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Exhibit 10.27    
    

 
 

PG&E CORPORATION
  NON-EMPLOYEE DIRECTOR STOCK INCENTIVE PLAN
  (As amended effective as of July 1, 2004)    
    

	1.
	Purpose
of the Plan 

This
is the controlling and definitive statement of the PG&E Corporation Non-Employee Director Stock Incentive Plan (hereinafter called the PLAN1). The purpose of the PLAN is
to advance the interests of the CORPORATION by providing NON-EMPLOYEE DIRECTORS with financial incentives to promote the success of its long-term (five to ten years) business
objectives, and to increase their proprietary interest in the success of the CORPORATION. Inasmuch as the PLAN is designed to encourage financial performance and to improve the value of shareholders'
investment in PG&E CORPORATION, the costs of the PLAN will be funded from corporate earnings. 

	1
	Capitalized
words are defined in Section 15 hereof.

	2.
	Formula
Awards of Director Restricted Stock, Non-Qualified Stock Options and Phantom Stock to Non-Employee Directors 

All
awards of DIRECTOR RESTRICTED STOCK, NON-QUALIFIED STOCK OPTIONS and PHANTOM STOCK under the PLAN shall be automatic and non-discretionary, and shall be made strictly in
accordance with the provisions contained herein. No person shall have any discretion to select which NON-EMPLOYEE DIRECTORS shall be granted DIRECTOR RESTRICTED STOCK,
NON-QUALIFIED STOCK OPTIONS or PHANTOM STOCK. Further, no person shall have any discretion to determine the number of shares of DIRECTOR RESTRICTED STOCK awarded to a
NON-EMPLOYEE DIRECTOR, and, except as otherwise provided in Section 4 with respect to a NON-EMPLOYEE DIRECTOR'S election to allocate formula awards between
NON-QUALIFIED STOCK OPTIONS and PHANTOM STOCK, no person shall have any discretion to determine the number of shares underlying NON-QUALIFIED STOCK OPTIONS and PHANTOM STOCK
awarded to a NON-EMPLOYEE DIRECTOR. 

	3.
	Awards
of Director Restricted Stock 
	(a)
	On
the first business day of each calendar year beginning on January 1, 1998, during the duration of the PLAN, each person who is a NON-EMPLOYEE DIRECTOR on the
first business day of the applicable calendar year shall receive a grant of DIRECTOR RESTRICTED STOCK in an amount to be determined in accordance with the formula set forth in this
Section 3(a). The number of shares of DIRECTOR RESTRICTED STOCK to be granted to each NON-EMPLOYEE DIRECTOR each calendar year shall be determined by (i) dividing thirty
thousand dollars ($30,000) by the FAIR MARKET VALUE of the COMMON STOCK on the first business day of the applicable calendar year, and (ii) rounding the resulting number down to the nearest
whole share. No person shall receive more than one (1) grant of DIRECTOR RESTRICTED STOCK during any calendar year.

	(b)
	Shares
of DIRECTOR RESTRICTED STOCK shall vest cumulatively as follows: (i) twenty percent (20%) of such shares on the first anniversary of the date of grant; (ii) forty
percent (40%) of such shares on the second anniversary of the date of grant; (iii) sixty percent (60%) of such shares on the third anniversary of the date of grant; (iv) eighty percent
(80%) of such shares on the fourth anniversary of the date of grant; and (v) one hundred percent (100%) of such shares on the fifth anniversary of the date of grant. Shares of DIRECTOR
RESTRICTED STOCK may not be resold or otherwise transferred by a GRANTEE until such shares are vested in accordance with the provisions of this Section 3(b).

	4.
	Annual
Election to Receive Non-Qualified Stock Options and Phantom Stock 

By
December 31 of each calendar year during the term of the Plan, each person who is then a NON-EMPLOYEE DIRECTOR shall deliver to the Corporate Secretary a written election to 

 

receive
either NON-QUALIFIED STOCK OPTIONS or PHANTOM STOCK, or both, with an aggregate value of $30,000, on the first business day of the following calendar year, provided the person
continues to be a NON-EMPLOYEE DIRECTOR on the date the award would otherwise be made. A NON-EMPLOYEE DIRECTOR may allocate between NON-QUALIFIED STOCK OPTIONS and
PHANTOM STOCK in minimum increments with a value equal to $5,000, as determined in accordance with Section 5 below with respect to NON-QUALIFIED STOCK OPTIONS, and Section 6
below, with respect to PHANTOM STOCK. All awards of NON-QUALIFIED STOCK OPTIONS and PHANTOM STOCK made to NON-EMPLOYEE DIRECTORS shall comply with Section 5 and
Section 6 below, respectively. A NON-EMPLOYEE DIRECTOR who has failed to make a timely election or who became a NON-EMPLOYEE DIRECTOR after December 31 shall be
awarded NON-QUALIFIED STOCK OPTIONS and PHANTOM STOCK, each with a value of $15,000 as determined in accordance with Section 5 and Section 6, respectively, provided that the
NON-EMPLOYEE DIRECTOR continues to be a NON-EMPLOYEE DIRECTOR on the on the first business day of the following calendar year. 

	5.
	Grant
of Non-Qualified Stock Options to Non-Employee Directors 
	(a)
	On
the first business day of each calendar year beginning on January 1, 1998, during the duration of the PLAN, each person who is then a NON-EMPLOYEE DIRECTOR and
who has elected to receive an award of NON-QUALIFIED STOCK OPTIONS in accordance with Section 4, shall receive a grant of NON-QUALIFIED STOCK OPTIONS with an aggregate
value equal to $5,000, $10,000, $15,000, $20,000, $25,000, or $30,000, as previously elected by the NON-EMPLOYEE DIRECTOR (or $15,000 in the case of a NON-EMPLOYEE DIRECTOR who
has failed to make a timely election in accordance with Section 4 or who became a NON-EMPLOYEE DIRECTOR after December 31) (the "Elected Option Value"). The number of shares
subject to the NON-QUALIFIED STOCK OPTIONS shall be determined by dividing the Elected Option Value by the value of a NON-QUALIFIED STOCK OPTION to purchase a single share of
PG&E Corporation common stock as of the first business day of the applicable calendar year. The per stock option value shall be calculated in accordance with the Black-Scholes stock option valuation
method using the average preceding November closing price of PG&E Corporation stock and reducing the per option value so calculated by twenty percent. The resulting number of NON-QUALIFIED
STOCK OPTIONS shall be rounded down to the nearest whole share. No person shall receive more than one grant of NON-QUALIFIED STOCK OPTIONS during any calendar year.

	(b)
	The
OPTION PRICE of the COMMON STOCK subject under each NON-QUALIFIED STOCK OPTION shall be the FAIR MARKET VALUE of the COMMON STOCK on the date of grant. The exercise of
any NON-QUALIFIED STOCK OPTION shall be contingent upon receipt by the CORPORATION of (i) cash, (ii) check, (iii) shares of COMMON STOCK, (iv) an executed
exercise notice together with irrevocable instructions to a broker to either sell the shares subject to the NON-QUALIFIED STOCK OPTION or hold such shares as collateral for a margin loan
and to promptly deliver to the CORPORATION the amount of sale or loan proceeds required to pay the OPTION PRICE, or (v) any combination of the foregoing in an amount equal to the full OPTION
PRICE of the shares being purchased. For purposes of this paragraph, shares of COMMON STOCK that are delivered in payment of the OPTION PRICE must have been previously owned by the GRANTEE for a
minimum of one year, and shall be valued at their FAIR MARKET VALUE as of the date of the exercise of the NON-QUALIFIED STOCK OPTION. The CORPORATION shall not make loans to any GRANTEE
for the purpose of exercising NON-QUALIFIED STOCK OPTIONS.

	(c)
	Each
NON-QUALIFIED STOCK OPTION granted under the Plan shall become exercisable and vested cumulatively as follows: (i) up to thirty-three percent (33%) of the
NON-QUALIFIED STOCK OPTION may be exercised on or after the second anniversary of 

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the
date of grant; (ii) up to sixty-six percent (66%) of the NON-QUALIFIED STOCK OPTION may be exercised on or after the third anniversary of the date of grant; and
(iii) up to one hundred percent (100%) of the NON-QUALIFIED STOCK OPTION may be exercised on or after the fourth anniversary of the date of grant. 

	(d)
	The
term of each NON-QUALIFIED STOCK OPTION shall be ten years and one day from the date of grant, subject to earlier termination as provided in Section 9 hereof.
Any provision of the PLAN to the contrary notwithstanding, no NON-QUALIFIED STOCK OPTION shall be exercised after the time limitations stated in this Section 5(d).

	6.
	Awards
of Phantom Stock to Non-Employee Directors 
	(a)
	On
the first business day of each calendar year beginning on January 1, 1998, during the duration of the PLAN, each person who is then a NON-EMPLOYEE DIRECTOR and
who has elected to receive an award of PHANTOM STOCK in accordance with Section 4, shall be credited with an amount of PHANTOM STOCK with a value (as determined by the FAIR MARKET VALUE of the
COMMON STOCK on the first business day of the applicable calendar year) equal to $5,000, $10,000, $15,000, $20,000, $25,000, or $30,000, as previously elected by the NON-EMPLOYEE DIRECTOR
(the "Elected Phantom Stock Value"). The number of shares of PHANTOM STOCK (including fractions computed to three decimal places) to be granted to each NON-EMPLOYEE DIRECTOR each calendar
year shall be determined by dividing the Elected Phantom Stock Value (or $15,000 in the case of a NON-EMPLOYEE DIRECTOR who has failed to make a timely election in accordance with
Section 4 or who became a NON-EMPLOYEE DIRECTOR after December 31) by the FAIR MARKET VALUE of the COMMON STOCK on the first business day of the applicable calendar year. No
person shall receive more than one grant of PHANTOM STOCK during any calendar year. The shares of PHANTOM STOCK awarded to a NON-EMPLOYEE DIRECTOR shall be credited to a newly established
PHANTOM STOCK account for the NON-EMPLOYEE DIRECTOR. Each share of PHANTOM STOCK shall be deemed to be equal to one share (or fraction thereof) of COMMON STOCK on the date of grant, and
shall thereafter fluctuate in value in accordance with the FAIR MARKET VALUE of the COMMON STOCK.

	(b)
	Each
NON-EMPLOYEE DIRECTOR'S PHANTOM STOCK account shall be credited quarterly on each dividend payment date with additional shares of PHANTOM STOCK (including fractions
computed to three decimal places) determined by dividing (i) the aggregate amount of dividends, i.e., the dividend multiplied by the number of shares of PHANTOM STOCK credited to the
participant's account as of the dividend record date, by (ii) by the FAIR MARKET VALUE of the COMMON STOCK on the dividend payment date.

	(c)
	Payment
of the shares of PHANTOM STOCK credited to a NON-EMPLOYEE DIRECTOR'S PHANTOM STOCK account shall be made after the NON-EMPLOYEE DIRECTOR'S RETIREMENT,
MANDATORY RETIREMENT, or TERMINATION by reason of death or disability and in accordance with Section 9 below. Payment shall be made only in the form of shares of COMMON STOCK equal to the
number of shares of PHANTOM STOCK credited to the NON-EMPLOYEE DIRECTOR'S PHANTOM STOCK account on the date of distribution, rounded down to the nearest whole share. The
NON-EMPLOYEE DIRECTOR may elect to receive the number of shares of COMMON STOCK to which he is entitled following RETIREMENT OR MANDATORY RETIREMENT in a lump sum distribution of the
entire amount or in a series of ten or less approximately equal annual installments, provided that distribution shall commence no later than January of the year following the year in which the
NON-EMPLOYEE DIRECTOR'S RETIREMENT or MANDATORY RETIREMENT occurred. Following a NON-EMPLOYEE 

3

 

DIRECTOR'S
death or disability, the shares to which the NON-EMPLOYEE DIRECTOR (or his estate) is entitled shall become payable in accordance with Section 9(a) below. 

	7.
	Shares
of Stock Subject to the Plan 

There
shall be reserved for use under the PLAN and for the grant of any other INCENTIVE AWARDS pursuant to the PROGRAM (subject to the provisions of Section 10 hereof) a total of 49,389,230
shares of COMMON STOCK, which shares may be authorized but unissued shares of COMMON STOCK or issued shares of COMMON STOCK which shall have been reacquired by PG&E CORPORATION. 

	8.
	Dividend,
Voting and Other Shareholder Rights 

Except
as otherwise provided in the PLAN, each GRANTEE shall have all of the rights of a shareholder of PG&E CORPORATION with respect to all outstanding shares of DIRECTOR RESTRICTED STOCK registered
in his or her name, whether or not such shares are vested, including the right to receive dividends and other distributions paid or made with respect to such shares and the right to vote such shares.
No GRANTEE shall have any of the rights of a shareholder of PG&E CORPORATION with respect to a NON-QUALIFIED STOCK OPTION until the shares acquired upon exercise of such
NON-QUALIFIED STOCK OPTION have been issued and registered in his or her name. No GRANTEE shall have any of the rights of a shareholder of PG&E CORPORATION with respect to PHANTOM STOCK
credited to the NON-EMPLOYEE DIRECTOR'S PHANTOM STOCK account under the Plan. 

	9.
	Termination
of Status as a Non-Employee Director 
	(a)
	In
the event of a TERMINATION by reason of disability or death, (i) all shares of DIRECTOR RESTRICTED STOCK held by the GRANTEE shall become fully vested, notwithstanding the
provisions of Section 3(b) hereof, and the GRANTEE (or the GRANTEE'S estate or a person who acquired the shares of DIRECTOR RESTRICTED STOCK by bequest or inheritance) shall have the right to
resell or transfer such shares at any time, (ii) all NON-QUALIFIED STOCK OPTIONS held by the GRANTEE, to the extent that such NON-QUALIFIED STOCK OPTIONS have not
previously expired or been exercised, shall become fully vested and exercisable, notwithstanding the provisions of Section 5(c) hereof, and the GRANTEE (or the GRANTEE'S estate or a person who
acquired the right to exercise the NON-QUALIFIED STOCK OPTION by bequest or inheritance) shall have the right to exercise the NON-QUALIFIED STOCK OPTIONS at any time within
their respective terms or within one (1) year after the date of the GRANTEE'S death or disability, whichever is shorter, and (iii) all shares of PHANTOM STOCK credited to the
NON-EMPLOYEE DIRECTOR'S PHANTOM STOCK account shall immediately become payable to the GRANTEE (or the GRANTEE'S estate or a person who acquired the shares of PHANTOM STOCK by bequest or
inheritance) in the form of a number of shares of COMMON STOCK equal to the number of shares of PHANTOM STOCK credited to the NON-EMPLOYEE DIRECTOR'S PHANTOM STOCK account, rounded down to
the nearest whole share. The term "disability" shall, for the purposes of the PLAN, be defined in Section 22(e)(3) of the CODE.

	(b)
	In
the event of a TERMINATION by reason of MANDATORY RETIREMENT, (i) all shares of DIRECTOR RESTRICTED STOCK held by the GRANTEE shall become fully vested, notwithstanding the
provisions of Section 3(b) hereof, and the GRANTEE shall have the right to resell or transfer such shares at any time, (ii) the NON-QUALIFIED STOCK OPTIONS then held by the
GRANTEE, to the extent that such NON-QUALIFIED STOCK OPTIONS have not previously expired or been exercised, shall become fully vested and exercisable, notwithstanding the provisions of
Section 5(c) hereof, and the GRANTEE shall have the right to exercise the NON-QUALIFIED STOCK OPTIONS at any time within their respective terms or within five (5) years after
such MANDATORY RETIREMENT, whichever is shorter; 

4

 

and
(iii) all shares of PHANTOM STOCK credited to the NON- EMPLOYEE DIRECTOR'S PHANTOM STOCK account shall become payable to the GRANTEE in accordance with Section 6(c)
hereof. 

	(c)
	In
the event of a TERMINATION for any reason other than those specified in subparagraphs (a) and (b) above, (i) any unvested shares of DIRECTOR RESTRICTED STOCK
granted hereunder shall be forfeited and the GRANTEE shall return to the CORPORATION for cancellation any stock certificates representing such forfeited shares which forfeited shares shall be deemed
to be canceled and no longer outstanding as of the date of TERMINATION; and from and after the date of TERMINATION, the GRANTEE shall cease to be a shareholder with respect to such forfeited shares
and shall have no dividend, voting or other rights with respect thereto, (ii) any NON-QUALIFIED STOCK OPTIONS granted hereunder that have not yet vested and become exercisable shall
terminate, (iii) the GRANTEE shall have the right to exercise NON-QUALIFIED STOCK OPTIONS, to the extent that such NON-QUALIFIED STOCK OPTIONS have vested and become
exercisable as of the date of TERMINATION, at any time within their respective terms or within three months after such TERMINATION, whichever is shorter, after which the NON-QUALIFIED
STOCK OPTIONS shall terminate, and (iv) all shares of PHANTOM STOCK credited to the NON-EMPLOYEE DIRECTOR'S PHANTOM STOCK account shall be forfeited on the date of TERMINATION;
provided, however, that if the TERMINATION results from the NON-EMPLOYEE DIRECTOR'S RETIREMENT, then the PHANTOM STOCK credited to the NON-EMPLOYEE DIRECTOR'S PHANTOM STOCK
account shall become payable in accordance with Section 6(c) hereof.

	(d)
	Notwithstanding
the provisions of subparagraphs (a) through (c) above, the BOARD OF DIRECTORS may, in its sole discretion, establish different terms and conditions
pertaining to the effect of TERMINATION, to the extent permitted by applicable federal and state law.

	10.
	Adjustments
Upon Changes in Number or Value of Shares of Common Stock 

If
there are any changes in the number or value of shares of COMMON STOCK by reason of stock dividends, stock splits, reverse stock splits, recapitalizations, mergers, consolidations or other events
that materially increase or decrease the number or value of issued and outstanding shares of COMMON STOCK, the BOARD OF DIRECTORS or COMMITTEE may make such adjustments as it shall deem appropriate,
in order to prevent dilution or enlargement of rights. 

	11.
	Non-Transferability

NON-QUALIFIED
STOCK OPTIONS, PHANTOM STOCK, and shares of DIRECTOR RESTRICTED STOCK that have not vested in accordance with the provisions of Section 3(b) hereof, shall not be
transferable by the GRANTEE otherwise than by will or the laws of descent and distribution, or pursuant to a qualified domestic relations order as defined by the CODE, Title I of ERISA or the rules
thereunder. 

	12.
	Change
in Control 

Upon
the occurrence of a CHANGE IN CONTROL (as defined below), (i) any time periods relating to the vesting of any shares of DIRECTOR RESTRICTED STOCK granted hereunder shall be accelerated so
that all such shares immediately become fully vested, (ii) any time periods relating to the vesting of NON-QUALIFIED STOCK OPTIONS granted hereunder shall be accelerated so that all
such NON-QUALIFIED STOCK OPTIONS immediately become fully vested and exercisable for the remainder of their terms, and (iii) all shares of PHANTOM STOCK credited to the
NON-EMPLOYEE DIRECTORS' PHANTOM STOCK accounts shall become payable in accordance with Section 6(c) hereof as if the CHANGE IN CONTROL constituted a RETIREMENT. 

5

 

A
"CHANGE IN CONTROL" shall be deemed to have occurred if: 

	(a)
	any
"person" (as such term is used in Sections 13(d) and 14(d)(2) of the EXCHANGE ACT, but excluding any benefit plan for EMPLOYEES or any trustee, agent or other fiduciary for any
such plan acting in such person's capacity as such fiduciary), directly or indirectly, becomes the beneficial owner of securities of PG&E CORPORATION representing twenty percent (20%) or more of the
combined voting power of PG&E CORPORATION's then outstanding securities;

	(b)
	during
any two consecutive years, individuals who at the beginning of such a period constitute the BOARD OF DIRECTORS cease for any reason to constitute at least a majority of the
BOARD OF DIRECTORS, unless the election, or the nomination for election by the shareholders of PG&E CORPORATION, of each new DIRECTOR was approved by a vote of at least two-thirds
(2/3) of the DIRECTORS then still in office who were DIRECTORS at the beginning of the period; or 

the
shareholders of the CORPORATION shall have approved (i) any consolidation or merger of the CORPORATION other than a merger or consolidation which would result in the voting securities of
the CORPORATION outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent of
such surviving entity) at least 70 percent of the Combined Voting Power of the CORPORATION, such surviving entity or the parent of such surviving entity outstanding immediately after the merger
or consolidation; (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the CORPORATION, or
(iii) any plan or
proposal for the liquidation or dissolution of the CORPORATION. For purposes of this paragraph, the term Combined Voting Power shall mean the combined voting power of the CORPORATION's or other
relevant entity's then outstanding voting securities. 

	13.
	Amendment
and Termination of the Plan 

The
BOARD OF DIRECTORS or the COMMITTEE may at any time suspend, terminate, modify or amend the PLAN in any respect; provided, however, that, to the extent necessary and desirable to comply with the
CODE (or any other applicable law or regulation, including the requirements of any stock exchange on which the COMMON STOCK is listed or quoted), shareholder approval of any PLAN amendment shall be
obtained in such a manner and to such a degree as is required by the applicable law or regulation. 

No
suspension, termination, modification or amendment of the PLAN may, without the consent of the GRANTEE, adversely affect his or her rights with respect to DIRECTOR RESTRICTED STOCK,
NON-QUALIFIED STOCK OPTIONS or PHANTOM STOCK theretofore granted to such GRANTEE. 

Except
as provided in Section 2 hereof, the BOARD OF DIRECTORS or COMMITTEE may make such amendments or modifications in the terms and conditions of any grant of DIRECTOR RESTRICTED STOCK,
NON-QUALIFIED STOCK OPTIONS or PHANTOM STOCK as it may deem advisable, or cancel or annul any grant of DIRECTOR RESTRICTED STOCK, NON-QUALIFIED STOCK OPTIONS or PHANTOM STOCK;
provided, however, that no such amendment, modification, cancellation or annulment may, without the consent of the GRANTEE, adversely affect his or her rights with respect to such grant. 

	14.
	Effective
Date of the Plan and Duration 

This
PLAN became effective as of January 1, 1996, upon approval by the shareholders of Pacific Gas and Electric Company at its Annual Meeting on April 17, 1996. Effective
January 1, 1997, the PLAN was assumed by PG&E CORPORATION. At its meeting on December 17, 1997, the 

6

 

BOARD
OF DIRECTORS amended and restated the PLAN effective January 1, 1998, to (i) reflect the adoption of new RULE 16B-3 which became effective November 1, 1996, and
(ii) provide automatic formula awards of NON-QUALIFIED STOCK OPTIONS and PHANTOM STOCK to NON-EMPLOYEE DIRECTORS within the limits of the PROGRAM as previously approved
by shareholders in 1996. The PLAN was subsequently amended on October 21, 1998 and April 21, 1999. 

Effective
May 16, 2001, the PLAN, and the PROGRAM of which the PLAN is a part, were amended to add 15,000,000 shares of COMMON STOCK to the total number of shares of COMMON STOCK reserved for
use under the PLAN and the PROGRAM. By resolution dated June 16, 2004 and effective July 1, 2004, the BOARD OF DIRECTORS increased the amount of equity awards automatically granted under
the PLAN. Unless terminated sooner pursuant to Section 13 hereof, the PLAN shall terminate on December 31, 2005. 

	15.
	Definitions

	(a)
	BOARD
OF DIRECTORS means the Board of Directors of PG&E CORPORATION.

	(b)
	CHANGE
IN CONTROL has the meaning set forth in Section 12 hereof.

	(c)
	CODE
means the Internal Revenue Code of 1986, as amended from time to time.

	(d)
	COMMITTEE
means the Nominating and Compensation Committee of the BOARD OF DIRECTORS or any successor to such committee.

	(e)
	COMMON
STOCK means common shares of PG&E CORPORATION with no par value and any class of common shares into which such common shares hereafter may be converted.

	(f)
	CORPORATION
means PG&E CORPORATION, and any parent corporation (as defined in Section 424(e) of the CODE) or subsidiary corporation (as defined in Section 424(f) of the
CODE).

	(g)
	DIRECTOR
means any person who is a member of the BOARD OF DIRECTORS or the Board of Directors of any parent corporation (as defined in Section 424(e) of the CODE) which may
hereafter be established, including an advisory, emeritus or honorary director.

	(h)
	DIRECTOR
RESTRICTED STOCK means RESTRICTED STOCK granted to a NON-EMPLOYEE DIRECTOR under the PLAN.

	(i)
	EMPLOYEE
means any person who is employed by the CORPORATION. The payment of a director's fee or consulting fee by the CORPORATION shall not be sufficient to constitute "employment"
by the CORPORATION.

	(j)
	ERISA
means the Employee Retirement Income Security Act of 1974, as amended.

	(k)
	EXCHANGE
ACT means the Securities Exchange Act of 1934, as amended.

	(l)
	FAIR
MARKET VALUE means the closing price of the COMMON STOCK reported on the New York Stock Exchange Composite Transactions for the date specified for determining such value.

	(m)
	GRANTEE
means the NON-EMPLOYEE DIRECTOR receiving the DIRECTOR RESTRICTED STOCK, NON-QUALIFIED STOCK OPTIONS and PHANTOM STOCK or his or her legal
representative, legatees, distributees or alternate payees, as the case may be.

	(n)
	MANDATORY
RETIREMENT means retirement as a DIRECTOR at age 70 or at such other age as may be specified in the retirement policy for the BOARD OF DIRECTORS or the Board of Directors of
any parent corporation which may hereafter be established (as the 

7

 

case
may be), as in effect at the time of a NON-EMPLOYEE DIRECTOR'S TERMINATION. 

	(o)
	NON-EMPLOYEE
DIRECTOR means a DIRECTOR who is not an EMPLOYEE.

	(p)
	NON-QUALIFIED
STOCK OPTION means a option to purchase shares of COMMON STOCK which is not intended to qualify as an incentive stock option under Section 422 of the
CODE.

	(q)
	PG&E
CORPORATION means PG&E CORPORATION, a California corporation.

	(r)
	PHANTOM
STOCK means allocated hypothetical shares of COMMON STOCK that can be converted at a future date into stock.

	(s)
	PLAN
means this Non-Employee Director Stock Incentive Plan, as may be amended from time to time, or any successor plan which the COMMITTEE or BOARD OF DIRECTORS may adopt
from time to time with respect to the grant of DIRECTOR RESTRICTED STOCK, NON-QUALIFIED STOCK OPTIONS, PHANTOM STOCK or other stock-based incentive awards under the PROGRAM.

	(t)
	PROGRAM
means the PG&E Corporation Long-Term Incentive Program, as amended effective May 16, 2001, and as may be amended from time to time, pursuant to which this
PLAN is adopted.

	(u)
	RESTRICTED
STOCK means COMMON STOCK that is subject to forfeiture by the GRANTEE to the CORPORATION under such circumstances as may be specified by the COMMITTEE.

	(v)
	RETIREMENT
means TERMINATION of service on the BOARD OF DIRECTORS after serving continuously for five consecutive years.

	(w)
	RULE
16b-3 means Rule 16b-3 under the EXCHANGE ACT or any successor to Rule 16b-3, as in effect when discretion is being exercised
with respect to the PLAN. 

        TERMINATION
occurs when a NON-EMPLOYEE DIRECTOR ceases to be a member of the BOARD OF DIRECTORS or the Board of Directors of any parent corporation which may hereafter be
established (as the case may be). 

8

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Exhibit 10.27

PG&E CORPORATION NON-EMPLOYEE DIRECTOR STOCK INCENTIVE PLAN (As amended effective as of July 1, 2004)QuickLinks
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Exhibit 10.37    
    

 
 

PG&E CORPORATION
  OFFICER SEVERANCE POLICY
  (As Amended Effective as of January 1, 2005)    
    

	1.
	Purpose

This
is the controlling and definitive statement of the Officer Severance Policy of PG&E Corporation ("Policy"). Since Officers are employed at the will of PG&E Corporation ("Corporation") or a
participating employer ("Employer"), their employment may be terminated at any time, with or without cause. The Policy, which was first adopted effective November 1, 1998, provides Officers of
the Corporation and Employer in Officer Compensation Bands I through V ("Officers") with severance benefits if their employment is terminated.1/ Severance benefits for officers not
covered by this Policy will be provided under policies or programs developed by the appropriate lines of business in consultation with and the approval by the Senior Human Resources Officer of the
Corporation. 

The
purpose of the Policy is to attract and retain senior management by defining terms and conditions for severance benefits, to provide severance benefits that are part of a competitive total
compensation package, to provide consistent treatment for all terminated officers, and to minimize potential litigation costs associated with Officer termination of employment. 

	2.
	Termination of Employment Not Following a Change in Control or Potential Change in Control
	(a)
	Corporation or Employer's Obligations. If the Corporation or an Employer exercises its right to terminate an Officer's employment
without cause and such termination does not entitle Officer to payments under Section 3, the Officer shall be given thirty (30) days' advance written notice or pay in lieu thereof.
Except as provided in Section 2(b) below, in consideration of the Officer's agreement to the obligations described in Section 2(d) below and to the arbitration provisions described in
Section 12 below, the following payments and benefits shall also be provided to Officer:2/ 

	1/
	Severance
benefits for Officers who are currently covered by an employment agreement will continue to be provided solely under such agreements until their expiration at
which time this Policy will become effective for such Officers. 
	2/
	Any
payments made hereunder shall be less applicable taxes.

	(1)
	A
lump sum severance payment equal to: 1/12 (the sum of the Officer's annual base compensation and the Officer's Short-Term Incentive Plan target award at
the time of his or her termination) times (the number of months that Officer was employed by the Corporation or the Employer ("Severance Multiple")); provided, however, that the Severance Multiple
shall be no less than 6, nor more than 24 for Officers in Officer Bands I, II, III, or more than 18 for Officers in Officer Bands IV or V. Annual base compensation shall mean the Officer's monthly
base pay for the month in which the Officer is given notice of termination, multiplied by 12.

	(2)
	If
Officer is a participant in the Supplemental Executive Retirement Plan of PG&E Corporation (SERP) and Officer's age is less than 55 years, such portion of the amount
described in the preceding Section 2(a)(1) to provide for additional years to Officer's age to age 55 shall be converted for purposes of calculating a benefit under the SERP. Any amount of
severance payment remaining after conversion under this subsection shall be paid to Officer in a lump sum. The value of any amount so converted shall be calculated using the same actuarial factors
used in calculating benefits under the Retirement Plan for Employees of Pacific Gas and Electric Company. If Officer is a participant in the SERP and if the additional age resulting from a conversion
under Section 2(a)(2) does 

 

not
result in an age of 55, Officer shall be paid the amount calculated under 2(a)(1) in a lump sum; 

	(3)
	The
incentive awards granted to Officer under the Corporation's Long-Term Incentive Program which have not yet vested as of the date of termination will continue to vest
over a period of months equal to the Severance Multiple after the date of termination as if the Officer had remained employed for such period. For vested stock options as of the date of termination,
the Officer shall have the right to exercise such stock options at any time within their respective terms or within five years after termination, whichever is shorter. For stock options that vest
during a period of months equal to the Severance Multiple, the Officer shall have the right to exercise such options at any time within five years after termination. Any unvested incentive awards
remaining at the end of such period shall be forfeited;

	(5)
	For
Officers in Officer Bands I, II or III, two thirds of the unvested Company stock units in the Officer's account in the Corporation's Deferred Compensation Plan for Officers which
were awarded in connection with the Executive Stock Ownership Program requirements ("SISOPs") shall vest upon the Officer's termination, and one third shall be forfeited. For Officers in Officer Bands
IV and V, one third of any unvested SISOPs shall vest upon the Officer's termination, and two thirds shall be forfeited. Unvested stock units attributable to SISOPs which become vested under this
provision shall be distributed to Officer in accordance with the Deferred Compensation Plan after such stock units vest;

	(6)
	For
a period of 18 months, the Officer's COBRA premiums, if any;

	(7)
	If
Officer is terminated after serving consecutively for six months in a fiscal year, Officer shall be entitled to receive a prorated bonus under any short-term incentive
plan in which such Officer participates, at the time such bonus would otherwise be paid, if any;

	(8)
	To
the extent not theretofore paid or provided, the Officer shall be paid or provided with any other amounts or benefits required to be paid or provided or which the Officer is
eligible to receive under any plan, contract or agreement of the Corporation or Employer;

	(9)
	Such
career transition services as the Corporation's Senior Human Resources Officer shall determine is appropriate; and

	(10)
	All
acts required of the Employer under the Policy may be performed by the Corporation for itself and the Employer, and the costs of the Policy may be equitably apportioned by the
Administrator among the Corporation and the other Employers. The Corporation shall be responsible for making payments and providing benefits pursuant to this Policy for Officers employed by the
Corporation. Whenever the Employer is permitted or required under the terms of the Policy to do or perform any act, matter or thing, it shall be done and performed by any Officer or employee of the
Employer who is thereunto duly authorized by the board of directors of the Employer. Each Employer shall be responsible for making payments and providing benefits pursuant to the Policy on behalf of
its Officers or for reimbursing the Corporation for the cost of such payments or benefits, as determined by the Corporation in its sole discretion. In the event the respective Employer fails to make
such payment or reimbursement, an Officer's (or other payee's) sole recourse shall be against the respective Employer, and not against the Corporation.

	(b)
	Remedies. An Officer shall be entitled to recover damages for late or nonpayment of amounts to which the Officer is entitled hereunder.
The Officer shall also be entitled to seek specific performance of the obligations and any other applicable equitable or injunctive relief. 

2

 

	(c)
	Section 2(a)
shall not apply in the event that an Officer's employment is terminated "for cause." Except as used in Section 3 of this Policy, "for cause" means that the
Corporation, in the case of an Officer employed by the Corporation, or Employer in the case of an Officer employed by an Employer, acting in good faith based upon information then known to it,
determines that the Officer has engaged in, committed, or is responsible for (1) serious misconduct, gross negligence, theft, or fraud against the Corporation and/or an Employer;
(2) refusal or unwillingness to perform his duties; (3) inappropriate conduct in violation of Corporation's equal employment opportunity policy; (4) conduct which reflects
adversely upon, or making any remarks disparaging of, the Corporation, its Board of Directors, Officers, or employees, or its affiliates or subsidiaries; (5) insubordination; (6) any
willful act that is likely to have the effect of injuring the reputation, business, or business relationship of the Corporation or its subsidiaries or affiliates; (7) violation of any fiduciary
duty; or (8) breach of any duty of loyalty; or (9) any breach of the restrictive covenants contained in Subsection 2(d) below. Upon termination "for cause," the Corporation, its Board of
Directors, Officers, or employees, or its affiliates or subsidiaries shall have no liability to the Officer other than for accrued salary, vacation benefits, and any vested rights the Officer may have
under the benefit and compensation plans in which the Officer participates and under the general terms and conditions of the applicable plan.

	(d)
	Obligations of Officer
	(1)
	Release of Claims. There shall be no obligation to commence the payment of the amounts and benefits described in Section 2(a)
until the latter of (1) the delivery by Officer to the Corporation a fully executed comprehensive general release of any and all known or unknown claims that he or she may have against the
Corporation, its Board of Directors, Officers, or employees, or its affiliates or subsidiaries and a covenant not to sue in the form prescribed by the Administrator, and (2) the expiration of
any revocation period associated with the release to which the Officer may be entitled under law.

	(2)
	Covenant Not to Compete. (i) During the period of Officer's employment with the Corporation or its subsidiaries and for a period
of months equal to the Severance Multiple thereafter (the "Restricted Period"), Officer shall not, in any county within the State of California or in any city, county or area outside the State of
California within the United States or in the countries of Canada or Mexico, directly or indirectly, whether as partner, employee, consultant, creditor, shareholder, or other similar capacity,
promote, participate, or engage in any activity or other business competitive with the Corporation's business or that of any of its subsidiaries or affiliates, without the prior written consent of the
Corporation's Chief Executive Officer. Notwithstanding the foregoing, Officer may have an interest in any public company engaged in a competitive business so long as Officer does not own more than
2 percent of any class of securities of such company, Officer is not employed by and does not consult with, or becomes a director of, or otherwise engage in any activities for, such competing
company. 

(ii) The
Corporation and its subsidiaries presently conduct their businesses within each county in the State of California and in areas outside California that are located within the United
States, and it is anticipated that the Corporation and its subsidiaries will also be conducting business within the countries of Canada and Mexico. Such covenants are necessary and reasonable in order
to protect the Corporation and its subsidiaries in the conduct of their businesses. To the extent that the foregoing covenant or any provision of this Section 2(d)(2)(ii) shall be deemed
illegal or unenforceable by a court or other tribunal of competent jurisdiction with respect to (i) any geographic area, (ii) any part of the time period covered by such covenant,
(iii) any activity or capacity covered by such covenant, or (iv) any other term or provision of such covenant, such determination shall 

3

 

not
affect such covenant with respect to any other geographic area, time period, activity or other term or provision covered by or included in such covenant. 

	(3)
	Soliciting Customers and Employees. During the Restricted Period, Officer shall not, directly or indirectly, solicit or contact any
customer or any prospective customer of the Corporation or its subsidiaries or affiliates for any commercial pursuit that could be reasonably construed to be in competition with the Corporation, or
induce, or attempt to induce, any employees, agents or consultants of or to the Corporation or any of its subsidiaries or affiliates to do anything from which Officer is restricted by reason of this
covenant nor shall Officer, directly or indirectly, offer or aid to others to offer employment to, or interfere or attempt to interfere with any employment, consulting or agency relationship with, any
employees, agents or consultants of the Corporation, its subsidiaries and affiliates, who received compensation of $75,000 or more during the preceding six (6) months, to work for any business
competitive with any business of the Corporation, its subsidiaries or affiliates.

	(4)
	Confidentiality. Officer shall not at any time (including after termination of employment) divulge to others, use to the detriment of
the Corporation or its subsidiaries or affiliates, or use in any business competitive with any business of the Corporation or its subsidiaries or affiliates any trade secret, confidential or
privileged information obtained during his employment with the Corporation or its subsidiaries or affiliates, without first obtaining the written consent of the Corporation's Chief Executive Officer.
This paragraph covers but is not limited to discoveries, inventions (except as otherwise provided by California law), improvements, and writings, belonging to or relating to the affairs of the
Corporation or of any of its subsidiaries or affiliates, or any marketing systems, customer lists or other marketing data. Officer shall, upon termination of employment for any reason, deliver to the
Corporation all data, records and communications, and all drawings, models, prototypes or similar visual or conceptual presentations of any type, and all copies or duplicates thereof, relating to all
matters contemplated by this paragraph.

	(5)
	Assistance in Legal Proceedings. During the Restricted Period, Officer shall, upon reasonable notice from the Corporation, furnish
information and proper assistance (including testimony and document production) to the Corporation as may be reasonably required by the Corporation in connection with any legal, administrative or
regulatory proceeding in which it or any of its subsidiaries or affiliates is, or may become, a party, or in connection with any filing or similar obligation of the Corporation imposed by any taxing,
administrative or regulatory authority having jurisdiction, provided, however, that the Corporation shall pay all reasonable expenses incurred by Officer in complying with this paragraph.

	(6)
	Remedies. Upon Officer's failure to comply with the provisions of this Section 2(d), the Corporation shall have the right to
immediately terminate any unpaid amounts or benefits described in Section 2(a) to Officer. In the event of such termination, the Corporation shall have no further obligations under this Policy
and shall be entitled to recover damages. In the event of an Officer's breach or threatened breach of any of the covenants set forth in this Section 2(d), the Corporation shall also be entitled
to specific performance by Officer of any such covenant and any other applicable equitable or injunctive relief.

	3.
	Termination of Employment Following a Change in Control or Potential Change in Control
	(a)
	If
an Executive Officer's employment by the Corporation or any subsidiary or successor of the Corporation shall be subject to an Involuntary Termination within the Covered Period,
then the provisions of this Section 3 instead of Section 2 shall govern the obligations of the 

4

 

Corporation
as to the payments and benefits it shall provide to the Executive Officer. In the event that Executive Officer's employment with the Corporation or an employing subsidiary is terminated
under circumstances which would not entitle Executive Officer to payments under this Section 3, Executive Officer shall only receive such benefits to which he is entitled under
Section 2, if any. In no event shall Executive Officer be entitled to receive termination benefits under both this Section 3 and Section 2. 

All
the terms used in this Section 3 shall have the following meanings: 

	(1)
	"Affiliate"
shall mean any entity which owns or controls, is owned or is under common ownership or control with, the Corporation.

	(2)
	"Cause"
shall mean (i) the willful and continued failure of the Executive Officer to perform substantially the Executive Officer's duties with the Corporation or one of its
affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive Officer by the
Board of Directors or the Chief Executive Officer of the Corporation which specifically identifies the manner in which the Board of Directors or Chief Executive Officer believes that the Executive
Officer has not substantially performed the Executive Officer's duties; or (ii) the willful engaging by the Executive Officer in illegal conduct or gross misconduct which is materially
demonstrably injurious to the Corporation. 

For
purposes of the provision, no act or failure to act, on the part of the Executive Officer, shall be considered "willful" unless it is done, or omitted to be done, by the Executive Officer in bad
faith or without reasonable belief that the Executive Officer's action or omission was in the best interests of the Corporation. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board of Directors or upon the instructions of the Chief Executive Officer or a senior officer of the Corporation or based upon the advice of counsel for the Corporation
shall be conclusively presumed to be done, or omitted to be done, by the Executive Officer in good faith and in the best interests of the Corporation. The cessation of employment of the Executive
Officer shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive Officer a copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board of Directors at a meeting of the Board of Directors called and held for such purpose (after reasonable notice is provided to the Executive Officer
and the Executive Officer is given an opportunity, together with counsel, to be heard before the Board of Directors), finding that, in the
good faith opinion of the Board of Directors, the Executive Officer is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in
detail. 

	(3)
	"Change
in Control" shall be deemed to have occurred if:

	a)
	any
"person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, but excluding any benefit plan for employees or any trustee, agent or other
fiduciary for any such plan acting in such person's capacity as such fiduciary), directly or indirectly, becomes the beneficial owner of securities of the Corporation representing 20 percent or
more of the combined voting power of the Corporation's then outstanding securities;

	b)
	during
any two consecutive years, individuals who at the beginning of such a period constitute the Board of Directors of the Corporation cease for any reason to constitute at least a
majority of the Board of Directors of the Corporation, unless the 

5

 

election
or the nomination for election by the shareholders of the Corporation, of each new Director was approved by a vote of at least two-thirds (2/3) of the Directors
then still in office who were Directors at the beginning of the period; or 

	c)
	the
shareholders of the Corporation shall have approved (i) any consolidation or merger of the Corporation other than a merger or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any
parent of such surviving entity) at least 70 percent of the Combined Voting Power of the Corporation, such surviving entity or the parent of such surviving entity outstanding immediately after
such merger or consolidation; (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the
Corporation; or (iii) any plan or proposal for the liquidation or dissolution of the Corporation.

	(4)
	"Change
in Control Date" shall mean the date on which a Change in Control occurs.

	(5)
	"Combined
Voting Power" shall mean the combined voting power of the Corporation's or other relevant entity's then outstanding voting securities.

	(6)
	"Covered
Period" shall mean the period commencing with the Change in Control Date and terminating two (2) years following said commencement; provided, however, that if a Change
in Control occurs and Executive Officer's employment with the Corporation or the employing subsidiary is subject to an Involuntary Termination before the Change in Control Date but on or after a
Potential Change in Control Date, and if it is reasonably demonstrated by the Executive Officer that such termination (i) was at the request of a third party who has taken steps reasonably
calculated to effect a Change in Control, or (ii) otherwise arose in connection with or in anticipation of a Change in Control, then the Covered Period shall mean, as applied to Executive
Officer, the two-year period beginning on the date immediately before the Potential Change in Control Date. In the case of termination of employment following a Potential Change in Control
Date, references in the definition of "Good Reason" to conditions in effect immediately prior to a Change in Control shall be deemed to mean conditions in effect immediately prior to Executive
Officer's termination.

	(7)
	"Disability"
shall mean the absence of the Executive Officer from the Executive Officer's duties with the Corporation or the employing subsidiary on a full-time basis for
180 consecutive business days as a result of incapacity due to physical or mental illness which is determined to be total and permanent by a physician selected by the Corporation or its insurers and
acceptable to the Executive Officer or the Executive Officer's legal representative.

	(8)
	"Executive
Officer" shall mean officers of the Corporation at the level of Senior Vice President and above.

	(9)
	"Good
Reason" shall mean any one or more of the following which takes place within the Covered Period:

	a)
	An
adverse change in Executive Officer's status or position(s) as in effect immediately before a Change in Control or Potential Change in Control, including, without limitation, the
assignment to the Executive Officer of any duties inconsistent in any respect with the Executive Officer's position (including status, offices, titles and reporting requirements, including reporting
requirements under Section 16 of the Securities Exchange Act of 1934), authority, duties or responsibilities prior to a 

6

 

Change
in Control or Potential Change in Control, or any other action by the Corporation which results in the diminution in such position, authority, duties or responsibilities prior to a Change in
Control or Potential Change in Control, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Corporation promptly after
receipt of notice thereof given by the Executive Officer; 

	b)
	Executive
Officer's base salary is reduced from that provided to him immediately before the Change in Control Date or as the same may be increased from time to time thereafter, unless
such reduction is part of an across-the-board reduction for all similarly situated executives, including executives of the other party to the transaction that results in the
Change in Control;

	c)
	Executive
Officer's eligibility to participate in bonus, stock option, incentive award and other compensation plans which provide opportunities to receive compensation is diminished
from that provided to him immediately before the Change in Control Date, unless substantially equal benefits are provided to Executive Officer under comparable compensation plans, or unless such
reduction is part of an across-the-board reduction for all similarly situated executives, including executives of the other party to the transaction that results in the Change
in Control;

	d)
	The
aggregate projected value of Executive Officer's employee benefits (including but not limited to supplemental and excess retirement programs, medical, dental, life insurance and
long-term disability plans) and perquisites is diminished from that provided to him immediately before the Change in Control Date, unless such reduction is part of an
across-the-board reduction for all similarly situated executives, including executives of the other party to the transaction that results in the Change in Control;

	e)
	A
change in Executive Officer's principal place of employment by Corporation (including its subsidiaries) to a location more than thirty-five miles from Executive Officer's
principal place of employment immediately before the Change in Control Date;

	f)
	A
reasonable determination by the Board of Directors that, as a result of a Change in Control and a change in circumstances thereafter significantly affecting his position, he is
unable to exercise the authorities, powers, function or duties attached to his position immediately before the Change in Control Date;

	g)
	The
failure of the Corporation to obtain the assumption of this Policy by any successor contemplated in Section 7, hereof; or

	h)
	The
material failure of the Corporation to fulfill its obligations under this Policy, to the extent not remedied in a reasonable period of time after the Corporation's receipt of
written notice from Executive Officer specifying the material failure by the Corporation.

	(10)
	"Involuntary
Termination" shall mean a termination (i) by the Corporation without Cause, or (ii) by Executive Officer following Good Reason; provided, however, the term
"Involuntary Termination" shall not include termination of Executive Officer's employment due to Executive Officer's death, Disability, or voluntary retirement.

	(11)
	"Potential
Change in Control" shall mean the earliest to occur of (i) the date on which the Corporation executes an agreement or letter of intent, where the consummation of
the transaction described therein would result in the occurrence of a Change in Control, 

7

 

(ii) the
date on which the Board of Directors approves a transaction or series of transactions, the consummation of which would result in a Change in Control, or (iii) the date on which
a tender offer for the Corporation's voting stock is publicly announced, the completion of which would result in a Change in Control; provided, however, that if such Potential Change in Control
terminates by its terms, such transaction shall no longer constitute a Potential Change in Control. 

	(12)
	"Potential
Change in Control Date" shall mean the date on which a Potential Change in Control occurs.

	(13)
	"Reference
Salary" shall mean the greater of (i) the annual rate of Executive Officer's base salary from the Corporation or the employing subsidiary in effect immediately
before the date of Executive Officer's Involuntary Termination, or (ii) the annual rate of Executive Officer's base salary from the Corporation or the employing subsidiary in effect immediately
before the Change in Control Date.

	(14)
	"Termination
Date" shall be the date specified in the written notice of termination of Executive Officer's employment given by either party in accordance with Section 3(b) of
this Policy.

	(b)
	Notice of Termination. During the Covered Period, in the event that the Corporation (including an employing subsidiary) or Executive
Officer terminates Executive Officer's employment with the Corporation or Employer, the party terminating employment shall give written notice of termination to the other party, specifying the
Termination Date and the specific termination provision in this Section 3 that is relied upon, if any, and setting forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executive Officer's employment under the provision so indicated. The Termination Date shall be determined as follows: (i) if Executive Officer's employment is
terminated for Disability, thirty (30) days after a Notice of Termination is given (provided that Executive Officer shall not have returned to the full-time performance of Executive
Officer's duties during such 30-day period); (ii) if Executive Officer's employment is terminated by the Corporation in an Involuntary Termination, five days after the date the
Notice of Termination is received by Executive Officer; and (iii) (as defined in this Section 3) if Executive Officer's employment is terminated by the Corporation for Cause, the date
specified in the Notice of Termination, provided, that the events or circumstances cited by the Board of Directors as constituting Cause are not cured by Executive Officer during any cure period that
may be offered by the Board of Directors. The Date of Termination for a resignation of employment other than for Good Reason shall be the date set forth in the applicable notice, which shall be no
earlier than ten (10) days after the date such notice is received by the Corporation, unless waived by the Corporation. 

During
the Covered Period, a notice of termination given by Executive Officer for Good Reason shall be given within three (3) months after occurrence of the event on which Executive Officer
bases his notice of termination and shall provide a Termination Date not more than sixty (60) days after the notice of termination is given to the Corporation. 

	(c)
	Corporation's Obligations. If Executive Officer's employment by the Corporation or any Employer or successor of the Corporation shall
be subject to an Involuntary Termination 

8

 

within
the Covered Period, then the Corporation shall provide Executive Officer the following benefits: 

	(1)
	The
Corporation shall pay to the Executive Officer a lump sum in cash within thirty (30) days after the Termination Date:

	a)
	the
sum of (1) any earned but unpaid base salary through the Termination Date at the rate in effect at the time of the notice of termination to the extent not theretofore paid;
(2) the Executive Officer's target bonus under the Short-Term Incentive Plan of the Corporation, an Affiliate, or a predecessor, for the fiscal year in which the Termination Date
occurs (the "Target Bonus"); and (3) any accrued but unpaid vacation pay, in each case to the extent not theretofore paid; and

	b)
	the
amount equal to the product of (1) three and (2) the sum of (x) the Reference Salary and (y) the Target Bonus.

	(2)
	Remedies. The Executive Officer shall be entitled to recover damages for late or nonpayment of amounts which the Corporation is
obligated to pay hereunder. The Executive Officer shall also be entitled to seek specific performance of the Corporation's obligations and any other applicable equitable or injunctive relief.

	(d)
	Adjustment for Excise Taxes. If any portion of the payments to the Executive Officer under this Section 3 or under any other
plan, program, or arrangement maintained by the Corporation (a "Payment") would be subject to the excise tax levied under Section 4999 of the Internal Revenue Code ("Code"), or any interest or
penalties are incurred by Executive Officer with respect to such excise tax (such excise tax together with such interest and penalties are referred to herein as the "Excise Tax"), then the Corporation
shall make an additional payment to Executive Officer (a "Tax Restoration Payment") in an amount such that after payment by the Executive Officer of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Tax Restoration
Payment, the Executive Officer retains an amount of the Tax Restoration Payment equal to the Excise Tax imposed upon the Payments. The payment of a Tax Restoration Payment under this Section 3
shall not be conditioned upon the Executive Officer's termination of employment. 

All
determinations and calculations required to be made under this Section 3(d) shall be made by Deloitte & Touche (the "Accounting Firm"), which shall provide its determination (the
"Determination"), together with detailed supporting calculations regarding the amount of any Tax Restoration Payment and any other relevant matter, both to the Corporation and the Executive Officer
within five (5) days of the termination of the Executive Officer's employment, if applicable, or such earlier time as is requested by the Corporation or the Executive Officer (if the Executive
Officer reasonably believes that any of the Payments may be subject to Excise Tax). If the Accounting Firm determines that no Excise Tax is payable by the Executive Officer, it shall furnish the
Executive Officer with a written statement that such Accounting Firm has concluded that no Excise Tax is payable (including the reasons therefor) and that the Executive Officer has substantial
authority not to report any Excise Tax on the Executive Officer's federal income tax return. If a Tax Restoration Payment is determined to be payable, it shall be paid to the Executive Officer within
five (5) days after the Determination is delivered to the Corporation or the Executive Officer. Any determination by the Accounting Firm shall be binding upon the Corporation and the Executive
Officer, absent manifest error. 

9

 

As
a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Tax Restoration Payments
not made by the Corporation should have been made ("Underpayment") or that Tax Restoration Payments will have been made by the Corporation which should not have been made ("Overpayment"). In either
such event, the Accounting Firm shall determine the amount of the Underpayment or Overpayment that has occurred. In the case of an Underpayment, the amount of such Underpayment shall be promptly paid
by the Corporation to or for the benefit of the Executive Officer. In the case of an Overpayment, the Executive Officer shall, at the direction and expense of the Corporation, take such steps as are
reasonably necessary (including the filing of returns and claims for refund), follow reasonable instructions from, and procedures established by, the Corporation, and otherwise reasonably cooperate
with the Corporation to correct such Overpayment, provided, however, that (i) the Executive Officer shall in no event be obligated to return to the Corporation an amount greater than the net
after-tax portion of the Overpayment that the Executive Officer has retained or has recovered as a refund from the applicable taxing authorities, and (ii) this provision shall be
interpreted in a manner consistent with the intent of the Tax Restoration Payment paragraph above, which is to make the Executive Officer whole, on an after-tax basis, from the application
of Excise Tax, it being understood that the correction of an Overpayment may result in the Executive Officer's repaying to the Corporation an amount that is less than the Overpayment. 

	4.
	Administration

The
Policy shall be administered by the Senior Human Resources Officer of the Corporation ("Administrator"), who shall have the authority to interpret the Policy and make and revise such rules as may
be reasonably necessary to administer the Policy. The Administrator shall have the duty and responsibility of maintaining records, making the requisite calculations, securing Officer releases, and
disbursing payments hereunder. The Administrator's interpretations, determinations, rules, and calculations shall be final and binding on all persons and parties concerned. 

	5.
	No Mitigation

Payment
of the amounts and benefits under Section 2(a) and Section 3 (except as otherwise provided in Section 2(a)(5)) shall not be subject to offset, counterclaim, recoupment,
defense or other claim, right or action which the Corporation or an Employer may have and shall not be subject to a requirement that Officer mitigate or attempt to mitigate damages resulting from
Officer's termination of employment. 

	6.
	Amendment and Termination

The
Corporation, acting through its Nominating and Compensation Committee, reserves the right to amend or terminate the Policy at any time; provided, however, that any amendment which would reduce the
aggregate level of benefits, or terminate the Policy, shall not become effective prior to the third anniversary of the Corporation giving notice to Officers of such amendment or termination. 

	7.
	Successors

The
Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Corporation
expressly to assume and to agree to perform its obligations under this Policy in the same manner and to the same extent that the Corporation would be required to perform such obligations if no such
succession had taken place; provided, however, that no such assumption shall relieve the Corporation of its obligations hereunder. As used herein, the "Corporation" shall mean the Corporation as
hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform its obligations by operation or law or otherwise. 

10

 

This
Policy shall inure to the benefit of and be binding upon the Officer (and Officer's personal representatives and heirs), Corporation and its successors and assigns, and any such successor or
assignee shall be deemed substituted for the Corporation under the terms of this Policy for all
purposes. As used herein, "successor" and "assignee" shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or
indirectly acquires the stock of the Corporation or to which the Corporation assigns this Policy by operation of law or otherwise. If Officer should die while any amount would still be payable to
Officer hereunder if Officer had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with this Policy to Officer's devisee, legatee or other designee, or
if there is no such designee, to Officer's estate. 

	8.
	Nonassignability of Benefits

The
payments under this Policy or the right to receive future payments under this Policy may not be anticipated, alienated, pledged, encumbered, or subject to any charge or legal process, and if any
attempt is made to do so, or a person eligible for payments becomes bankrupt, the payments under the Policy of the person affected may be terminated by the Administrator who, in his or her sole
discretion, may cause the same to be held if applied for the benefit of one or more of the dependents of such person or make any other disposition of such benefits that he or she deems appropriate. 

	9.
	Nonguarantee of Employment

Officers
covered by the Policy are at-will employees, and nothing contained in this Policy shall be construed as a contract of employment between the Officer and the Corporation (or, where
applicable, a subsidiary or affiliate of the Corporation), or as a right of the Officer to continued employment, or to remain as an Officer, or as a limitation on the right of the Corporation (or a
subsidiary or affiliate of the Corporation) to discharge Officer at any time, with or without cause. 

	10.
	Benefits Unfunded and Unsecured

The
payments under this Policy are unfunded, and the interest under this Policy of any Officer and such Officer's right to receive payments under this Policy shall be an unsecured claim against the
general assets of the Corporation. 

	11.
	Applicable Law

All
questions pertaining to the construction, validity, and effect of the Policy shall be determined in accordance with the laws of the United States and, to the extent not preempted by such laws, by
the laws of the state of California. 

	12.
	Arbitration

With
the exception of any request for specific performance, injunctive or other equitable relief, any dispute or controversy of any kind arising out of or related to this Policy, Officer's employment
with the Corporation (or with the employing subsidiary), the termination thereof or any claims for benefits shall be resolved exclusively by final and binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then in effect. Provided, however, that in making their determination, the arbitrators shall be limited to accepting the position
of the Officer or the position of the Corporation, as the case may be. The only claims not covered by this Section 12 are claims for benefits under workers' compensation or unemployment
insurance laws; such claims will be resolved under those laws. The place of arbitration shall be San Francisco, California. Parties may be represented by legal counsel at the arbitration but must bear
their own fees for such representation. The prevailing party in any dispute or controversy covered by this Section 12, or with respect to any request for specific performance, injunctive or
other equitable relief, shall be entitled to recover, in addition to any other available remedies specified in this Policy, all litigation expenses and costs, including any arbitrator or
administrative or filing fees and reasonable attorneys' fees. Both the Officer and the Corporation specifically waive any right to a jury trial on any dispute or controversy covered by this
Section 12. Judgment may be entered on the arbitrators' award in any court of competent jurisdiction. 

11

QuickLinks

Exhibit 10.37

PG&E CORPORATION OFFICER SEVERANCE POLICY (As Amended Effective as of January 1, 2005)

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