Business Day immediately following the Valuation Date.
 
 
Reserved Shares:
 
For each Transaction, as set forth in the Supplemental Confirmation.
Fixed and Floating Amounts Payable:
 
 
Floating Amount Payable by GS&Co.:
 
 
 
 
Floating Amount Payment Date:
 
The Cash Settlement Payment Date
 
 
Floating Amount:
 
For each Transaction, an amount equal to the sum of the applicable Federal Funds
Rate multiplied by (i) the Daily Notional Amount multiplied by (ii) 1/360 for
each day from and including the Floating Amount Accrual Date to and including
the Valuation Date.
 
 
Floating Amount Accrual Date:
 
Trade Date
 
 
Federal Funds Rate:
 
For any date of determination, the "Fed Funds Open Rate," which shall be the
interest rate reported on Bloomberg under the symbol "FEDSOPEN <index>" on such
date. For the avoidance of doubt, for any day which is not a Currency Business
Day the "Federal Funds Open Rate" for the immediately preceding Currency
Business Day shall apply.
 
 
Daily Notional Amount:
 
Commencing with the Floating Amount Accrual Date, for any date of determination,
the Daily Notional Amount shall be an amount equal to the product of the Initial
Notional Amount (as set forth in the Supplemental Confirmation) multiplied by a
fraction with a numerator equal to the number of Scheduled Trading Days in the
Valuation Period minus the number of Exchange Business Days in the Valuation
Period that have elapsed (other than any days during which the Valuation Period
is suspended pursuant to Section 5 herein) as of such date of determination and
a denominator equal to the number of Scheduled Trading Days in the Valuation
Period (such fraction, the "Remaining Percentage").              

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To the extent that the Valuation Period is extended pursuant to the terms of
this Master Confirmation, the Calculation Agent shall adjust the Daily Notional
Amount commencing with the first Exchange Business Day after such extension (the
"Valuation Period Extension Date"). The notional amount deemed to be remaining
at the end of the Exchange Business Day before the Valuation Period Extension
Date (the "Remaining Notional Value") shall be the Initial Notional Value
multiplied by the Remaining Percentage at the end of such day. Commencing with
the Valuation Period Extension Date, for any date of determination, the Daily
Notional Amount shall be equal to the product of the Remaining Notional Value
multiplied by a fraction with (a) a numerator equal to (i) the number of
Scheduled Trading Days remaining from and including the Valuation Period
Extension Date to the Valuation Date after extension (the "Remaining Scheduled
Trading Days") minus (ii) the number of Exchange Business Days in the Valuation
Period after extension from and including the Valuation Period Extension Date
that have elapsed (other than any days during which the Valuation Period after
extension is suspended pursuant to Section 5 herein) as of such date of
determination and (b) a denominator equal to the Remaining Scheduled Trading
Days.
Fixed Amount Payable by Counterparty:
 
 
 
 
Fixed Amount Payment Date:
 
The Cash Settlement Payment Date
 
 
Fixed Amount:
 
For each Transaction, an amount equal to the sum of (I) the applicable Daily
Additional Spread multiplied by (i) the Daily Notional Amount multiplied by (ii)
1/360 for each day from and including the Floating Amount Accrual Date to and
including the Valuation Date plus (II) an amount equal to the sum of the
applicable Fixed Rate multiplied by (i) the Notional Amount multiplied by (ii)
1/360 for each day from and including the Floating Amount Accrual Date to and
including the Valuation Date.
 
 
Fixed Rate:
 
For each Transaction, as set forth in the Supplemental Confirmation.
 
 
Daily Additional Spread:
 
The Additional Spread shall be 25 basis points
 
 
Notional Amount:
 
For any date of determination, 105% of the Daily Notional Amount.
Settlement Terms for Fixed Amount:
 
 
 
 
Settlement Currency:
 
USD (all amounts shall be converted to the Settlement Currency in good faith and
in a commercially reasonable manner by the Calculation Agent).              

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Settlement Method Election:
 
Applicable; provided that Section 7.1 of the Equity Definitions is hereby
amended by deleting the word "Physical" in the sixth line thereof and replacing
it with the words "Net Share" and deleting the word "Physical" in the last line
thereof and replacing it with the word "Cash".
 
 
Electing Party:
 
Counterparty
 
 
Settlement Method Election Date:
 
10 Scheduled Trading Days prior to the originally scheduled Valuation Date.
 
 
Default Settlement Method:
 
Cash Settlement
Share Adjustments:
 
 
 
 
Method of Adjustment:
 
Calculation Agent Adjustment
Extraordinary Events:
 
 
Consequences of Merger Events:
 
Subject to Section 7(b) of the Master Confirmation:
 
 
(a)
 
Share-for-Share:
 
Modified Calculation Agent Adjustment
 
 
(b)
 
Share-for-Other:
 
Cancellation and Payment on that portion of the Other Consideration that
consists of cash; Modified Calculation Agent Adjustment on the remainder of the
Other Consideration.
 
 
(c)
 
Share-for-Combined:
 
Component Adjustment
 
 
Determining Party:
 
GS&Co.
Tender Offer:
 
Applicable
Consequences of Tender Offers:
 
Subject to Section 7(b) of the Master Confirmation:
 
 
(a)
 
Share-for-Share:
 
Modified Calculation Agent Adjustment
 
 
(b)
 
Share-for-Other:
 
Cancellation and Payment on that portion of the Other Consideration that
consists of cash; Modified Calculation Agent Adjustment on the remainder of the
Other Consideration.
 
 
(c)
 
Share-for-Combined:
 
Component Adjustment
 
 
Determining Party:
 
GS&Co.
Nationalization, Insolvency or Delisting:
 
Subject to Section 7(a) of this Master Confirmation, Negotiated Close-out;
provided that in addition to the provisions of Section 12.6(a)(iii) of the
Equity Definitions, it shall also constitute a Delisting if the Exchange is
located in the United States and the Shares are not immediately re-listed,
re-traded or re-quoted on any of the New York Stock Exchange, the American Stock
Exchange or The NASDAQ National Market (or their respective successors); if the
Shares are immediately re-listed, re-traded or re-quoted on any such exchange or
quotation system, such exchange or quotation system shall be deemed to be the
Exchange.              

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Additional Disruption Events:
 
 
 
 
(a)
 
Change in Law:
 
Applicable; provided that Section 12.9(a)(ii)(Y) of the Equity Definitions is
hereby deleted.
 
 
(b)
 
Failure to Deliver:
 
Not Applicable
 
 
(c)
 
Insolvency Filing:
 
Applicable
 
 
(d)
 
Loss of Stock Borrow:
 
Applicable; provided that Loss of Stock Borrow shall not constitute an
Additional Disruption Event so long as Counterparty agrees to pay the Hedging
Party the amount by which the stock loan rate necessary to maintain a borrowing
of Shares by GS&Co. ("Hedge Position") in connection with the Transaction
exceeds the Maximum Stock Loan Rate.
 
 
 
 
Maximum Stock Loan Rate
 
30 basis points
 
 
(e)
 
Hedging Disruption:
 
Not Applicable.
 
 
(f)
 
Increased Cost of Hedging:
 
Not Applicable.
 
 
(g)
 
Increased Cost of Stock Borrow:
 
Not Applicable.
 
 
Hedging Party:
 
GS&Co.
 
 
Determining Party:
 
GS&Co.
Non-Reliance:
 
Applicable
Agreements and Acknowledgements Regarding Hedging Activities:
 
Applicable
Additional Acknowledgements:
 
Applicable              

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Net Share Settlement following Extraordinary Event:
 
Counterparty shall have the right, in its sole discretion, to make any payment
required to be made by it pursuant to Sections 12.7 or 12.9 of the Equity
Definitions (except with respect to any portion of the consideration for the
Shares consisting of cash in the event of a Merger Event or Tender Offer)
following the occurrence of an Extraordinary Event by electing to Net Share
Settle the Transactions under this Master Confirmation in accordance with the
terms, and subject to the conditions, for Net Share Settlement herein by giving
written notice to GS&Co. of such election on the day that the notice fixing the
date that the Transactions are terminated or cancelled, as the case may be, (the
"Cancellation Date") pursuant to the applicable provisions of Section 12 of the
Equity Definitions is effective. If Counterparty elects Net Share Settlement:
(a) the Net Share Valuation Date shall be the date specified in the notice
fixing the date that the Transactions are terminated or cancelled, as the case
may be; provided that the Net Share Valuation Date shall be either the Exchange
Business Day that such notice is effective or the first Exchange Business Day
immediately following the Exchange Business Day that such notice is effective,
(b) the Net Share Settlement Date shall be deemed to be the Exchange Business
Day immediately following the Cancellation Date and (c) all references to the
Forward Cash Settlement Amount or the Fixed Amount, as the case may be, in Annex
B hereto shall be deemed to be references to the Cancellation Amount. The
definition of "Cancellation Amount" in Section 12.8 of the Equity Definitions is
hereby amended by inserting the following paragraph: "(h) The Determining Party
shall show the other party in reasonable detail its calculation of the
Cancellation Amount, including without limitation providing all relevant
quotations and assumptions and specifying the methodologies used in sufficient
detail so as to enable the other party to replicate the calculation".          
   

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Net Share Settlement Upon Early Termination:
 
Counterparty shall have the right, in its sole discretion, to make any payment
required to be made by it (the "Early Termination Amount") pursuant to Sections
6(d) and 6(e) of the Agreement following the occurrence of an Early Termination
Date in respect of the Agreement by electing to Net Share Settle all the
Transactions under this Master Confirmation in accordance with the terms, and
subject to the conditions, for Net Share Settlement herein by giving written
notice to GS&Co. of such election on the day that the notice fixing an Early
Termination Date is effective. If Counterparty elects Net Share Settlement: (a)
the Net Share Valuation Date shall be the date specified in the notice fixing an
Early Termination Date; provided that the Net Share Valuation Date shall be
either the Exchange Business Day that such notice is effective or the first
Exchange Business Day immediately following the Exchange Business Day that such
notice is effective, (b) the Net Share Settlement Date shall be deemed to be the
Exchange Business Day immediately following the Early Termination Date (except
for an Early Termination as a result of Section 7(d), in which event the Net
Share Settlement Date shall be deemed to be the tenth Exchange Business Day
following the Early Termination Date) and (c) all references to Forward Cash
Settlement Amount or the Fixed Amount, as the case may be, in Annex B hereto
shall be deemed references to the Early Termination Amount.
Transfer:
 
Notwithstanding anything to the contrary in the Agreement, GS&Co. may assign,
transfer and set over all rights, title and interest, powers, privileges and
remedies of GS&Co. under any Transaction, in whole or in part, to an affiliate
of GS&Co. that is fully and unconditionally guaranteed by The Goldman Sachs
Group, Inc. without the consent of Counterparty, provided that Counterparty is
not required to make a payment to GS&Co. in respect of an Indemnifiable Tax as a
result of such transfer.
GS&Co. Payment Instructions:
 
Chase Manhattan Bank New York
For A/C Goldman, Sachs & Co.
A/C # 930-1-011483
ABA: 021-000021
Counterparty Payment Instructions:
 
PG&E Corporation Master Account No. 099023
Mellon Trust of New England, N.A.
Boston, MA
ABA Routing No: 011001234

        2.    Calculation Agent: GS&Co.    

        3.    Representations, Warranties and Covenants of GS&Co. and
Counterparty.    

        (a)   Each party represents and warrants that it (i) is an "eligible
contract participant", as defined in the U.S. Commodity Exchange Act, as amended
and (ii) is entering into each

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Transaction hereunder as principal (and not as agent or in any other capacity,
fiduciary or otherwise) and not for the benefit of any third party.

        (b)   Each party acknowledges that the offer and sale of each Share
Forward Transaction to it is intended to be exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act"), by virtue of
Section 4(2) thereof and the provisions of Regulation D promulgated thereunder
("Regulation D"); and this acknowledgement shall not be deemed to extend to
Settlement Shares or Early Settlement Shares. Accordingly, each party represents
and warrants to the other that (i) it has the financial ability to bear the
economic risk of its investment in each Share Forward Transaction and is able to
bear a total loss of its investment, (ii) it is an "accredited investor" as that
term is defined under Regulation D, (iii) it will purchase each Share Forward
Transaction for investment and not with a view to the distribution or resale
thereof, and (iv) the disposition of each Share Forward Transaction is
restricted under this Master Confirmation and each Supplemental Confirmation,
the Securities Act and state securities laws.

        4.    Additional Representations, Warranties and Covenants of
Counterparty.    

        As of the date hereof and the date of each Supplemental Confirmation,
Counterparty represents, warrants and covenants to GS&Co. that:

        (a)   the purchase or writing of each Transaction will not violate
Rule 13e-1 or Rule 13e-4 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act");

        (b)   is not entering into any Transaction on the basis of, and is not
aware of, any material non-public information with respect to the Shares or in
anticipation of, in connection with, or to facilitate, a distribution of its
securities, a self tender offer or a third-party tender offer;

        (c)   it is not entering into any Transaction to create, and will not
engage in any other securities or derivative transaction to create, a false or
misleading appearance of active trading or market activity in the Shares (or any
security convertible into or exchangeable for the Shares), or which would
otherwise violate the Exchange Act;

        (d)   Counterparty is in compliance with its reporting obligations under
the Exchange Act and its most recent Annual Report on Form 10-K, together with
all reports subsequently filed by it pursuant to the Exchange Act, taken
together and as amended and supplemented to the date of this representation, do
not, as of their respective filing dates, contain any untrue statement of a
material fact or omit any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances in
which they were made, not misleading;

        (e)   each Transaction is being entered into pursuant to a publicly
disclosed Share buy-back program and its Board of Directors has approved the use
of the Transaction to effect the Share buy-back program;

        (f)    notwithstanding the generality of Section 13.1 of the Equity
Definitions, GS&Co. is not making any representations or warranties with respect
to the treatment of any Transaction under FASB Statements 149 or 150, EITF 00-19
(or any successor issue statements) or under FASB's Liabilities & Equity
Project;

        (g)   it has not, and during any Valuation Period (as extended pursuant
to the provisions of Section 5 and "Valuation Period" herein) will not, enter
into agreements similar to the Transactions described herein except with GS&Co.
or an entity affiliated with GS&Co. where the valuation period in such other
transaction will overlap at any time (including as a result of extensions in
such valuation period as provided in the relevant agreements) with any Valuation
Period (as extended pursuant to the provisions of Section 5 and "Valuation
Period" herein) under this Master Confirmation. In the event that the valuation
period in any other similar transaction with an entity other than GS&Co. or an
entity affiliated with GS&Co. overlaps with any Valuation

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Period under this Master Confirmation as a result of any extension made pursuant
to the provisions of Section 5 and "Valuation Period" herein, Counterparty shall
promptly amend such transaction to avoid any such overlap; and

        (h)   it shall report each Transaction as required under the Exchange
Act and the regulations promulgated thereunder.

        5.    Suspension of Valuation Period; Extension of Valuation Period.    

        (a)   If Counterparty concludes that it will be engaged in a
distribution of the Shares for purposes of Regulation M promulgated under the
Exchange Act ("Regulation M"), Counterparty agrees that it will, on one
Scheduled Trading Day's written notice, direct GS&Co. not to purchase Shares in
connection with hedging any Transaction during the "restricted period" (as
defined in Regulation M). If on any Scheduled Trading Day Counterparty delivers
written notice (and confirms by telephone) by 8:30 a.m. New York Time (the
"Notification Time"), then such notice shall be effective to suspend the
Valuation Period as of such Notification Time. In the event that Counterparty
delivers notice and/or confirms by telephone after the Notification Time, then
the Valuation Period shall be suspended effective as of 8:30 a.m. New York Time
on the following Scheduled Trading Day or as otherwise required by law or agreed
between Counterparty and GS&Co. The Valuation Period shall be suspended and the
Valuation Date extended for each Scheduled Trading Day in such restricted
period.

        (b)   In the event that GS&Co. concludes, in its reasonable discretion,
that it is appropriate with respect to any legal, regulatory or self-regulatory
requirements or related policies and procedures (whether or not such
requirements, policies or procedures are imposed by law or have been voluntarily
adopted by GS&Co.), for it to refrain from purchasing Shares on any Scheduled
Trading Day during the Valuation Period, GS&Co. may by written notice to
Counterparty elect to suspend the Valuation Period for such number of Scheduled
Trading Days as is specified in the notice. The notice shall not specify, and
GS&Co. shall not otherwise communicate to Counterparty, the reason for GS&Co.'s
election to suspend the Valuation Period. The Valuation Period shall be
suspended and the Valuation Date extended for each Scheduled Trading Day
occurring during any such suspension.

        (c)   In the event that the Valuation Period is suspended pursuant to
Sections 5(a) or (b) above during the regular trading session on the Exchange,
then the Calculation Agent in its sole discretion shall, in calculating the
Forward Cash Settlement Amount, extend the Valuation Period and make adjustments
to the weighting of each Relevant Price for purposes of determining the
Settlement Price, with such adjustments based on, among other factors, the
duration of any such suspension and the volume, historical trading patterns and
price of the Shares.

        (d)   On the first Exchange Business Day of each calendar week during
the Valuation Period, to the extent that the Number of Daily Reference Shares
exceeds 25% of the ADTV (as defined in Rule 10b-18 under the Exchange Act
("Rule 10b-18")) for the Shares on such day, the Calculation Agent will
(i) adjust the Number of Daily Reference Shares to equal an amount equal to 15%
of ADTV for the Shares determined and effective on such Exchange Business Day
and (ii) deem the remaining Scheduled Trading Days in the Valuation Period to be
equal to the Remaining Number of Shares divided by the Number of Daily Reference
Shares (after giving effect to any adjustments pursuant to (i) above), rounded
up to the nearest whole number.

        "Number of Daily Reference Shares" means, for each Transaction,
initially the Initial Number of Daily Reference Shares (as set forth in the
Supplemental Confirmation) and thereafter as may be adjusted in accordance with
this Section 5(d); provided that on the first Exchange Business Day of the fifth
calendar week following any such adjustment the Number of Daily Reference Shares
shall equal

12

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the lesser of (i) the Initial Number of Daily Reference Shares and (ii) 15% of
the ADTV of the Shares determined on such Exchange Business Day.

        "Remaining Number of Shares" means, for each Transaction and as of any
date of determination, a number of Shares equal to (i) the Number of Shares
minus (ii) the sum of, for each Exchange Business Day in the Valuation Period up
to and including such date, the Number of Shares divided by the total number of
Exchange Business Days in the Valuation Period (the "Daily Amount"). The Daily
Amount will be deemed to be zero for each day on which the Valuation Period is
suspended in accordance with Sections 5(a) and (b) hereof. In the event that the
Valuation Period is extended pursuant to the terms of this Master Confirmation,
the Calculation Agent may make corresponding adjustments to the amount of the
Remaining Number of Shares.

        6.    Counterparty Purchases.    Counterparty represents, warrants and
covenants to GS&Co. that for each Transaction:

        (a)   Counterparty (or any "affiliated purchaser" as defined in
Rule 10b-18) shall not, purchase any Shares, listed contracts on the Shares or
securities that are convertible into, or exchangeable or exercisable for Shares
(including, without limitation, any Rule 10b-18 purchases of blocks (as defined
in Rule 10b-18)) during any Valuation Period (as extended pursuant to the
provisions of Section 5 and "Valuation Period" herein) except for purchases
through GS&Co. or an entity affiliated with GS&Co., or if not through GS&Co.,
with the prior written consent of GS&Co., and in compliance with Rule 10b-18 or
otherwise in a manner that Counterparty and GS&Co. believe is in compliance with
applicable requirements and except for purchases in connection with management
compensation plans or other employee benefit arrangements and except for
purchases of the Counterparty's 9.50% Convertible Subordinated Notes due 2010,
provided such purchases are made in compliance with any applicable legal
regulatory or self-regulatory requirements or related policies and procedures
(whether such requirements, policies or procedures are imposed by law or have
been voluntarily adopted by GS&Co. for uniform application to all such
purchases). Any such purchase by Counterparty shall be disregarded for purposes
of determining the Forward Cash Settlement Amount. To the extent that
Counterparty makes any such purchase other than through GS&Co., or other than in
connection with any Transaction, Counterparty hereby represents and warrants to
GS&Co. that (a) it will not take other action that would or could cause GS&Co.'s
purchases of the Shares during the Valuation Period not to comply with
Rule 10b-18 and (b) any such purchases will not otherwise constitute a violation
of Section 9(a) or Rule 10(b) of the Exchange Act. This subparagraph (a) shall
not restrict any purchases by Counterparty of Shares effected during any
suspension of any Valuation Period in accordance with Section 5 herein and any
purchases during such suspension shall be disregarded in calculating the Forward
Cash Settlement Amount; and for the avoidance of doubt, this subparagraph
(a) shall not restrict any holders of outstanding securities of the Counterparty
from exercising or converting such securities to Shares; and

        (b)   Counterparty is entering into this Master Confirmation and each
Transaction hereunder in good faith and not as part of a plan or scheme to evade
the prohibitions of Rule 10b5-1 under the Exchange Act ("Rule 10b5-1"). It is
the intent of the parties that each Transaction entered into under this Master
Confirmation comply with the requirements of Rule 10b5-1(c)(1)(i)(A) and (B) and
each Transaction entered into under this Master Confirmation shall be
interpreted to comply with the requirements of Rule 10b5-1(c). Counterparty will
not seek to control or influence GS&Co. to make "purchases or sales" (within the
meaning of Rule 10b5-1(c)(1)(i)(B)(3)) under any Transaction entered into under
this Master Confirmation, including, without limitation, GS&Co.'s decision to
enter into any hedging transactions. Counterparty represents and warrants that
it has consulted with its own advisors as to the legal aspects of its adoption
and implementation of this Master Confirmation and each Supplemental
Confirmation under Rule 10b5-1.

13

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        7.    Additional Termination Events.    Additional Termination Events
will apply under Section 5(b)(v) of the Agreement. The following will constitute
Additional Termination Events, in each case with Counterparty as the sole
Affected Party:

        (a)   Notwithstanding anything to the contrary in the Equity
Definitions, the occurrence of a Nationalization, Insolvency or a Delisting (in
each case effective on the Announcement Date as determined by the Calculation
Agent);

        (b)   Notwithstanding anything to the contrary in the Equity
Definitions, the occurrence of a Merger Event (effective on the Merger Date) or
a Tender Offer (effective on the Tender Offer Date) in respect of which any
Other Consideration received for the Shares does not consist of cash. For the
avoidance of doubt, in the event that any portion of the consideration received
for the Shares consists of cash or New Shares, this Additional Termination Event
shall only apply with respect to all or any Transaction(s) (or portions thereof)
remaining after giving effect to the provisions in "Consequences of Merger
Events" or "Consequences of Tender Offers", as the case may be, above;

        (c)   [reserved]; or

        (d)   Notwithstanding anything to the contrary in the Equity
Definitions, one day prior to the ex-dividend date in respect of any
Extraordinary Dividend (as specified in the Supplemental Confirmation) by the
Issuer; provided that in the event that GS&Co. and Counterparty enter into a
mutually acceptable new transaction (using their good faith and commercially
reasonable efforts) on or prior to one day prior to the ex-dividend date in
respect of the amount determined pursuant to Section 6(e) of the Agreement or
otherwise with respect to the Affected Transaction(s) shall be deemed to be
zero. For the avoidance of doubt, in the event that an Early Termination Date
would otherwise occur pursuant to this clause 7(d) while the Counterparty is in
possession of, or is aware of, material, non-public information, the Early
Termination Date shall not be deemed to occur until the day after the day on
which Counterparty is not in possession of, and is not aware of, material
non-public information.

        8.    Automatic Termination Provisions.    Notwithstanding anything to
the contrary in Section 6 of the Agreement:

        (a)   An Additional Termination Event with Counterparty as the sole
Affected Party will automatically occur without any notice or action by GS&Co.
or Counterparty if the price of the Shares on the Exchange at any time falls
below the Termination Price (as specified in the related Supplemental
Confirmation) provided that (for the avoidance of doubt only) such Additional
Termination Event shall be an Additional Termination Event only with respect to
the Transaction documented in such related Supplemental Confirmation. The
Exchange Business Day that the price of the Shares on the Exchange at any time
falls below the Termination Price will be the "Early Termination Date" for
purposes of the Agreement.

        (b)   Notwithstanding anything to the contrary in Section 6(d) of the
Agreement, following the occurrence of such an Additional Termination Event,
GS&Co. will notify Counterparty of the amount owing under Section 6(e) of the
Agreement within a commercially reasonable time period (with such period based
upon the amount of time, determined by GS&Co. (or any of its Affiliates) in its
reasonable discretion, that it would take to unwind any of its Hedge Position(s)
related to the Transaction in a commercially reasonable manner based on relevant
market indicia). For purposes of the "Net Share Settlement Upon Early
Termination" provisions herein, (i) the date that such notice is effective (the
"Notice Date") shall constitute the "Net Share Valuation Date", (ii) the
Exchange Business Day immediately following the Notice Date shall be the Net
Share Settlement Date and (iii) all references to the Forward Cash Amount or the
Fixed Amount in Annex B hereto shall be deemed to be the Early Termination
Amount. For the avoidance of

14

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doubt, Hedge Position shall only mean any purchase, sale, entry into or
maintenance of one or more stock borrowing transactions by GS&Co. or its
Affiliates in respect of the Shares in connection with this Transaction and,
notwithstanding the forgoing portions of this paragraph and Sections 6(d) and
(e) of the Agreement, Counterparty shall be entitled to satisfy the Hedge
Position by delivery of the Number of Early Settlement Shares as defined in and
pursuant to the provisions of Section 10.

        9.    Special Provisions for Merger Events.    Notwithstanding anything
to the contrary herein or in the Equity Definitions, to the extent that an
Announcement Date for a potential Merger Transaction occurs during any Valuation
Period:

        (a)   Promptly after request from GS&Co., Counterparty shall provide
GS&Co. with written notice specifying (i) Counterparty's average daily
Rule 10b-18 Purchases (as defined in Rule 10b-18) during the three full calendar
months immediately preceding the Announcement Date that were not effected
through GS&Co. or its affiliates and (ii) the number of Shares purchased
pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act for the
three full calendar months preceding the Announcement Date. Such written notice
shall be deemed to be a certification by Counterparty to GS&Co. that such
information is true and correct. Counterparty understands that GS&Co. will use
this information in calculating the trading volume for purposes of Rule 10b-18;
and

        (b)   GS&Co. in its sole discretion may (i) make adjustments to the
terms of any Transaction, including, without limitation, the Valuation Date and
the Number of Shares to account for the number of Shares that could be purchased
on each day during the Valuation Period in compliance with Rule 10b-18 following
the Announcement Date or (ii) treat the occurrence of the Announcement Date as
an Additional Termination Event with Counterparty as the sole Affected Party.

        "Merger Transaction" means any merger, acquisition or similar
transaction involving a recapitalization as contemplated by
Rule 10b-18(a)(13)(iv) under the Exchange Act.

        10.    Special Settlement Following Early Termination and Extraordinary
Events.    Notwithstanding anything to the contrary in this Master Confirmation
or any Supplemental Confirmation hereunder, in the event that an Extraordinary
Event under Article 12 of the Equity Definitions occurs or an Early Termination
Date under Section 6 of the Agreement occurs or is designated with respect to
any Transaction (each an "Affected Transaction"), then either party may elect,
by notice to the other party, to have Counterparty deliver the Number of Early
Settlement Shares to GS&Co. on the date that such notice is effective (provided
that GS&Co. determines in its good faith sole discretion that such delivery is
in compliance with any legal, regulatory or self-regulatory requirements or
related policies and procedures), except for a termination as a result of
Section 7(d), in which event the date of delivery shall be the tenth Business
Day thereafter. To the extent that Counterparty elects to deliver Shares to
GS&Co. accompanied by an effective Registration Statement (satisfactory to
GS&Co. in its reasonable discretion) covering such Early Settlement Shares,
Counterparty must be in compliance with the conditions specified in (iii) though
(ix) in Annex B hereto at the time of such delivery. If Counterparty elects to
deliver Unregistered Shares (as defined in Annex B) to GS&Co., Counterparty and
GS&Co. will negotiate in good faith on acceptable procedures and documentation
relating to the sale of such Unregistered Shares.

        "Number of Early Settlement Shares" means a number of Shares based on
the Hedge Positions of GS&Co. or any of its Affiliates' with respect to each
Affected Transaction under this Master Confirmation at the time of the
Extraordinary Event or Early Termination Date, as applicable.

        In determining the amount of Loss under Section 6(e) of the Agreement or
the Cancellation Amount under Article 12, the parties shall take into account
the Floating Rate Amount that would

15

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have otherwise been due to the Counterparty and the Fixed Amount that would have
otherwise been due to GS&Co., and the difference between the New York 10b-18
Volume Weighted Average Price per share of the Shares over the Valuation Period
as compared to the Forward Price. Further, if Counterparty delivers Early
Settlement Shares, an amount equal to the product of (i) the Number of Early
Settlement Shares multiplied by (ii) the Forward Price (or if Counterparty
delivers Unregistered Shares, as reduced by a discount determined by GS&Co. in a
good faith commercially reasonable manner based on the discount to the New York
10b-18 Volume Weighted Average Price at which it could sell the Shares and
whether GS&Co. and Counterparty have agreed on acceptable procedures and
documentation relating to such Unregistered Shares as described above) shall be
credited against any amount owing under Section 6(e) of the Agreement or
pursuant to Article 12 of the Equity Definitions or otherwise under this Master
Confirmation.

        11.    Acknowledgments.    The parties hereto intend for:

        (a)   Each Transaction to be a "securities contract" as defined in
Section 741(7) of the U.S. Bankruptcy Code (Title 11 of the United States Code)
(the "Bankruptcy Code"), a "swap agreement" as defined in Section 101(53B) of
the Bankruptcy Code, or a "forward contract" as defined in Section 101(25) of
the Bankruptcy Code, and the parties hereto to be entitled to the protections
afforded by, among other Sections, Sections 362(b)(6), 362(b)(17), 555, 556, and
560 of the Bankruptcy Code;

        (b)   A party's right to liquidate or terminate any Transaction, net out
or offset termination values of payment amounts, and to exercise any other
remedies upon the occurrence of any Event of Default under the Agreement with
respect to the other party to constitute a "contractual right" (as defined in
the Bankruptcy Code);

        (c)   All payments for, under or in connection with each Transaction,
all payments for the Shares and the transfer of such Shares to constitute
"settlement payments" and "transfers" (as defined in the Bankruptcy Code).

        12.    Set-Off.    The parties agree to amend Section 6 of the Agreement
by adding a new Section 6(f) thereto as follows:

"(f) Upon the occurrence of an Event of Default or Termination Event with
respect to a party who is the Defaulting Party or the Affected Party ("X"), the
other party ("Y") will have the right (but not be obliged) without prior notice
to X or any other person to set-off or apply any obligation of X owed to Y
(whether or not matured or contingent and whether or not arising under the
Agreement, and regardless of the currency, place of payment or booking office of
the obligation) against any obligation of Y owed to X (whether or not matured or
contingent and whether or not arising under the Agreement, and regardless of the
currency, place of payment or booking office of the obligation). Y will give
notice to the other party of any set-off effected under this Section 6(f).

Amounts (or the relevant portion of such amounts) subject to set-off may be
converted by Y into the Termination Currency at the rate of exchange at which
such party would be able, acting in a reasonable manner and in good faith, to
purchase the relevant amount of such currency. If any obligation is
unascertained, Y may in good faith estimate that obligation and set-off in
respect of the estimate, subject to the relevant party accounting to the other
when the obligation is ascertained. Nothing in this Section 6(f) shall be
effective to create a charge or other security interest. This Section 6(f) shall
be without prejudice and in addition to any right of set-off, combination of
accounts, lien or other right to which any party is at any time otherwise
entitled (whether by operation of law, contract or otherwise)."

        13.    Payment Date Upon Early Termination.    Notwithstanding anything
to the contrary in Section 6(d)(ii) of the Agreement, all amounts calculated as
being due in respect of an Early

16

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Termination Date under Section 6(e) of the Agreement will be payable on the day
that notice of the amount payable is effective, except as otherwise provided in
this Master Confirmation or any Supplemental Confirmation.

        14.    Share Settlement; Maximum Shares.    Notwithstanding anything
contained in this Master Confirmation, the Agreement or the Equity Definitions,
Counterparty may satisfy all amounts it may owe GS&Co. hereunder and under each
Supplemental Confirmation by delivery of Shares in accordance with Annex B
and/or Section 10 hereof, and is solely vested with the right to determine
whether to satisfy its obligations in Shares, in cash or in a combination of the
two. Notwithstanding anything contained in this Master Confirmation, the
Agreement or the Equity Definitions, Counterparty and GS&Co. agree that if
Counterparty elects to satisfy its obligations to GS&Co. by delivery of Shares,
the delivery of a number of Shares equal to the Reserved Shares will satisfy in
full the obligation of Counterparty to make any payments pursuant to
Section 6(e) of the Agreement, Article 12 of the Equity Definitions or otherwise
in respect of the Transaction.

        15.    Governing Law.    The Agreement, this Master Confirmation and
each Supplemental Confirmation and all matters arising in connection with the
Agreement, this Master Confirmation and each Supplemental Confirmation shall be
governed by, and construed and enforced in accordance with, the law of the State
of New York without reference to its choice of law doctrine.

        16.    Offices.    

        (a)   The Office of GS&Co. for each Transaction is: One New York Plaza,
New York, New York 10004.

        (b)   The Office of Counterparty for each Transaction is: One Market
Spear Tower, Suite 2400 San Francisco, CA 94105.

        17.    Arbitration.    

        (a)   Arbitration is final and binding on Counterparty and GS&Co.

        (b)   Counterparty and GS&Co. are waiving their right to seek remedies
in court, including the right to a jury trial.

        (c)   Pre-arbitration discovery is generally more limited than and
different from court proceedings.

        (d)   The arbitrator's award is not required to include factual findings
or legal reasoning and any party's right to appeal or to seek modification of
rulings by the arbitrators is strictly limited.

        (e)   The panel of arbitrators will typically include a minority of
arbitrators who were or are affiliated with the securities industry.

        Any controversy between or among GS&Co. or its affiliates, or any of its
or their partners, directors, agents or employees, on the one hand, and
Counterparty or its agents and affiliates, on the other hand, arising out of or
relating to the Agreement or any Transaction entered into hereunder, shall be
settled by arbitration, in accordance with the then current rules of the
American Arbitration Association ("AAA"), except that the provisions of this
Section 17 shall supersede any conflicting or inconsistent provisions of such
rules. Each party shall appoint a qualified arbitrator within 5 days after the
giving of notice by either party. If either party shall fail timely to appoint a
qualified arbitrator, the appointed, qualified arbitrator shall select the
second qualified arbitrator within 5 days after such party's failure to appoint.
The qualified arbitrators so appointed shall meet and shall, if possible,
determine such matter within 10 days after the second qualified arbitrator is
appointed, and their determination shall be binding on the parties. If for any
reason such two qualified arbitrators fail to agree on such matter within such
period of 10 days, then either party may request the AAA to appoint a qualified
arbitrator who shall be impartial within 7 days of such request and both parties

17

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shall be bound by any appointment so made by the AAA. Within 7 days after the
third qualified arbitrator has been appointed, each of the first two qualified
arbitrators shall submit their respective determinations to the third qualified
arbitrator who must select one or the other of such determinations (whichever
the third qualified arbitrator believes to be correct or closest to a correct
determination) within 7 days after the first two qualified arbitrators shall
have submitted their respective determinations to the third qualified
arbitrator, and the selection so made shall in all cases be binding upon the
parties, and judgment upon such decision may be entered into any court having
jurisdiction. In the event of the failure, refusal or inability of a qualified
arbitrator to act, a successor shall be appointed within 10 days as hereinbefore
provided. The costs of the arbitration shall be funded 50% by each party, and
the parties shall bear their own attorneys' fees, during the arbitration. The
prevailing party shall be repaid all of such expenses by the non-prevailing
party within 10 days after the final determination of the qualified
arbitrator(s). The award of the arbitrators shall be final, and judgment upon
the award rendered may be entered in any court, state or Federal, having
jurisdiction.

        Neither party shall bring a putative or certified class action to
arbitration, nor seek to enforce any pre-dispute arbitration agreement against
any person who has initiated in court a putative class action; who is a member
of a putative class who has not opted out of the class with respect to any
claims encompassed by the putative class action until:

(i)the class certification is denied;

(ii)the class is decertified; or

(iii)the party is excluded from the class by the court.

Such forbearance to enforce an agreement to arbitrate shall not constitute a
waiver of any rights under the Agreement except to the extent stated herein.

        18.   Counterparty hereby agrees (a) to check this Master Confirmation
carefully and immediately upon receipt so that errors or discrepancies can be
promptly identified and rectified and (b) to confirm that the foregoing (in the
exact form provided by GS&Co.) correctly sets forth the terms of the agreement
between GS&Co. and Counterparty with respect to any Transaction, by manually
signing this Master Confirmation or this page hereof as evidence of agreement to
such terms and providing the other information requested herein and immediately
returning an executed copy to Equity Derivatives Documentation Department,
facsimile No. 212-428-1980/83.

[SIGNATURE PAGE FOLLOWS]

18

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      Yours sincerely,
 
 
 
GOLDMAN, SACHS & CO.
 
 
 
By:
/s/  VANESSA MARLING      

--------------------------------------------------------------------------------

Authorized Signatory
Agreed and Accepted
 
 
 
By:
PG&E CORPORATION
 
 
 
By:
/s/  LEROY BARNES JR.      
 
 
   

--------------------------------------------------------------------------------

Name:  Leroy Barnes, Jr.
Title:    VP Treasurer      

19

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ANNEX A

SUPPLEMENTAL CONFIRMATION FOR FULLY UNCOLLARED TRANSACTIONS

To:   PG&E Corporation
One Market Spear Tower
Suite 2400
San Francisco, CA 94105
From:
 
Goldman, Sachs & Co.
Subject:
 
Accelerated Share Repurchase Transaction—VWAP Pricing
Ref. No:
 
EN41JA000000000
Date:
 
December 16, 2004

This Supplemental Confirmation amends and supercedes any previous

Supplemental Confirmation relating to this Transaction

--------------------------------------------------------------------------------

        The purpose of this Supplemental Confirmation is to confirm the terms
and conditions of the Transaction entered into between Goldman, Sachs & Co.
("GS&Co.") and PG&E Corporation ("Counterparty") (together, the "Contracting
Parties") on the Trade Date specified below. This Supplemental Confirmation is a
binding contract between GS&Co. and Counterparty as of the relevant Trade Date
for the Transaction referenced below.

        1.     This Supplemental Confirmation supplements, forms part of, and is
subject to the Master Confirmation dated as of December 15, 2004 (the "Master
Confirmation") between the Contracting Parties, as amended and supplemented from
time to time. The definitions and provisions contained in the Master
Confirmation are incorporated into this Supplemental Confirmation, except as
expressly modified below. In the event of any inconsistency between those
definitions and provisions and this Supplemental Confirmation, this Supplemental
Confirmation will govern.

        2.     The terms of the Transaction to which this Supplemental
Confirmation relates are as follows:

Trade Date:   December 15, 2004. In a related transaction Counterparty agreed to
purchase a number of Shares equal to the Number of Shares from GS&Co. on the
Trade Date at the Forward Price per Share.
Forward Price:
 
USD $32.50 per Share
Valuation Period Start Date:
 
The Scheduled Trading Day following the Trade Date.
Valuation Date:
 
February 16, 2005
Number of Shares:
 
9,769,600 Shares
Termination Price:
 
$10 per Share
Fixed Rate:
 
25 basis points
Reserved Shares:
 
A number of Shares equal to two times the Number of Shares.      

A-1

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Extraordinary Dividends:
 
Any cash dividend declared by the Issuer in excess of $0.00 per Share.
Initial Number of Daily Reference Shares:
 
227,200 shares
Initial Notional Amount:
 
$317,512,000.00

        3.     Counterparty represents and warrants to GS&Co. that neither it
(nor any "affiliated purchaser" as defined in Rule 10b-18 under the Exchange
Act) have made any purchases of blocks except through GS&Co. or an entity
affiliated with GS&Co. pursuant to the proviso in Rule 10b-18(b)(4) under the
Exchange Act during the four full calendar weeks immediately preceding the Trade
Date.

        Counterparty hereby agrees (a) to check this Supplemental Confirmation
carefully and immediately upon receipt so that errors or discrepancies can be
promptly identified and rectified and (b) to confirm that the foregoing (in the
exact form provided by GS&Co.) correctly sets forth the terms of the agreement
between GS&Co. and Counterparty with respect to this Transaction, by manually
signing this Supplemental Confirmation or this page hereof as evidence of
agreement to such terms and providing the other information requested herein and
immediately returning an executed copy to Equity Derivatives Documentation
Department, facsimile No. 212-428-1980/83.

      Yours sincerely,
 
 
 
GOLDMAN, SACHS & CO.
 
 
 
By:
/s/  VANESSA MARLING      

--------------------------------------------------------------------------------

Authorized Signatory
Agreed and Accepted
 
 
 
By:
PG&E CORPORATION
 
 
 
By:
/s/  LEROY BARNES JR.      
 
 
   

--------------------------------------------------------------------------------

Name:  Leroy Barnes, Jr.
Title:    VP Treasurer      

A-2

--------------------------------------------------------------------------------

ANNEX B

NET SHARE SETTLEMENT PROCEDURES

        The following Net Share Settlement Procedures shall apply to the extent
that Counterparty elects Net Share Settlement in accordance with the Master
Confirmation:

        Net Share Settlement shall be made by delivery of the number of Shares
equal in value to the Forward Cash Settlement Amount plus the Fixed Amount (the
"Settlement Shares"), with such Shares' value based on the Net Share Settlement
Price. Delivery of such Settlement Shares shall be made free of any contractual
or other restrictions in good transferable form (other than under the Securities
Act with respect to any Unregistered Shares (as defined below)) on the Net Share
Settlement Date with Counterparty (i) representing and warranting to GS&Co. at
the time of such delivery that it has good, valid and marketable title or right
to sell and transfer all such Shares to GS&Co. under the terms of the related
Transaction free of any lien charge, claim or other encumbrance and (ii) making
the representations and agreements contained in Section 9.11(ii) through (iv) of
the Equity Definitions to GS&Co. with respect to the Settlement Shares. GS&Co.
or any affiliate of GS&Co. designated by GS&Co. (GS&Co. or such affiliate, "GS")
shall resell the Settlement Shares during a period (the "Resale Period")
commencing no earlier than the Exchange Business Day on which the Settlement
Shares are delivered. GS shall use its good faith, commercially reasonable
efforts to sell the Settlement Shares as promptly as possible at commercially
reasonable prices based on prevailing market prices for the Shares. The Resale
Period shall end on the Exchange Business Day on which GS completes the sale of
all Settlement Shares or a sufficient number of Settlement Shares so that the
realized net proceeds of such sales exceed the Forward Cash Settlement Amount
plus the Fixed Amount. Notwithstanding the foregoing, if resale by GS of the
Settlement Shares, as determined by GS in its sole discretion (i) occurs during
a distribution for purposes of Regulation M, and if GS would be subject to the
restrictions of Rule 101 of Regulation M in connection with such distribution,
the Resale Period will be postponed or tolled, as the case may be, until the
Exchange Business Day immediately following the end of any "restricted period"
as such term is defined in Regulation M with respect to such distribution under
Regulation M or (ii) conflict with any legal, regulatory or self-regulatory
requirements or related policies and procedures applicable to GS (whether or not
such requirements, policies or procedures are imposed by law or have been
voluntarily adopted by GS), the Resale Period will be postponed or tolled, as
the case may be, until such conflict is no longer applicable. During the Resale
Period, if the realized net proceeds from the resale of the Settlement Shares
exceed the Forward Cash Settlement Amount plus the Fixed Amount, GS shall refund
such excess in cash to Counterparty by the close of business on the third
Exchange Business Day immediately following the last day of the Resale Period.
If the Forward Cash Settlement Amount plus the Fixed Amount exceeds the realized
net proceeds from such resale, Counterparty shall transfer to GS by the open of
the regular trading session on the Exchange on the third Scheduled Trading Day
immediately following the last day of the Resale Period the amount of such
excess (the "Additional Amount") in the number of Shares ("Make-whole Shares")
in an amount that, based on the Net Share Settlement Price on the last day of
the Resale Period (as if such day was the "Net Share Valuation Date" for
purposes of computing such Net Share Settlement Price), has a dollar value equal
to the Additional Amount. The Resale Period shall continue to enable the sale of
the Make-whole Shares. The requirements and provisions set forth below shall
apply to Shares delivered to pay such Additional Amounts. This provision shall
be applied successively until the Additional Amount is equal to zero.

Net Share Settlement of a Transaction is subject to the following conditions:

Counterparty at its sole expense shall:

          (i)  as promptly as practicable (but in no event more than five
(5) Exchange Business Days immediately following the Settlement Method Election
Date or, in the case of an election of Net Share Settlement upon the occurrence
of an Extraordinary Event or an Early Termination Date,

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no more than one Exchange Business Day immediately following either the
Cancellation Date or the Early Termination Date, as the case may be) file under
the Securities Act and use its best efforts to make effective, as promptly as
practicable, a registration statement or supplement or amend an outstanding
registration statement, in any such case, in form and substance reasonably
satisfactory to GS (the "Registration Statement") covering the offering and sale
by GS of not less than 150% of the Shares necessary to fulfill the Net Share
Settlement delivery obligation by Counterparty (determining the number of such
Shares to be registered on the basis of the average of the Settlement Prices on
the five (5) Exchange Business Days prior to the date of such filing, amendment
or supplement, as the case may be);

         (ii)  maintain the effectiveness of the Registration Statement until GS
has sold all shares to be delivered by Counterparty necessary to satisfy its Net
Share Settlement obligations;

        (iii)  have afforded GS and its counsel and other advisers a reasonable
opportunity to conduct a due diligence investigation of Counterparty customary
in scope for transactions in which GS acts as underwriter of equity securities,
and GS shall have been satisfied (with the approval of its Commitments Committee
in accordance with its customary review process) with the results of such
investigation;

        (iv)  have negotiated and entered into an agreement with GS providing
for such covenants, conditions, representations and warranties, underwriting
discounts, commissions, indemnities and contribution rights as are customary for
GS equity underwriting agreements, together with customary certificates and
opinions of counsel and letters of independent auditors of Counterparty to be
delivered to GS covering the shares to be delivered by Counterparty in
satisfaction of its Net Share Settlement obligations;

         (v)  have delivered to GS such number of prospectuses relating thereto
as GS shall have reasonably requested and shall promptly update and provide GS
with replacement prospectuses as necessary to ensure the prospectus does not
contain any untrue statement of a material fact or any omission of a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances in which they were made, not misleading;

        (vi)  have retained for GS nationally-recognized underwriting counsel
acceptable to GS (in its sole discretion) with broad experience in similar
registered securities offerings and such counsel shall have agreed to act as
such;

       (vii)  have taken all steps necessary for the shares sold by GS to be
listed or quoted on the primary exchange or quotation system that the Shares are
listed or quoted on;

      (viii)  have paid all reasonable and actual out-of-pocket costs and
expenses of GS and all reasonable and actual fees and expenses of GS's outside
counsel and other independent experts in connection with the foregoing; and

        (ix)  take such action as is required to ensure that GS's sale of the
Shares does not violate, or result in a violation of, the federal or state
securities laws.

        In the event that the Registration Statement is not declared effective
by the Securities Exchange Commission (the "SEC") or any of the conditions
specified in (ii) through (ix) above are not satisfied on or prior to the
Valuation Date (or, in the case of an election of Net Share Settlement upon the
occurrence of an Extraordinary Event or an Early Termination Date, on or prior
to the first Exchange Business Day following either the Cancellation Date or the
Early Termination Date, as the case may be except for any Early Termination as
result of Section 7(d) of the Master Confirmation, in which case, such date
shall be the tenth Exchange Business Day following such Early Termination Date),
then Counterparty may deliver Unregistered Shares to GS in accordance with the
following conditions. If GS and Counterparty can agree on acceptable pricing,
procedures and documentation relating to the sale

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of such Unregistered Shares (including, without limitation, applicable
requirements in (iii) through (ix) above and insofar as pertaining to private
offerings), then such Unregistered Shares shall be deemed to be the "Settlement
Shares" for the purposes of the related Transaction and the settlement procedure
specified in this Annex B shall be followed except that in the event that the
Forward Cash Settlement Amount plus the Fixed Amount, exceeds the proceeds from
the sale of such Unregistered Shares then for the purpose of calculating the
number of "Make-whole Shares" to be delivered by Counterparty, GS shall
determine the discount to the Net Share Settlement Price at which it can sell
the Unregistered Shares. Notwithstanding the delivery of the Unregistered
Shares, Counterparty shall endeavor in good faith to have a registration
statement declared effective by the SEC as soon as practical. In the event that
GS has not sold sufficient Unregistered Shares to satisfy Counterparty's
obligations to GS contained herein at the time that a Registration Statement
covering the offering and sale by GS of a number of Shares equal in value to not
less than 150% of the amount then owed to GS is declared effective (based on the
Net Share Settlement Price on the Exchange Business Day (as if such Exchange
Business Day were the "Net Share Valuation Date" for purposes of computing such
Net Share Settlement Price) that the Registration Statement was declared
effective), GS shall return all unsold Unregistered Shares to Counterparty and
Counterparty shall deliver such number of Shares covered by the effective
Registration Statement equal to 100% of the amount then owed to GS based on such
Net Share Settlement Price. Such delivered shares shall be deemed to be the
"Settlement Shares" for the purposes of the related Transaction and the
settlement procedure specified in this Master Confirmation, including, without
limitation, this Annex B, (including the obligation to deliver any Make-whole
Shares, if applicable) shall be followed. In all cases GS shall be entitled to
take any and all required actions in the course of its sales of the Settlement
Shares, including without limitation making sales of the Unregistered Shares
only to "Qualified Institutional Buyers" (as such term is defined under the
Securities Act), to ensure that the sales of the Unregistered Shares and the
Settlement Shares covered by the Registration Statement are not integrated
resulting in a violation of the securities laws and Counterparty agrees to take
all actions requested by GS in furtherance thereof.

        If GS and Counterparty cannot agree on acceptable pricing, procedures
and documentation relating to the sales of such Unregistered Shares then the
number of Unregistered Shares to be delivered to GS pursuant to the provisions
above shall not be based on the Net Share Settlement Price but rather GS shall
determine the value attributed to each Unregistered Share in a commercially
reasonable manner and based on such value Counterparty shall deliver a number of
Shares equal in value to the Forward Cash Settlement Amount plus the Fixed
Amount. For the purposes hereof "Unregistered Shares" means Shares that have not
been registered pursuant to an effective registration statement under the
Securities Act or any state securities laws ("Blue Sky Laws") and that cannot be
sold, transferred, pledged or otherwise disposed of without registration under
the Securities Act or under applicable Blue Sky Laws unless such sale, transfer,
pledge or other disposition is made in a transaction exempt from registration
thereunder.

        In the event that Counterparty delivers Shares pursuant to an election
of Net Share Settlement then Counterparty agrees to indemnify and hold harmless
GS, its affiliates and its assignees and their respective directors, officers,
employees, agents and controlling persons (GS and each such person being an
"Indemnified Party") from and against any and all losses, claims, damages and
liabilities (or actions in respect thereof), joint or several, to which such
Indemnified Party may become subject, under the Securities Act or otherwise,
(i) relating to or arising out of any of the Transactions contemplated by this
Master Confirmation concerning Net Share Settlement or (ii) arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus, prospectus, Registration Statement or
other written material relating to the Shares delivered to prospective
purchasers, including in each case any amendments or supplements thereto and
including but not limited to any documents deemed to be incorporated in any such
document by reference (the "Offering Materials"), or arising out of or based
upon any omission or alleged omission to state in the Offering Materials a
material fact necessary in order to make the statements therein, in

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the light of the circumstances under which they were made, not misleading;
provided, however, that, in the case of this clause (ii), Counterparty will not
be liable to the extent that any loss, claim, damage or liability arises out of
or is based upon any untrue statement or omission or alleged untrue statement or
omission in the Offering Materials made in reliance upon and in conformity with
written information furnished to Counterparty by GS expressly for use in the
Offering Materials, as expressly identified in a letter to be delivered at the
closing of the delivery of Shares by Counterparty to GS. The foregoing indemnity
shall exclude losses that GS incurs solely by reason of the proceeds from the
sale of the Capped Number of Shares being less than the Forward Cash Settlement
Amount. Counterparty will not be liable under the foregoing indemnification
provision to the extent that any loss, claim, damage, liability or expense is
found in a nonappealable judgment by a court of competent jurisdiction to have
resulted from GS's willful misconduct, gross negligence or bad faith in
performing the services that are subject of this Master Confirmation or from
information provided in writing by GS for inclusion in the Registration
Statement. If for any reason the foregoing indemnification is unavailable to any
Indemnified Party or insufficient to hold harmless any Indemnified Party, then
Counterparty shall contribute, to the maximum extent permitted by law, to the
amount paid or payable by the Indemnified Party as a result of such loss, claim,
damage or liability. In addition, Counterparty will reimburse any Indemnified
Party for all expenses (including reasonable counsel fees and expenses) as they
are incurred (after notice to Counterparty) in connection with the investigation
of, preparation for or defense or settlement of any pending or threatened claim
or any action, suit or proceeding arising therefrom, whether or not such
Indemnified Party is a party thereto and whether or not such claim, action, suit
or proceeding is initiated or brought by or on behalf of Counterparty.
Counterparty also agrees that no Indemnified Party shall have any liability to
Counterparty or any person asserting claims on behalf of or in right of
Counterparty in connection with or as a result of any matter referred to in the
Agreement or this Master Confirmation concerning Net Share Settlement except to
the extent that any losses, claims, damages, liabilities or expenses incurred by
Counterparty result from the gross negligence, willful misconduct or bad faith
of the Indemnified Party. This indemnity shall survive the completion of any
Transaction contemplated by this Master Confirmation and any assignment and
delegation of a Transaction made pursuant to this Master Confirmation or the
Agreement shall inure to the benefit of any permitted assignee of GS&Co.

        In no event shall the number of Settlement Shares (including, but
without duplication or double counting, any Unregistered Shares) and any
Make-whole Shares, be greater than the Reserved Shares minus the amount of any
Shares actually delivered under any other Transaction(s) under this Master
Confirmation (the result of such calculation, the "Capped Number"). Counterparty
represents and warrants (which shall be deemed to be repeated on each day that a
Transaction is outstanding) that the Capped Number is equal to or less than the
number of Shares determined according to the following formula:

A - B

    Where   A = the number of authorized but unissued shares of the Issuer that
are not reserved for future issuance on the date of the determination of the
Capped Number; and
 
 
 
 
B = the maximum number of Shares required to be delivered to third parties if
Counterparty elected Net Share Settlement of all transactions in the Shares
(other than Transactions in the Shares under this Master Confirmation) with all
third parties that are then currently outstanding and unexercised.

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QuickLinks

Exhibit 10.3

ANNEX A SUPPLEMENTAL CONFIRMATION FOR FULLY UNCOLLARED TRANSACTIONS
ANNEX B NET SHARE SETTLEMENT PROCEDURES