<PAGE>

                                                                    EXHIBIT 10.1

              CONFIDENTIAL SEVERANCE AGREEMENT AND GENERAL RELEASE

     This Confidential Severance Agreement and General Release (this
"Agreement") is hereby entered into by and between Richard L. Paulsen, an
individual (the "Executive"), and Commonwealth Energy Corporation, a California
corporation (the "Company").

                                    RECITALS

     A.   The Executive has been employed by the Company pursuant to an
Employment Agreement by and between the Company and the Executive dated as of
November 1, 2000 (the "Employment Agreement"), serving as Chief Operating
Officer of the Company and as President of the Company's wholly-owned
subsidiary, UtiliHost, Inc.;

     B.   The Executive and the Company determined that it is in their mutual
best interests that the Executive resign his employment with the Company on the
terms and conditions set forth in this Agreement; and

     C.   On October 8, 2001, the Company's Board of Directors approved the
grant to the Executive of options to purchase 900,000 shares of the Company's
Common Stock with an exercise price of $2.75 per share (the "Options"), of which
899,500 shares are currently subject to exercise.

     D.   The Executive currently holds a total of 500 shares of the company's
common stock (the "Shares").

                                    AGREEMENT

     In consideration of the mutual promises contained herein and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows:

          1.   Effective Date. Except as otherwise provided herein, this
Agreement shall be effective on the date on which it has been executed by both
of the parties (the "Effective Date").

          2.   Resignation. The Executive hereby voluntarily, unconditionally
and irrevocably resigns as an employee, officer and director of the Company and
any of its parents, direct or indirect subsidiaries, affiliates, divisions or
related entities (collectively referred to herein as the "Company and its
Related Entities"), effective as of 5:00 p.m. on March 16, 2004 (the
"Resignation Date"). The Company accepts such resignation, and the Executive is
relieved of all duties after the Resignation Date.

          3.   Continuation of Benefits After the Resignation Date. Except as
expressly provided in this Agreement or in the plan documents governing the
Company's employee benefit plans, after the Resignation Date, the Executive will
no longer be eligible for, receive, accrue, or participate in any other benefits
or benefit plans provided by the Company and its Related Entities, including,
without limitation, medical, dental and life insurance benefits, and the
Company's 401(k) retirement plan; provided, however, that nothing in this
Agreement shall

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waive the Executive's right to any vested amounts in the Company's 401(k)
retirement plan, which amounts shall be handled as provided in the plan.

          4.   COBRA Benefits. Nothing in this Agreement is intended to alter
the Executive's availability to purchase continuation coverage under the terms
of COBRA, and the Executive shall retain all rights afforded under that law.

          5.   Normal Salary Through Resignation Date. Within one business day
after the Resignation Date, the Company shall pay Executive all wages earned
through the Resignation Date. The Executive acknowledges that he has been paid
for all accrued, unused vacation earned through the Resignation Date.

          6.   Special Payments. In return for Executive's promises in this
Agreement, the Company will provide Executive with the following special
payments.

               (a)  A payment in the amount of $80,000, less deductions required
by law;

               (b)  A payment in the amount of $620,000 less legally required
deductions, which approximates the present value of Executive's monthly salary
for a period of 18 months; and

               (c)  A payment in the total amount of $960 for the repurchase of
the Shares pursuant to Section 7 of this Agreement; and

               (d)  An additional payment in the total amount of $899,915.

          The foregoing amounts shall initially be made by wire transfer from
the Company to the Company's counsel who shall hold them. Eight days after the
Effective Date, or if the eighth day falls on a day which is not a business day,
the next business day after such eighth day, and if the Executive has not
revoked the Agreement as provided in Section 14(c), below, and the Company's
counsel has received a signed original of this Agreement and the endorsed
certificate of the Shares, as provided in Section 7, below, the Company's
counsel shall provide the Executive's counsel with an original of the Agreement
signed for the Company and shall transfer by wire immediately available funds in
the sum of the special payments above to the following account of the Executive:

          Union Bank of California Investment Services
          445 S. Figueroa
          Los Angeles, CA 90071
          ABA Routing No. 122000496
          Account No. 9911063304
          For the benefit of Richard L. and Carol J. Paulsen

          7.   Repurchase of Shares. The Company will repurchase the Shares of
the Company owned by the Executive for an aggregate purchase price of $960. The
Executive shall provide to the Company's counsel, with a signed original of this
Agreement, a certificate or certificates representing the Shares to be
repurchased, duly endorsed in blank by the Executive.

                                      -2-
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          8.   Cancellation of Stock Options. The parties agree that all
outstanding options or other rights to purchase securities of the Company,
including but not limited to the Options, shall be cancelled as of the
Resignation Date.

          9.   Acknowledgement of Total Compensation and Indebtedness. The
Executive acknowledges and agrees that the cash payments under Sections 5 and 6
of this Agreement extinguish any and all obligations for monies, or other
compensation or benefits that the Executive claims or could claim to have earned
or claims or could claim is owed to him as a result of his employment by the
Company through the Resignation Date, under the Employment Agreement or
otherwise.

          10.  Status of Related Agreements and Future Employment.

               (a)  Agreements Between the Executive and the Company. The
Executive and the Company agree that, in addition to this Agreement, the
Employment Agreement attached hereto as Exhibit A and the Indemnification
Agreement dated as of November 1, 2000, attached hereto as Exhibit B (the
"Indemnification Agreement") are the only other executed agreements between the
Company and the Executive.

               (b)  Employment Agreement. Except as otherwise provided herein,
the parties agree that the Employment Agreement shall be terminated as of the
Resignation Date. Notwithstanding the termination of the Employment Agreement,
the Executive acknowledges that the duties and obligations set forth in Section
5 of the Employment Agreement extend beyond the Resignation Date. In the event
that any provision of this Agreement conflicts with Section 5 of the Employment
Agreement, the terms and provisions of Section 5 of the Employment Agreement
shall control.

               (c)  Indemnification Agreement; Indemnification. Notwithstanding
the termination of the Employment Agreement or any provision of this Agreement,
the Executive and the Company acknowledge and agree that the Indemnification
Agreement shall remain in full force and effect in accordance with its terms,
and shall also apply in connection with any services provided pursuant to
Section 20 of this Agreement. In the event that (i) Executive is made a party
to, or threatened to be made a party to, any threatened or pending action, suit
or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he was an director, officer, employee or agent of the
Company or an affiliate of the Company or was serving at the request of the
Company as a director, officer, employee or agent of any other corporation,
partnership, joint venture, trust or other enterprise, and (ii) the Company
provides indemnification and/or reimbursement of expenses with respect to that
action, suit or proceeding to any other person who, during the period related to
the action, was an officer, director, employee or agent of the Company or an
affiliate of the Company or was serving at the request of the Company as a
director, officer, employee or agent of any other corporation, partnership,
joint venture, trust or other enterprise, and (iii) the indemnification and/or
reimbursement of expenses provided to such other person is more favorable than
the indemnification and/or reimbursement of expenses to which Executive would be
entitled but for this Section 10(c) for conduct comparable to that in which the
Executive is alleged to have engaged, then the Company shall, to the maximum
extent permitted by applicable law, provide indemnification and/or reimbursement
of expenses (as the case may be) to Executive to the same extent, at the same

                                      -3-
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time, and on the same terms and conditions as such indemnification and/or
reimbursement of expenses is provided by the Company to such other person.

               (d)  Stock Option Agreements. Except as otherwise provided
herein, the parties agree that any and all stock option agreements in favor of
the Executive with respect to the Company's common stock shall be cancelled as
of the Resignation Date.

          11.  Release by the Executive. Except as otherwise expressly provided
in this Agreement, the Executive, for himself and his heirs, executors,
administrators, assigns, affiliates, successors and agents (collectively, the
"Executive's Affiliates") hereby fully and without limitation releases and
forever discharges the Company and its Related Entities, and each of their
respective agents, representatives, shareholders, owners, officers, directors,
employees, consultants, attorneys, auditors, accountants, investigators,
affiliates, successors and assigns (collectively, the "Company Releasees"), both
individually and collectively, from any and all rights, claims, demands,
liabilities, actions, causes of action, damages, losses, costs, expenses and
compensation, of whatever nature whatsoever, known or unknown, fixed or
contingent, which the Executive or any of the Executive's Affiliates has or may
have or may claim to have against the Company Releasees by reason of any matter,
cause, or thing whatsoever, from the beginning of time to the Effective Date
("Claims"), including, without limiting the generality of the foregoing, any
Claims arising out of, based upon, or relating to the recruitment, hiring,
employment, relocation, remuneration, investigation, or termination of the
Executive by any of the Company Releasees, the Executive's tenure as an employee
and/or an officer of any of the Company Releasees, any agreement or compensation
arrangement between the Executive and any of the Company Releasees (including,
without limitation, the Employment Agreement), or any act or occurrence in
connection with any actual, existing, proposed, prospective or claimed ownership
interest of any nature of the Executive or the Executive's Affiliates in equity
capital or rights in equity capital or other securities of any of the Company
Releasees to the maximum extent permitted by law. The Executive specifically and
expressly releases any Claims arising out of or based on: the California Fair
Employment and Housing Act, as amended; Title VII of the Civil Rights Act of
1964, as amended; the Americans With Disabilities Act; the National Labor
Relations Act, as amended; the Equal Pay Act; ERISA; any provision of the
California Labor Code; the California common law on fraud, misrepresentation,
negligence, defamation, infliction of emotional distress or other tort, breach
of contract or covenant, violation of public policy or wrongful termination;
state or federal wage and hour laws; or any other state or federal law, rule, or
regulation dealing with the employment relationship. Nothing contained in this
Section 11 or any other provision of this Agreement shall release or waive any
right that Executive has to indemnification and/or reimbursement of expenses by
the Company with respect to which Executive may be eligible as provided in
Section 10(c), above.

          12.  Waiver of Civil Code Section 1542.

               (a)  The Executive understands and agrees that the release
provided herein extends to all Claims released above whether known or unknown,
suspected or unsuspected. The Executive expressly waives and relinquishes any
and all rights he may have under California Civil Code Section 1542, which
provides as follows:

                                      -4-
<PAGE>

          "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
          CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
          THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
          MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
          DEBTOR."

               (b)  The Executive expressly waives and releases any rights and
benefits which he has or may have under any similar law or rule of any other
jurisdiction. It is the intention of each party through this Agreement and with
the advice of counsel to fully, finally and forever settle and release the
Claims as set forth above. In furtherance of such intention, the release herein
given shall be and remain in effect as a full and complete release of such
matters notwithstanding the discovery of any additional Claims or facts relating
thereto.

          13.  Release of Federal Age Discrimination Claims by the Executive.
The Executive hereby knowingly and voluntarily waives and releases all rights
and claims, known or unknown, arising under the Age Discrimination In Employment
Act of 1967, as amended, which he might otherwise have had against the Company
or any of the Company Releasees regarding any actions which occurred prior to
the Effective Date.

          14.  Rights Under the Older Workers Benefit Protection Act. In
accordance with the Older Workers Benefit Protection Act of 1990, the Executive
hereby is advised of the following:

               (a)  The Executive has the right to consult with an attorney
before signing this Agreement and is encouraged by the Company to do so;

               (b)  The Executive has twenty-one (21) days from his receipt of
this Agreement to consider it; and

               (c)  The Executive has seven (7) days after signing this
Agreement to revoke Sections 9, 11 and 13 of this Agreement (which must be
revoked in their entirety and as a group), and such Sections of this Agreement
(as a group) will not be effective until that revocation period has expired
without exercise ("Settlement Date"). The Executive agrees that in order to
exercise his right to revoke this Agreement within such seven (7) day period, he
must do so in a signed writing delivered to the Company's Chief Executive
Officer before the close of business on the seventh calendar day after the
Effective Date.

          15.  Confidentiality of Agreement. After the execution of this
Agreement by the Executive, neither the Executive, his attorney, nor any person
acting by, through, under or in concert with them, shall disclose any of the
terms of or amount paid under this Agreement (other than to state that the
Company has filed this Agreement and/or agreements related thereto as public
documents) or the negotiation thereof to any individual or entity; provided,
however, that the foregoing shall not prevent such disclosures by Executive to
his attorney, tax advisors and/or immediate family members, or as may be
required by law.

          16.  No Filings. The Executive represents that he has not filed any
lawsuits, claims, charges or complaints against the Company or the Company
Releasees with any local,

                                      -5-
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state or federal agency or court from the beginning of time to the date of
execution of this Agreement; that he will not do so at any time hereafter based
upon events prior to the date of execution of this Agreement; that he will not
induce, encourage, solicit or assist any other person or entity to file or
pursue any proceeding of any kind against the Company or the Company Releasees
or voluntarily appear or invite a subpoena to testify in any such legal
proceeding; and that, if any such agency or court ever assumes jurisdiction over
any such lawsuit, claim, charge or complaint and/or purports to bring any legal
proceeding, in whole or in part, on behalf of the Executive based upon events
occurring prior to the execution of this Agreement, the Executive will request
such said agency or court to withdraw from and/or to dismiss the lawsuit, claim,
charge or complaint with prejudice. It shall not be a breach of this Section 16
for Executive to testify truthfully in any judicial or administrative
proceeding.

          17.  Proprietary Information. The Executive acknowledges that certain
information, observations and data obtained by him during the course of or
related to his employment with the Company and its Related Entities (including,
without limitation, projection programs, business plans, business matrix
programs (i.e., measurement of business), strategic financial projections,
certain financial information, shareholder information, product design
information, marketing plans or proposals, personnel information, customer lists
and other customer information) are the sole property of the Company and its
Related Entities and constitute Confidential Information of the Company and its
Related Entities as defined in Section 5 of the Employment Agreement. The
Executive represents and warrants that he has returned all files, customer
lists, financial information and other property of the Company and its Related
Entities that were in the Executive's possession or control without retaining
copies thereof. The Executive further represents and warrants that he does not
have in his possession or control any files, customer lists, financial
information or other property of the Company and its Related Entities. In
addition to his promises in Section 5 of the Employment Agreement, the Executive
agrees that he will not disclose to any person or use any such information,
observations or data without the written consent of the Company's Board of
Directors or the Board of Directors of the Company's parent. If the Executive is
served with a deposition subpoena or other legal process calling for the
disclosure of such information, or if he is contacted by any third person
requesting such information, he will notify the Company's Chief Executive
Officer as soon as is reasonably practicable after receiving notice and will
cooperate with the Company and its Related Entities in minimizing the disclosure
thereof.

          18.  No Solicitation. For a period of 18 months from the Effective
Date, the Executive agrees that he will not solicit or attempt to solicit any
customer of the Company to do business with any person or entity other than the
Company, and will not solicit for employment any person who is an officer,
manager, employee of the Company, or any consultant of the Company who is under
contract to provide full-time services to the Company. It shall not be a breach
of this Section 18 for Executive to make general solicitations of employment
that are not directed to any person who is at the time of the solicitation an
officer, manager or employee of the Company.

          19.  Equitable Remedies. The Executive acknowledges that any unfair
competition or misuse of trade secret or Confidential Information belonging to
the Company and its Related Entities, or any violation of Section 5 of the
Employment Agreement or Sections 15, 17 and 18 of this Agreement, will result in
irreparable harm to the Company and/or its Related

                                      -6-
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Entities, and therefore, the Company and its Related Entities shall, in addition
to any other remedies, be entitled to immediate injunctive relief.

          20.  Cooperation Clause.

               (a)  To facilitate the orderly conduct of the Company's and its
Related Entities' businesses, for a period of 18 months from the Effective Date,
the Executive agrees to cooperate, at no charge, with the Company's and its
Related Entities' reasonable requests for information or assistance related to
the time of his employment, including, without limitation (i) assisting the
Company and its Related Entities to insure that the projection program, business
plans, business matrix program (i.e., measurement of business) and strategic
financial projections are transitioned to the Company and its Related Entities;
and (ii) otherwise assist the new Chief Financial Officer of the Company and its
Related Entities in connection with his transition.

               (b)  For a period of 18 months from the Effective Date, the
Executive agrees to cooperate, at no charge, with the Company's and its Related
Entities' and its or their counsel's reasonable requests for information or
assistance related to (i) any investigations (including internal investigations)
and audits of the Company's or any of its Related Entities' management's current
and past conduct and business and accounting practices and (ii) the Company's
defense of, or other participation in, any administrative, judicial, or other
proceeding arising from any charge, complaint or other action which has been or
may be filed relating to the period during which the Executive was engaged in
employment with the Company and/or its Related Entities. Except as required by
law or authorized in advance by the Company's Board of Directors or the Board of
Directors of the Company's Related Entities, the Executive will not communicate,
directly or indirectly, with any third party, including any person or
representative of any group of people or entity who is suing or has indicated
that a legal action against the Company or any of its directors or officers is
being contemplated, concerning the management or governance of the Company
and/or its Related Entities, the operations of the Company and its Related
Entities, the legal positions taken by the Company and/or its Related Entities,
or the financial status of the Company and/or its Related Entities. If asked
about any such individuals or matters, the Executive shall say: "I have no
comment," and shall direct the inquirer to the Company. The Executive
acknowledges that any violation of this Section 20 will result in irreparable
harm to the Company and its Related Entities and will give rise to an immediate
action by the Company and/or its Related Entities for injunctive relief.

               (c)  Executive shall not be required to provide more than an
aggregate of five hours per month, on a non-cumulative basis, in providing the
assistance and information to the Company at no charge as provided in
subsections (a) and (b), above.

          21.  No Future Employment. Except for any requests for assistance
under Section 20, above, the Executive understands that his employment with the
Company and its Related Entities will irrevocably end as of the Resignation Date
and will not be resumed at any time in the future. Executive agrees that he will
not apply for, seek or accept employment by the Company or its Related Entities
at any time, unless invited to do so by the Company or any of its Related
Entities.

                                      -7-
<PAGE>

          22.  Non-disparagement. The Executive agrees not to disparage or
otherwise publish or communicate derogatory statements about the Company and/or
its Related Entities, its/their respective management, products and services to
any third party. It shall not be a breach of this Section 22 for the Executive
to testify truthfully in any judicial or administrative proceeding, or to make
factually accurate statements in legal or public filings. The Company will not
authorize or tolerate any disparagement of, or the publication or other
communication of derogatory statements about, Executive and/or Executive's
knowledge, skill, abilities or managerial or employment performance to any third
party. It shall not be a breach of this Section 22 for the Company to present
truthful testimony in any judicial or administrative proceeding, or to make
factually accurate statements in legal or public filings or in response to a
reference check authorized by Executive.

          23.  Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, without giving effect to
principles of conflict of laws.

          24.  Venue. The parties hereby agree that all actions or proceedings
arising directly or indirectly hereunder, whether instituted by the Executive or
the Company, shall be litigated in courts having situs within the State of
California, County of Orange, and the each of the parties hereby expressly
consents to the jurisdiction of any local, state or Federal court located within
said state and county, and consent that any service of process in such action or
proceeding may be made by personal service upon the parties wherever such
parties may be located, respectively, or by certified or registered mail
directed to the Executive at his/its last known address. The parties hereby
waive trial by jury in connection with any future dispute between them, any
objection based on forum non conveniens, and any objection to venue of any
action instituted hereunder.

          25.  Attorneys' Fees. Except as otherwise provided herein, in any
action, litigation or proceeding between the parties arising out of or in
relation to this Agreement, including any purported breach of this Agreement,
each party shall bear its own costs and expenses, including reasonable
attorneys' fees.

          26.  Non-Admission of Liability. The parties understand and agree that
neither the payment of any sum of money nor the execution of this Agreement by
the parties will constitute or be construed as an admission of any wrongdoing or
liability whatsoever by any party.

          27.  Severability. If any one or more of the provisions contained
herein (or parts thereof), or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity and enforceability of any such provision in every other respect and of
the remaining provisions hereof will not be in any way impaired or affected, it
being intended that all of the rights and privileges shall be enforceable to the
fullest extent permitted by law.

          28.  Entire Agreement. This Agreement, together with the attachments
hereto, represents the sole and entire agreement among the parties and, except
as expressly stated herein,

                                      -8-
<PAGE>

supersedes all prior agreements, negotiations and discussions among the parties
with respect to the subject matters contained herein.

          29.  Waiver. No waiver by any party hereto at any time of any breach
of, or compliance with, any condition or provision of this Agreement to be
performed by any other party hereto may be deemed a waiver of similar or
dissimilar provisions or conditions at the same time or at any prior or
subsequent time.

          30.  Amendment. This Agreement may be modified or amended only if such
modification or amendment is agreed to in writing and signed by duly authorized
representatives of the parties hereto, which writing expressly states the intent
of the parties to modify this Agreement.

          31.  Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original as against any
party that has signed it, but all of which together will constitute one and the
same instrument.

          32.  Assignment. This Agreement inures to the benefit of and is
binding upon the Company and its successors and assigns, but the Executive's
rights under this Agreement are not assignable, except to his estate.

          33.  Notice. All notices, requests, demands, claims and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (a) if personally delivered; (b) if sent by telecopy or facsimile; or
(c) if mailed by overnight or by first class, certified or registered mail,
postage prepaid, return receipt requested, and properly addressed as follows:

     If to the Executive:       Richard L. Paulsen
                                30842 Steeplechase
                                San Juan Capistrano, CA 92675
                                Fax: (949) 240-2667

     with a copy to:            Higham, McConnell & Dunning LLP
                                15 Enterprise, Suite 360
                                Aliso Viejo, CA 92656
                                Attn: Scott McConnell, Esq.
                                Fax: (949) 900-4401

     If to the Company:         Commonwealth Energy Corporation
                                15901 Red Hill Avenue, Suite 100
                                Tustin, CA 92780 9390 Gateway Drive
                                Attn: Chief Executive Officer
                                Fax: (714) 259-2538

                                      -9-
<PAGE>

     with a copy to:            Paul, Hastings, Janofsky and Walker, LLP
                                695 Town Center Drive, 17th Floor
                                Costa Mesa, California 92626
                                Attn: John F. Della Grotta, Esq.
                                Fax: (714) 979-1921

Such addresses may be changed, from time to time, by means of a notice given in
the manner provided above. Notice will conclusively be deemed to have been given
when personally delivered (including, but not limited to, by messenger or
courier); or if given by mail, on the third day after being sent by first class,
certified or registered mail; or if given by Federal Express or other similar
overnight service, on the date of delivery; or if given by telecopy or facsimile
machine during normal business hours on a business day, when confirmation of
transmission is indicated by the sender's machine; or if given by telecopy or
facsimile machine at any time other than during normal business hours on a
business day, the first business day following when confirmation of transmission
is indicated by the sender's machine. Notices, requests, demands and other
communications delivered to legal counsel of any party hereto, whether or not
such counsel shall consist of in-house or outside counsel, shall not constitute
duly given notice to any party hereto.

          34.  Miscellaneous Provisions.

               (a)  The parties represent that they have read this Agreement and
fully understand all of its terms; that they have conferred with their
attorneys, or have knowingly and voluntarily chosen not to confer with their
attorneys about this Agreement; that they have executed this Agreement without
coercion or duress of any kind; and that they understand any rights that they
have or may have and sign this Agreement with full knowledge of any such rights.

               (b)  Both parties have been represented by counsel who have
participated in the drafting of this Agreement. The language in all parts of
this Agreement must be in all cases construed simply according to its fair
meaning and not strictly for or against any party. Whenever the context
requires, all words used in the singular must be construed to have been used in
the plural, and vice versa, and each gender must include any other gender. The
captions of the Sections of this Agreement are for convenience only and must not
affect the construction or interpretation of any of the provision herein.

               (c)  Each provision of this Agreement to be performed by a party
hereto is both a covenant and condition, and is a material consideration for the
other party's performance hereunder, and any breach thereof by the party will be
a material default hereunder. All rights, remedies, undertakings, obligations,
options, covenants, conditions and agreements contained in this Agreement are
cumulative and no one of them is exclusive of any other. Time is of the essence
in the performance of this Agreement.

               (d)  Each party acknowledges that no representation, statement or
promise made by any other party, or by the agent or attorney of any other party,
except for those in this Agreement, has been relied on by him or it in entering
into this Agreement.

                                      -10-
<PAGE>


               (e)  Each party understands that the facts with respect to which
this Agreement is entered into may be materially different from those the
parties now believe to be true. Except in the case where the existence of any
additional or different facts constitutes the breach of a representation or
warranty, each party accepts and assumes this risk and agrees that this
Agreement and the releases in it shall remain in full force and effect, and
legally binding, notwithstanding the discovery or existence of any additional or
different facts, or of any claims with respect to those facts.

               (f)  Unless expressly set forth otherwise, all references herein
to a "day" are deemed to be a reference to a calendar day. All references to
"business day" mean any day of the year other than a Saturday, Sunday or a
public or bank holiday in Orange County, California. Unless expressly stated
otherwise, cross-references herein refer to provisions within this Agreement and
are not references to the overall transaction or to any other document.

               (g)  Each party to this Agreement will cooperate fully in the
execution of any and all other documents and in the completion of any additional
actions that may be necessary or appropriate to give full force and effect to
the terms and intent of this Agreement.

     EACH OF THE PARTIES ACKNOWLEDGES THAT HE/IT HAS READ THIS AGREEMENT,
UNDERSTANDS IT AND IS VOLUNTARILY ENTERING INTO IT, AND UNDERSTANDS THAT THIS
AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
dates indicated below.

"EXECUTIVE"                     /S/ RICHARD L. PAULSEN
                                ----------------------------------
                                RICHARD L. PAULSEN

                                Dated: 3/17/04

"COMPANY"                       COMMONWEALTH ENERGY CORPORATION,
                                a California corporation

                                By: /S/ ROBERT C. PERKINS
                                   -------------------------------
                                Printed Name: Robert C. Perkins
                                Title: Chairman, Compensation Committee
                                Dated: 3/17/04

                                      -11-