Document:

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                                                                    EXHIBIT 10.9

                                    FORM OF
                             STOCK OPTION AGREEMENT
                           (NONQUALIFIED STOCK OPTION)

      This Stock Option Agreement (this "Agreement"), is entered into effective
as of the Grant Date (as defined in paragraph 1), by and between Commerce Energy
Group, Inc., a Delaware corporation (the "Company"), and the employee, director
or officer of the Company listed in paragraph 1 (the "Optionee").

                                    RECITALS

      WHEREAS, the Company maintains the 1999 Equity Incentive Plan, as amended
(the "Plan"), which is incorporated into and forms a part of this Agreement;

      WHEREAS, the Compensation Committee of the Company's Board of Directors
(the "Committee") administers the Plan; and

      WHEREAS, the Optionee has been selected by the Committee to receive a
non-qualified stock option to purchase shares of the Company's common stock,
$.001 par value per share (the "Common Stock") under the Plan.

                                    AGREEMENT

1.    Terms of Award.

      (a)   The following terms used in this Agreement shall have the meanings
set forth in this paragraph 1:

            (i)   The "Optionee" is ______________________.

            (ii)  The "Grant Date" is _____________________.

            (iii) The number of "Option Shares" shall be ___________ shares of
Common Stock.

            (iv)  The "Exercise Price" is $_________ per share.

      (b)   Other terms used in this Agreement are defined pursuant to paragraph
14 or elsewhere in this Agreement.

2.    Award and Exercise Price. This Agreement specifies the terms of the option
(the "Option") granted to the Optionee to purchase the number of Option Shares
of Common Stock at the Exercise Price per share as set forth in paragraph 1. The
Option is not intended to constitute an "incentive stock option" as that term is
used in section 422 of the Code.

                                       -1-
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3.    Date of Exercise and Vesting.

      (a)   Subject to the limitations of this Agreement, the Option shall be
exercisable according to the following schedule, with respect to each
installment shown in the schedule on and after the Vesting Date applicable to
such installment: [NOTE - UNDER THE PLAN, OPTIONS MUST VEST AT LEAST 20% PER
YEAR OVER FIRST 5 YEARS.]

<TABLE>
<CAPTION>
                             Amount Vested per Period/
    Vesting Dates            Cumulative Amount Vested
--------------------         -------------------------
<S>                          <C>
______________, 200_             _______/_______
______________, 200_             _______/_______
______________, 200_             _______/_______
______________, 200_             _______/_______
</TABLE>

      (b)   An installment shall not become exercisable on the otherwise
applicable vesting date if the Optionee's Termination Date (as defined in
paragraph 14) occurs on or before such vesting date; provided, however, that
such Option Shares may become fully vested and exercisable in the discretion of
the Board. Subject to the provisions of paragraph 4, the Option may be exercised
on or after the Termination Date only as to that portion of the Option Shares as
to which it was exercisable immediately prior to the Termination Date, or as to
which it became exercisable on the Termination Date in accordance with this
paragraph 3.

4.    Expiration.

      (a)   The Option shall not be exercisable after the Company's close of
business on the last business day that occurs prior to the Expiration Date.

      (b)   The "Expiration Date" shall be earliest to occur of:

            (i)   the ten-year anniversary of the Grant Date;

            (ii)  if the Optionee's Termination Date occurs by reason of death
or Disability, the one-year anniversary of such Termination Date;

            (iii) if the Optionee's Termination Date occurs for reasons other
than death, Disability, or Cause, the three month anniversary of such
Termination Date; or

            (iv)  the earliest to occur of any of the following events (each a
"Corporate Event"): (A) the dissolution or liquidation of the Company or a
merger, consolidation or reorganization (including the sale of substantially all
of its assets) of the Company with one or more entities, corporate or otherwise,
as a result of which the Company is not the surviving entity; or (B) the merger
or other reorganization of the Company with one or more entities, corporate or
otherwise, as a result of which the outstanding shares of the Common Stock are
changed into or exchanged for shares of the capital stock or other securities of
another entity or for cash or other property; provided, however, that the
Company may, in its discretion, and immediately prior to any Corporate Event,
cause a new option to be substituted for this Option or cause this Option to be
assumed by a successor entity or a parent or subsidiary of such entity;

                                       -2-
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and such new option shall apply to all shares issued in addition to or
substitution, replacement or modification of the shares of Common Stock
theretofore covered by this Option.

      [NOTE - SOME EMPLOYMENT AGREEMENTS PROVIDE THAT THE OPTIONS DO NOT
TERMINATE UPON TERMINATION OF EMPLOYMENT.]

      (c)   Notwithstanding subparagraphs (a) and (b) of this paragraph 4, if an
Optionee ceases to be a director, officer or employee of the Company or a
Subsidiary due to Cause, all of the Optionee's options shall be forfeited
immediately upon such cessation, whether or not then exercisable.

      (d)   If no provision is made for the continuance of the Plan and the
assumption of this Option, or the substitution for this Option of a new option
as hereinabove provided, then the Company shall cause written notice to be given
to the Optionee of the proposed Corporate Event not less than twenty (20) days
prior to the anticipated effective date thereof, for the purpose of affording
the Optionee the opportunity to exercise the Option, in accordance with the
provisions of this Agreement, effective immediately prior to the consummation of
the Corporate Event. To the extent the Option remains unexercised as of the
effective date of the Corporate Event, the Option shall, concurrently with the
consummation of the Corporate Event, terminate and become void and of no effect.

5.    Method of Option Exercise.

      (a)   Subject to the terms of this Agreement and the Plan, the Option may
be exercised in whole or in part by filing a written notice, in the form
attached hereto as Exhibit A, with the Secretary of the Company at its corporate
headquarters prior to the Company's close of business on the last business day
that occurs prior to the Expiration Date. Such notice shall specify the number
of shares of Common Stock which the Optionee elects to purchase, and shall be
accompanied by payment of the Exercise Price for such shares of Common Stock
indicated by the Optionee's election. Payment shall be by cash or by check
payable to the Company or, where expressly approved for the Optionee by the
Board and where permitted by law:

            (i)   by cancellation of indebtedness of the Company to the
Optionee;

            (ii)  by surrender of shares that either: (A) have been owned by the
Optionee for more than six (6) months and have been paid for within the meaning
of SEC Rule 144 (and, if such shares were purchased from the Company by use of a
promissory note, such note has been fully paid with respect to such shares); or
(B) were obtained by the Optionee in the public market;

            (iii) by tender of a full recourse promissory note having such terms
as may be approved by the Board and bearing interest at a rate sufficient to
avoid imputation of income under Sections 483 and 1274 of the Code; [provided,
however, that the Optionee will not be entitled to purchase Option Shares with a
promissory note unless the note is adequately secured by collateral other than
the Option Shares] [INSERT THE BRACKETED PHRASE IF OPTIONEE IS NOT AN EMPLOYEE
OR DIRECTOR OF THE COMPANY, IF THE OPTIONEE IS AN EXECUTIVE OFFICER OR DIRECTOR,
DELETE THIS SUBPARAGRAPH (III) COMPLETELY];

                                       -3-
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            (iv)  by waiver of compensation due or accrued to Optionee for
services rendered;

            (v)   with respect only to purchases upon exercise of the Option,
and provided that a public market for the Company's stock exists:

                  (1)   through a "same day sale" commitment from the Optionee
and a broker-dealer that is a member of the National Association of Securities
Dealers (an "NASD Dealer") whereby the Optionee irrevocably elects to exercise
the Option and to sell a portion of the Option Shares so purchased to pay for
the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt
of such Option Shares to forward the Exercise Price directly to the Company; or

                  (2)   through a "margin" commitment from the Optionee and a
NASD Dealer whereby the Optionee irrevocably elects to exercise the Option and
to pledge the Option Shares so purchased to the NASD Dealer in a margin account
as security for a loan from the NASD Dealer in the amount of the Exercise Price,
and whereby the NASD Dealer irrevocably commits upon receipt of such Option
Shares to forward the Exercise Price directly to the Company; or

            (vi)  by any combination of the foregoing.

6.    Transferability of Option. The Option granted hereunder may not be
transferred by the Optionee except upon death by will or the laws of descent and
distribution. Unless the context otherwise requires, references herein to the
Optionee are deemed to include any permitted transferee under this paragraph 6.
During the Optionee's lifetime, only the Optionee (or his or her guardian or
legal representative) may exercise the Option. In the event of the Optionee's
death, the Option (to the extent still held by the Optionee at such time) may be
exercised only (i) by the executor or administrator of the Optionee's estate or
the person or persons to whom his or her rights under the Option shall pass by
will or the laws of descent and distribution and (ii) to the extent that the
Optionee was entitled hereunder at the date of the Optionee's death.

7.    Withholding of Taxes.

      (a)   Withholding Generally. Upon exercise of this Option, the Company may
require the Optionee to remit to the Company an amount sufficient to satisfy
federal, state and local withholding tax requirements prior to the delivery of
any certificate or certificates for the Option Shares.

      (b)   Stock Withholding. When, under applicable tax laws, the Optionee
incurs tax liability in connection with the exercise or vesting of this Option
that is subject to tax withholding and the Optionee is obligated to pay the
Company the amount required to be withheld, the Committee may in its sole
discretion allow the Optionee to satisfy the minimum withholding tax obligation
by electing to have the Company withhold from the Option Shares to be issued
that number of shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by the Optionee to have Option
Shares withheld for this purpose will

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be made in accordance with the requirements established by the Board and be in
writing in a form acceptable to the Board.

8.    Compliance With Securities Laws. This Option shall not be exercisable if
such exercise would involve a violation of any applicable Federal or state
securities law.

9.    No Rights As Shareholder. The Optionee shall not have any rights of a
shareholder with respect to the shares subject to the Option, until a stock
certificate has been duly issued following exercise of the Option as provided
herein.

10.   Plan Governs. Notwithstanding anything in this Agreement to the contrary,
the terms of this Agreement shall be subject to the terms of the Plan, a copy of
which may be obtained by the Optionee from the office of the Secretary of the
Company; and this Agreement is subject to all interpretations, amendments, rules
and regulations promulgated by the Board from time to time pursuant to the Plan.

11.   Not An Employment Contract. The Option will not confer on the Optionee any
right with respect to continuance of employment or other service with the
Company or any Subsidiary, nor will it interfere in any way with any right the
Company or any Subsidiary would otherwise have to terminate or modify the terms
of such Optionee's employment or other service at any time.

12.   Adjustments. In the event that the number of outstanding shares is changed
by a stock dividend, recapitalization, stock split, reverse stock split,
subdivision, combination, reclassification or similar change in the capital
structure of the Company without consideration, then the Exercise Prices of and
number of Option Shares subject to this Option will be proportionately adjusted,
subject to any required action by the Board or the stockholders of the Company
and compliance with applicable securities laws; provided, however, that
fractions of a Share will not be issued but will either be replaced by a cash
payment equal to the Fair Market Value of such fraction of a Share or will be
rounded up to the nearest whole Share, as determined by the Board.

13.   Amendment. Except as otherwise provided herein, any provision of this
Agreement may be amended or waived only with the prior written consent of the
Optionee and the Board.

14.   Certain Definitions. For the purposes of this Agreement, the following
terms shall have the meanings set forth below:

      (a)   "Board" means the Board of Directors of the Company, or if the Board
has delegated responsibility for any matter with respect to the Plan to the
Committee, the Compensation Committee of the Board.

      (b)   "Cause" shall mean the commission of an act of theft, embezzlement,
fraud, dishonesty or a breach of fiduciary duty to the Company or a Subsidiary
of the Company.

      (c)   "Code" shall mean the Internal Revenue Code of 1986, as amended, and
any successor statute.

                                       -5-
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      (d)   "Common Stock" shall mean the Common Stock, par value $.001 per
share, of the Company, and any other shares into which such stock may be changed
by reason of a recapitalization, reorganization, merger, consolidation or any
other change in the corporate structure or capital stock of the Company.

      (e)   "Disability" means a disability, whether temporary or permanent,
partial or total, as determined by the Board.

      (f)   "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and any successor statute.

      (g)   "Fair Market Value" of a share of Common Stock of the Company shall
mean, as of any date, the value of a share of the Company's Common Stock
determined as follows: (1) if such Common Stock is then quoted on the Nasdaq
National Market, its closing price on the Nasdaq National Market on the date of
determination as reported in The Wall Street Journal; (2) if such Common Stock
is publicly traded and is then listed on a national securities exchange, its
closing price on the date of determination on the principal national securities
exchange on which the Common Stock is listed or admitted to trading as reported
in The Wall Street Journal; (3) if such Common Stock is publicly traded but is
not quoted on the Nasdaq National Market nor listed or admitted to trading on a
national securities exchange, the average of the closing bid and asked prices on
the date of determination as reported in The Wall Street Journal; or (4) if none
of the foregoing is applicable, by the Board in good faith.

      (h)   "Securities Act" shall mean the Securities Act of 1933, as amended,
and any successor statute.

      (i)   "Subsidiary" shall mean any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.

      (j)   "Termination" or "Terminated" means that the Optionee has for any
reason ceased to provide services as an employee, officer, director, consultant,
independent contractor, or advisor to the Company or a Subsidiary of the
Company. An employee will not be deemed to have ceased to provide services in
the case of (1) sick leave, (2) military leave, or (3) any other leave of
absence approved by the Board, provided, that such leave is for a period of not
more than 90 days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute or unless provided otherwise pursuant to
formal policy adopted from time to time by the Company and issued and
promulgated to employees in writing. In the case of any employee on an approved
leave of absence, the Board may make such provisions respecting suspension of
vesting of the Option while on leave from the employ of the Company or a
Subsidiary as it may deem appropriate, except that in no event may an Option be
exercised after the expiration of the term set forth in this agreement.

      (k)   "Termination Date" shall mean the effective date on which the
Optionee ceased to provide services, as determined by the Board in its sole
discretion.

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15.   Entire Agreement. The Agreement, together with the Plan, constitutes the
entire agreement of the parties and supercedes any and all agreements, either
oral or in writing, between the parties with respect to the subject matter
hereof.

                                      -7-
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                    SIGNATURE PAGE TO STOCK OPTION AGREEMENT

      IN WITNESS WHEREOF, the parties have executed this Agreement on
___________ to reflect the grant which was authorized on the Grant Date as first
above written.

                                      COMMERCE ENERGY GROUP, INC.

                                      By:_______________________________________

                                      Name:_____________________________________

                                      Title:____________________________________

                                      OPTIONEE:

                                      Name:_____________________________________

                                      Address (please print):

                                      __________________________________________

                                      __________________________________________

                                       -8-
<PAGE>

                                    EXHIBIT A

         FORM OF LETTER TO BE USED TO EXERCISE NONQUALIFIED STOCK OPTION

_______________
Date

Commerce Energy Group, Inc.
600 Anton Boulevard, Suite 2000
Costa Mesa, CA 92626
Attention: Chief Financial Officer

      I wish to exercise the stock option granted on ________ and evidenced by a
Stock Option Agreement dated as of ____________, to acquire __________ shares of
Common Stock of Commerce Energy Group, Inc., at an option price of $_______ per
share. In accordance with the provisions of the Stock Option Agreement, I wish
to make payment of the exercise price (please check all that apply):

      [ ] in cash

      [ ] by delivery of shares of Common Stock held by me

      [ ] by simultaneous sale through a broker of Option Shares

      [ ] by authorizing the Company to withhold Option Shares

Please issue a certificate for these shares in the following name:

_______________________
Name

_______________________
Address

_______________________                           Very truly yours,

                                                  ______________________________
                                                  Signature

                                                  ______________________________
                                                  Typed or Printed Name

                                                  ______________________________
                                                  Social Security Number<PAGE>

                                                                   EXHIBIT 10.12

                        SETTLEMENT AGREEMENT AND RELEASE

            THIS SETTLEMENT AGREEMENT AND RELEASE (this "Agreement") is entered
into effective as of August 29, 2003, by and between Commonwealth Energy
Corporation, a California corporation ("Commonwealth") and Robert C. Perkins
("Perkins").

                                    RECITALS

            A. Perkins has served as a director of Commonwealth since 1999.

            B. In connection with his service as a director, Perkins was
promised certain options to purchase shares of Commonwealth's Common Stock in
1999, 2001 and 2002 (the "Promised Options").

            C. There is a dispute between Commonwealth and Perkins as to the
number and terms of the Promised Options.

            D. The parties desire to fully, finally and forever settle and
compromise all claims, demands, damages, debts, liabilities, accounts,
obligations, costs, expenses, liens, actions and causes of action of any kind or
nature whatsoever, known or unknown, suspected or unsuspected (collectively,
"Claims"), which any of the parties may now have or hereafter have or claim to
have against the other parties and affiliates of the other parties based on the
Promised Options.

            NOW, THEREFORE, for and in consideration of the foregoing recitals,
the mutual undertakings contained in this Agreement, and other good and valuable
consideration, the sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:

                                    AGREEMENT

      1. Issuance of Stock Option. Commonwealth shall issue to Perkins the
following options to purchase shares of Commonwealth common stock (the "New
Options"), which shall be fully vested as of the date of grant:

                  (a) an option to purchase 80,000 shares of Commonwealth common
stock at an exercise price of $1.00 per share; and

                  (b) an option to purchase 20,000 shares of Commonwealth common
stock at an exercise price of $1.86 per share.

      2. Release by Perkins. Except for obligations created by this Agreement
and the New Options, Perkins releases and discharges and agrees to hold harmless
Commonwealth and its officers, directors, employees, agents, servants,
consultants, advisors, attorneys, heirs, executors, representatives,
administrators, affiliates, predecessors, successors and assigns (collectively,
the "Commonwealth Affiliates"), from any and all Claims which Perkins may now

<PAGE>

have or hereafter have or claim to have against Commonwealth or any of the
Commonwealth Affiliates based on the Promised Options.

      3. Waiver of Civil Code Section 1542. Perkins understands and agrees that
the release provided herein extends to all Claims released above whether known
or unknown, suspected or unsuspected. As to those matters released herein only,
Perkins expressly waives and relinquishes any and all rights they he have under
California Civil Code Section 1542, which provides as follows:

            "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."

Perkins expressly waives and releases any rights and benefits which he has or
may have under any similar law or rule of any other jurisdiction pertaining to
the matters released herein. 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 full and complete release
of such matters notwithstanding the discovery of any additional Claims or facts
relating thereto.

      4. Binding Upon Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the successors and assigns of the parties
hereto.

      5. Modifications. This Agreement may not be amended, canceled, revoked or
otherwise modified except by written agreement executed by the party or parties
to be charged with such modification.

      6. No Admission of Liability. The parties hereto explicitly acknowledge
that by entering into this Agreement no party admits or acknowledges the
existence of any liability or wrongdoing.

      7. Severability. In the event any provision of this Agreement shall be
held to be void, voidable or unenforceable, the remaining provisions shall
remain in full force and effect.

      8. Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of California without regard to the
conflicts of law principles thereof.

      9. Venue. Any action, suit or other proceeding brought by or against any
of the parties hereto to enforce this Agreement shall be instituted and
maintained only in Orange County, California.

      10. Warranty of Authority. Each party whose signature is affixed hereto in
a representative capacity represents and warrants that he is authorized to
execute this Agreement on behalf of and to bind the entity on whose behalf his
signature is affixed.

                                       -2-
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      11. Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes any and all other agreements, understandings,
negotiations, or discussions, either oral or in writing, express or implied,
relative to the matters which are the subject of this Agreement.

      12. Further Acts. Each party hereto agrees to perform any further acts and
execute and deliver any further documents which reasonably may be necessary to
carry out the provisions and intent of this Agreement.

      13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which when executed and delivered shall be an original,
and all of which when executed shall constitute one and the same instrument.

      14. Miscellaneous Provisions.

            14.1 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.

            14.2 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.

            14.3 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.

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

            14.5 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. Each party accepts and assumes this risk and
agrees that this Agreement and the release 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.

                                       -3-
<PAGE>

            IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.

"COMMONWEALTH"                       COMMONWEALTH ENERGY CORPORATION,
                                     a California corporation

                                     By:/S/ IAN B. CARTER
                                        ----------------------------------------
                                     Name: Ian B. Carter
                                     Title: Chairman and Chief Executive Officer

"PERKINS"                            /S/ ROBERT C. PERKINS
                                     -------------------------------------------
                                     Robert C. Perkins

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