Unassociated Document


    August
      31, 2006      Exhibit
      10.2

    


    


    


    Mr.
      Thomas B. King

    President
      and CEO

    Pacific
      Gas and Electric Company

    77
      Beale
      Street, 32nd
      Floor

    San
      Francisco, CA 94105

    


    Dear
      Tom,

    


    To
      provide a long-term incentive to retain your services, I am pleased to offer
      you
      the following modifications to your current compensation package:

    


    	·  	
            Elimination
              of Early Retirement Reduction Factors:
              The Board of Directors of Pacific Gas and Electric Company (Company)
              has
              agreed to eliminate the reduction factors that otherwise would be used
              to
              calculate your pension benefit under the defined benefit pension plan,
              provided you remain employed by the Company, PG&E Corporation, or any
              of their affiliates until age 55. This
              enhanced pension benefit will be paid from the PG&E Corporation
              Supplemental Executive Retirement Plan. 

          


     

    	·  	
            Grant
              of Restricted Phantom Stock Units:
              At its July 12, 2006, meeting, the Nominating, Compensation and Governance
              Committee of the PG&E Corporation Board of Directors awarded you
              25,433.41 restricted phantom stock units with an aggregate value of
              $1
              million based on the closing stock price of PG&E Corporation common
              stock on that day of $39.63, as reported on the New York Stock Exchange.
              These units will be credited to your account in the PG&E Corporation
              Phantom Stock Investment Fund under the PG&E Corporation Supplemental
              Retirement Savings Plan (SRSP). 

          


    


    	o  	
            Vesting.
              The restricted phantom stock units, together with any dividend equivalent
              units, will vest five years after the date of grant, provided that
              you are
              still employed by the Company, PG&E Corporation, or any of their
              affiliates. You may not elect to transfer the value of the units to
              another investment option in accordance with the SRSP until the units
              have
              vested. 

          


    


    	o 	
            Payment.
              The amount of your deferred compensation account balance that is
              attributable to units that have vested shall be paid to you following
              your
              Retirement (as defined in the SRSP) or following your termination of
              employment. 

          


    


    Under
      certain situations, application or vesting of these benefits and awards may
      be
      accelerated. Upon your death or disability: 

    


    	·  	
            the
              early retirement reduction factors will cease to apply for purposes
              of
              calculating the value of your pension benefit, and
              

          


     

     

    Mr.
      Thomas B. King

    August
      31, 2006

    Page
      2

    


    


    	·  	
            the
              restricted phantom stock units, together with any dividend equivalent
              units, will immediately vest and will be paid in a lump sum as soon
              as
              practicable following the triggering event, based on the average closing
              price of a share of PG&E Corporation common stock for the last 30
              calendar days preceding the date of the triggering event, as reported
              on
              the New York Stock Exchange. 

          


    


    These
      awards and benefits also will vest or accelerate as described in the prior
      paragraph if there is a Change in Control of PG&E Corporation (as defined in
      the PG&E Corporation 2006 Long-Term Incentive Plan (LTIP)) and these
      modifications to your compensation arrangements are not assumed by the Acquiror
      (as defined in the LTIP) or your employment is subject to an Involuntary
      Termination within the Covered Period following the Change in Control (as those
      terms are defined in the PG&E Corporation Officer Severance
      Policy).

    


    If
      you
      are terminated without cause, a prorated portion of any unvested restricted
      phantom stock units and any dividend equivalent units will vest immediately,
      in
      accordance with the percentage of time you were employed by the Company,
      PG&E Corporation, or their affiliates during the 60-month vesting period.
      Those units will be forfeited if you are terminated for cause before the units
      vest. If you are terminated before you reach age 55, you will not receive the
      enhanced pension benefit, and early retirement reduction factors will apply.
      This paragraph does not apply if you are subject to an Involuntary Termination
      within the Covered Period in connection with a Change in Control. 

    


    Tom,
      you
      are and continue to be a very valued member of my senior management team and
      pivotal to the effort underway for the Company to become the leading utility
      in
      the United States. I am confident in your abilities and see you as a key player
      in the future of the Company.

    


    Sincerely,

    


    


    /s/
      Peter
      A. Darbee

    


    


    


    


    Accepted:
          /s/
      Thomas B.
      King                     

    Thomas
      B.
      King

    


    Date:     8/31/06