A CULTURE FOUNDED ON INTEGRITY STANDARDS · 2008-10-28 · 1In this handbook, the term “PG&E” refers to PG&E Corporation and its affiliates and subsidiaries, including Pacific

STANDARDSfor Personal Conduct and Business DecisionsCode of Conduct Handbook

A C U L T U R E F O U N D E D O N I N T E G R I T Y

Revised January 2007

1In this handbook, the term “PG&E” refers to PG&E Corporation and its affiliates and subsidiaries,including Pacific Gas and Electric Company. The conduct and compliance standards in this handbook apply to all employees, including officers, and any non-employee officers of PG&E.

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MESSAGEfrom Peter Darbee

To reach our vision of becoming the leading utilityin the United States, it is vital that each of us isaccountable for embracing PG&E’s1 values and putting them into action with one another and with our customers, communities, business partnersand other stakeholders.

At every level and in every part of the company, our values must guide and alignour behavior as we make business decisions and operate on a day-to-day basis.

To help ensure this practice, this code of conduct handbook outlines our core values, describes our standards for conduct, and addresses key regulatory andcompliance requirements. It supports our continuing commitment to ethical conduct and compliance with laws, regulations, and policies.

Use this handbook and our values as a guide whenever you have a questionabout the right course of action. For additional guidance, you should talk to yoursupervisor or human resources representative, or call the Compliance and EthicsHelpline at 1-888-231-2310.

Thank you for your ongoing commitment to ensure that, together, we are all livingthe values that will help us achieve our vision.

Peter DarbeeChairman, CEO, and PresidentPG&E Corporation

Chairman, Pacific Gas and Electric Company

CONTENTSTable of Contents

CORE VALUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

HOW TO REPORT QUESTIONABLE ACTIVITIES . . . . . . . . . . . . . . . . . . . . 4

OVERVIEW OF STANDARDS AND KEY COMPLIANCE AREAS . . . . . . . 5

EMPLOYEE CONDUCT STANDARDS

Fitness for Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Use of Alcohol or Illegal Drugs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Harassment and Discrimination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Safety and Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Community Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Corporate Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Employee Privacy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Business Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Corporate Name, Logo, and Colors. . . . . . . . . . . . . . . . . . . . . . . . . .10

Endorsements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

News Media Inquiries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

Investor Inquiries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

Regulatory or Legal Inquiries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

Publishing Articles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

Proprietary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

Corporate Records and Disclosures . . . . . . . . . . . . . . . . . . . . . . . . .13

Document Retention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

CONFLICT OF INTEREST STANDARDS

Influencing Business Decisions for Personal Gain . . . . . . . . . . . . . .14

Favored Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Accepting or Giving Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Loans, Advances, or Guarantees of Obligations . . . . . . . . . . . . . . .18

Holding an Elected or Appointed Office . . . . . . . . . . . . . . . . . . . . . .18

Outside Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

KEY COMPLIANCE AREAS

Federal Securities Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Insider Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Affiliate Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Antitrust Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Environmental Laws and Regulations . . . . . . . . . . . . . . . . . . . . . . . 23

Political Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Copyright Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Foreign Corrupt Practices Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Facilities Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Government Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

COMPLIANCE AND ETHICS DECISION-MAKING CHECKLIST. . . . . . . 27

WAIVERS OF CODE OF CONDUCT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

REFERENCES AND RESOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

1If you have questions, contact your supervisor or human resources representative, or call the Compliance and Ethics Helpline at 1-888-231-2310

VALUESCORE

Our values guide how we behave as individuals, and collectively, our behaviorsdetermine how we are perceived as a company. Following are the five core values that each of us must follow and the underlying behaviors that supporteach value.

We act with integrity and communicate honestly and openly:

> Act ethically and with integrity

> Deal with people and issues openly, directly and respectfully

> Take actions that are consistent with words

> Do the right thing even if unpopular or risky

We are passionate about meeting our customers’ needs and delivering for our shareholders:

> Demonstrate a passion for understanding and meeting the needs of our customers and shareholders

> Take active responsibility for the quality of service we provide to customers and others

> Have a “can do” attitude and bias for action

> Hold self and others accountable for results

We are accountable for all of our own actions: these include safety,protecting the environment, and supporting our communities:

> Build safety into everything we do

> Take accountability for actions, decisions and results vs. blaming

> Demonstrate commitment to improving the health and well-being of the environment and the communities we serve

> Act in a way that connects the company’s actions and the well-being of the community

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We work together as a team and are committed to excellence and innovation:

> Take ownership of team goals and are accountable for own part in the process

> Have high performance expectations and a mind set of excellence

> Promote teamwork among groups; discourage “we vs. they” thinking

> Openly give and receive coaching and feedback

> Are innovative in identifying new opportunities and approaches for ourcustomers and ourselves

> Embrace change and are personally willing to undertake it

We respect each other and celebrate our diversity:

> Treat fellow employees and customers with respect

> Appreciate and value each other and our diverse backgrounds and lifeexperiences

> Celebrate and leverage our diversity

> Listen to input from teammates to reach the best solution

> Invite feedback from others

> Foster a climate of trust and openness between people

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The leading

utility in the United States

Delighted CustomersEnergized Employees

Rewarded Shareholders

Operational ExcellenceTransformation

• We act with integrity and communicate honestly and openly

• We are passionate about meeting our customers’ needs and delivering for our shareholders

• We are accountable for all of our own actions: these include safety, protecting the environment, and supporting our communities

• We work together as a team and are committed to excellence and innovation

• We respect each other and celebrate our diversity

OUR VISION

OUR GOALS

OUR STRATEGIES

OUR VALUES

Remember:> Apply PG&E’s “Core Values” to all business decisions.

Deal fairly with PG&E’s customers, suppliers and competitors,and your fellow officers or employees. You should not take unfairadvantage of anyone through manipulation, concealment, abuseof privileged information, misrepresentation of material facts, orany other unfair-dealing practice.

> Never knowingly violate laws, regulations, policies, orstandards, even if you think doing so would lower costs,increase earnings, or delight a customer. Even your supervisorcannot order you to take an action that intentionally violates alaw, regulation, policy, or standard.

> If you aren’t sure, ask. Check with your supervisor or humanresources representative, or call the Compliance and EthicsHelpline at 1-888-231-2310.

You Are the Key You are responsible for making business decisions that are consistent with ourcommitment to compliance and ethics. Always use the “STAR” method: Stop,Think, and Act Responsibly to work through tough decisions.



QUESTIONABLEHOW TO REPORT

ACTIVITIES

If you encounter questionable activities at work, immediately bring them toPG&E’s attention. Contact your supervisor, your human resources representative, or other appropriate department such as Corporate Security. You also may call the Compliance and Ethics Helpline at 1-888-231-2310.

If you have a concern about questionable accounting or auditing matters or internal controls (collectively, “accounting complaints”), contact the Complianceand Ethics Helpline at 1-888-231-2310. The PG&E Corporation Senior VicePresident and General Counsel reviews all such accounting complaints. The Chairsof the Audit Committees of the Boards of Directors are informed of any significantand material accounting complaints.

The Helpline is available 24 hours a day, 7 days a week. It’s a multilingualservice that provides a safe place to ask compliance and ethics questions or tocommunicate concerns.

Helpline calls are handled confidentially, to the extent permitted by the law, and canbe submitted anonymously, without fear of retribution. PG&E prohibits retaliationagainst anyone raising complaints or involved in investigations.


2For the purpose of regulatory reporting, the Senior Vice President and General Counsel of PG&ECorporation is responsible for determining if a violation of this code has occurred.

KEY COMPLIANCE AREAS

OVERVIEW OF STANDARDS AND

The information in this code of conduct handbook is not intended to supersedeany other applicable legal or regulatory requirements, such as those imposed bythe Nuclear Regulatory Commission, the Department of Transportation, or anyother federal, state, or local governmental entity.

Keep in mind that individual business areas may have more stringent policies andstandards than those described in this handbook, and each of us is responsible for being familiar with the various policies, standards, and legal requirementsapplicable to our jobs. PG&E expects each of us to comply with them, and PG&E retains the right to discipline or discharge those who do not comply.2


STANDARDS EMPLOYEE CONDUCT

Our conduct on the job has a major impact on PG&E’s ability to achieve itsvision of being the leading utility in the United States. If you need more specificinformation about this code of conduct, ask your supervisor or human resourcesrepresentative, or call the Compliance and Ethics Helpline at 1-888-231-2310.

Fitness for Duty You’re expected to be mentally and physically fit for work, reporting to work fit for duty and remaining fit while on duty. Tell your supervisor if you’re takingprescription drugs or over-the-counter medications that could affect your abilityto work safely or efficiently. You may not be under the influence of alcohol orillegal drugs while on duty.

Use of Alcohol or Illegal Drugs PG&E is committed to a workplace that is free from the influence of alcohol and illegal drugs.

As the general rule, you may not consume alcohol while on duty, includinglunches and overtime meals, or on company property. Officers and the next levelof management below officer may authorize, in advance, the consumption ofalcohol for special occasions or for certain business meetings, as long as suchuse is limited and does not violate other legal requirements, such as those ofthe Nuclear Regulatory Commission or the Department of Transportation.

You may not operate a PG&E-owned, leased, or rented vehicle after consumingalcohol. You may not transport alcohol in a PG&E-owned, leased, or rented vehicle, unless you have the prior consent of an officer or the next level of management below officer.

Do not use, possess, sell, purchase, provide, or be under the influence of illegaldrugs while on duty or on company property. You also must comply with yourspecific organization’s alcohol and drug policies.

Harassment and DiscriminationConduct yourself in a professional manner and treat others with respect, fairness, and dignity. PG&E does not tolerate harassment or discrimination,including behavior, comments, jokes, slurs, e-mail messages, pictures, or otherconduct that contributes to an intimidating or offensive environment. You mustcomply with applicable federal, state, and local statutes prohibiting discriminationor harassment based on race, color, religion, age, sex, pregnancy, disability,national origin, ancestry, medical condition, veteran status, marital status, sexual orientation, gender identity, or any other non-job-related factor.

Officers and other supervisors are expected to be familiar with PG&E’s standardson harassment and discrimination and with relevant federal, state, and locallaws. Supervisors who fail to take action, or who engage in harassment, notonly expose PG&E to liability, they also expose themselves to personal liability.Employees also can be held personally liable for engaging in harassment.

PG&E has the same expectations for its contractors, consultants, and supplierswhen they engage in PG&E-related work. Those expectations are described inPG&E’s Contractor, Consultant, and Supplier Code of Conduct.

Safety and HealthPG&E aims to have an injury and illness-free work environment for the benefit of employees,customers, and the general public. Building safetyinto everything we do is a core behavior at PG&E.To this end, perform your work in a way that willprotect yourself, co-workers, and the public.Comply with all safety and health rules and procedures at all times. Ensure that your work environment is safe by identifying and controllinghazards or unsafe situations, helping and encouraging others to work safely, and placingsafety first. Immediately report unsafe conditionsthat you cannot correct to your supervisor, or callthe Safety Helpline at 1-415-973-8700 (internalnumber 223-8700).


If necessary, safety compliance concerns can be reported by calling theCompliance and Ethics Helpline at 1-888-231-2310.

Community ActivitiesFor more than a century, PG&E has supported the communities it serves by creating communitypartnerships, making charitable contributions, andvolunteering at community events. To make thesecommunity partnerships successful, PG&E worksclosely with community residents and local organizations to identify needs and develop programs to deliver targeted contributions. If youare interested in being a positive force in PG&E’scommunities, please contact the Civic Partnershipand Community Initiatives Department for moreinformation.

The endorsements section of this handbook applies when you’re engaged incommunity activities.

Corporate AssetsEach of us is responsible for the proper acquisition (including compliance withdelegations of authority and bid and award procedures), use, maintenance, anddisposal of corporate assets (e.g., materials, equipment, tools, real property, information, funds, etc.) and services.

> Acquire assets in compliance with procurement policies and procedures,(including delegations of authority and bid and award procedures)avoiding any real or apparent conflict of interest.

> Use corporate assets only for legal and ethical activities.

> Protect assets from damage, waste, loss, misuse, or theft.

> Dispose of assets only with appropriate written approval. PG&E’s goalis to obtain fair market value for all assets that no longer are needed,unless they are donated with appropriate approval. PG&E may have a legal responsibility to report a donation to a charitable entity or a political organization, so you will need to request approval in advance.


> Don’t destroy or take intangible assets, including information about PG&Eor others that you obtain in the course of your job. This responsibilityextends to such information when you’re no longer employed by PG&E.

> Follow procedures in Interactions in the Corporate Family: An Overviewof Affiliate Rules, or contact the Law Department if you intend to shareor transfer assets between or among PG&E’s lines of business.

Corporate assets such as computers, telephones and cell phones, fax machines,copy machines, conference rooms, and vehicles are intended primarily for PG&Ebusiness. PG&E allows limited personal use of these and similar assets as long assuch use is occasional, is not for outside employment, doesn’t result in excessivecosts, doesn’t interfere with your work responsibilities, and is in compliancewith laws, regulations, and any business line or local restrictions. Personal useof a vehicle must be incidental to business use. If you would like to allow acharitable entity or political organization to use any such corporate asset, PG&Emay need to report the use as a donation. You will need to request approval inadvance. Please talk to your supervisor before making arrangements.

Other corporate assets, including such things as construction equipment, tools,and similar assets, may be used only for PG&E business and are not availablefor personal use. Exceptions are permitted in emergency situations or with officer approval.

Employee Privacy PG&E retains the right to monitor its assets and work environments in compliancewith applicable federal, state, and local law. It monitors to promote safety, preventcriminal activity, investigate alleged misconduct and security violations, manageinformation systems, or for other business reasons.


Even though limited personal use of company assets is permitted, you shouldhave no expectation of privacy when you use PG&E computer, voicemail, or othersystems to create, access, transmit, or store information. Such information isaccessible to PG&E even if it is password-protected or deleted by the user.

Business ExpensesUse PG&E funds for business expenses only,whether paying by credit card, cash, or othermethod. Use good judgment to keep businessexpenses (for example, meal expenses) reasonable.You’re expected to comply with PG&E’s requirementsfor incurring and reporting business expenses.Report all expenses promptly and accurately via thetravel and expense system.

Corporate Name, Logo, and ColorsPG&E Corporation legally owns the trademarks that incorporate “PG&E” and theholding company and utility corporate names. You may use the corporate namesand logos, the PG&E logo, and PG&E colors in presentations to public audiencesin compliance with the Corporate Identity Guidelines issued by the PG&ECorporation Communications Department.

Watch for the use of the PG&E graphic icon, the corporate name, logo, or colorsby those not authorized to represent PG&E, such as contractors. Also, energyaffiliate companies must include disclaimers of specific wording and size whenusing the icon, corporate name, or logo. If you have any questions, please callthe PG&E Corporation Communications Department at 1-800-743-6397.


Endorsements PG&E does not endorse products or services, nor the firms or individuals whosupply them. Favoritism must not be implied by testimonials or endorsements of PG&E’s use of any materials, supplies, equipment, or service, or by the use of its name in advertising, publicity, or catalogues. If you have questions about endorsements, please call the Law Department or the Compliance andEthics Helpline at 1-888-231-2310.

Implied or express endorsements of political candidates, ballot measures,community organizations, or other entities must be approved in advance by theGovernmental Relations Department.

If you want to endorse an event, product, or service, or to provide a testimonial,you should not use your job title or affiliation without approval from your supervisorand the Communications Department.

News Media InquiriesImmediately refer any news media inquiries to your News or Communications Department. Referinquiries from national publications or news servicesto PG&E’s Communications Department. (UtilityNews Department, 1-415-973-5930; PG&ECorporation Communications Department, 1-800-743-6397.)

Investor InquiriesRefer portfolio manager and financial analyst inquiries to the Investor RelationsDepartment at 1-415-267-7080. Refer individual shareholders and beneficialowners with questions about shareholder accounts and other administrativematters to the Corporate Secretary’s Office at 1-415-267-7070.


Regulatory or Legal InquiriesRefer inquiries from federal, state, or local governmental officials to theGovernmental Relations Department. Refer inquiries about legal issues or subpoenas to the Law Department. Refer any requests for information from law enforcement agencies to your local security contact or the CorporateSecurity Department.

Publishing ArticlesIf you author an article or other publication and plan to identify yourself as an employee of PG&E, you should get approval from your supervisor and theCommunications Department prior to publication.

Proprietary InformationYou may have access to proprietary non-publicinformation on the job. Never use this informationfor personal gain or advantage, and never sharethis information without appropriate approval. Ifyou leave employment with PG&E, it would beunethical and could be illegal to reveal non-publicinformation that you obtained in the course ofyour employment with PG&E.

Three common types of confidential proprietary information are customerinformation, employee information, and competitor information.

> Customer information includes any information about a specific customer, including such things as name, address, phone numbers, contacts, and energy usage. Never disclose any information about a customer without the customer’s written approval unless legallyrequired to do so (for example, under a court-issued subpoena). If youreceive a request for customer information, follow your organization’sprocedures for handling it.

> Employee information includes information about a specific employee,including such things as name, address, social security number, phonenumbers, benefits, and performance evaluations. Never disclose suchinformation to another employee or a third party without appropriate



approval. Forward requests for employee information and references to your human resources representative.

> Competitor information is collected by PG&E from a variety of legitimate sources. PG&E uses such information to evaluate the meritsof its own products, services, and marketing methods, and to developstrategic plans. Any competitor information obtained accidentally orunethically must be kept confidential and immediately reviewed withthe Law Department to determine the appropriate course of action. It’s against the law and PG&E’s policy to gather competitor informationby trespassing, burglary, wiretapping, theft, or other illegal activity.

There are restrictions on the flow of non-public information between PG&E’slines of business, although non-public information may be shared freely with theholding company. For more information on this subject, review the Affiliate Rulessection of this handbook and the compliance booklet, Interactions in the CorporateFamily: An Overview of Affiliate Rules.

Please exercise caution when using or handling proprietary information. If you have questions, contact the Law Department.

Corporate Records and DisclosuresAccurate records and disclosures are critical to PG&E’s meeting its legal, financial, regulatory, and management obligations. Never misstate facts or omit material information. Ensure that all corporate records, disclosures, andcommunications are full, fair, accurate, timely, and understandable. Never hide,alter, falsify, or disguise the true nature of any transaction.

Document RetentionMany areas of PG&E have policies or regulatory requirements to retain certain documents for specific periods of time. There may be additional retention requirements for any documents you possess that relate to a topic ofinvestigation or litigation. Also, as a condition of forming the holding company,the California Public Utilities Commission requires employees to retain certaincorrespondence and documents involving communications with the utility.

If you need assistance with the document retention requirements that may apply to you, ask your supervisor or contact the Law Department.


You’re expected to do your job for the benefit of PG&E, its customers, and itsshareholders. A conflict of interest occurs when your private interests interferein any way, or even appear to interfere, with the interests of PG&E as a whole.A conflict of interest can arise if you take actions or have interests that maymake it difficult for you to perform your company work objectively and effectively.

Influencing Business Decisions for Personal GainWhen you represent PG&E, you must avoid any real or apparent conflictbetween your interests and those of PG&E. A potential conflict of interest existsif you participate in or attempt to influence a decision or transaction that couldmaterially affect the value of a “financial interest” held by you, a member of yourfamily, or other person with whom you have a close relationship. A “financialinterest” is a) any investment in a privately held business or b) an investmentequal to one month of your base salary or more in a business’ publicly traded stock.(Do not include indirect holdings of stock via mutual funds when considering this threshold.)

If you have any doubt about potential conflicts, the following steps must be taken:

You must disclose the “financial interest” and potential conflict to yoursupervisor in writing.

Your supervisor must determine if there is a conflict of interest. A conflictof interest exists if a) the decision or transaction could materially affectthe value of the “financial” interest, or b) your continued involvement withthe decision or transaction could create the appearance of impropriety.

Your supervisor must document in writing whether a conflict of interestexists and obtain the written concurrence of any other appropriate decision-maker.

STANDARDS CONFLICT OF INTEREST

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If your supervisor determines that there is a conflict of interest, he or shemust exclude you from participating in the decision or transaction or adoptother effective measures that would prevent the conflict.

Favored Treatment Do not use your position to obtain or provide favored treatment for yourself or others with whom you have a personal relationship. This can include anybusiness matter, including hiring or promoting employees, selecting contractorsor vendors, or participating in non-public investment opportunities such as InitialPublic Offerings (IPOs). You also may not take for your own benefit any PG&Ebusiness opportunity that you discover through the use of company property,information, or your position. Disclose any potential conflicts to your supervisor,and ensure that the appropriate decision-maker concurs in writing if you’re allowedto remain in a situation that could raise a perception of favored treatment.

Accepting or Giving Gifts Accepting or giving a gift in a business setting can create a sense of obligation orthe appearance of obligation. A gift can beanything of value, including such items as a ticket to a sporting event or play, a non-business meal, a bottle of wine, a coffeecup, a free service, a special discount, or an all-expense paid trip to a conference or trade show. Cash is considered to becompensation, so you may not accept orgive cash or a cash equivalent (such as acash-redeemable gift card) as a “gift.”

Accepting Gifts

PG&E forbids employees, as well as members of their immediate families, from accepting gifts from contractors, vendors, consultants, or similar businesscontacts doing business with or seeking to do business with PG&E, unless all six of the following conditions are met:


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> The value of the item must be less than $100, and the value of all giftsfrom one business contact during a 12-month period must not exceed$250. A gift that exceeds either value must be approved by your officer.Any such gift to an officer must be approved by the officer’s supervisor.

> The item is customary and does not create any appearance of impropriety.

> The item imposes no sense of obligation on the receiver.

> The item results in no special or favored treatment.

> The item could not be considered extravagant, excessive, or too frequent considering all of the circumstances, including your ability to reciprocate at company expense.

> The item is not concealed in any way.

If circumstances make it appropriate to accept a gift that exceeds either valuethreshold, the officer granting approval must retain the following documentation:

> The identities of the giver and recipient of the gift,

> The date the officer approved the gift,

> A brief description of the gift,

> The business reason for the gift, and

> An estimated value of the gift.

A gift no longer is considered a gift if within 30 days the recipient either 1) returns the gift to the giver or 2) reimburses the value of the gift tothe giver from personal funds.

“Customary business meals” are not consideredgifts. These are routine meals, similar in cost toyour own meals when you entertain clients.

In addition to the restrictions on gifts, you andmembers of your family must never accept a loan,service, or payment from a contractor, vendor,consultant, or similar business contact under termsthat aren’t available to the general public.



Giving Gifts

PG&E forbids employees from giving gifts funded by PG&E unless all six of thefollowing conditions are met:

> The value of the item must be less than $100 and the value of all giftsto one business contact during a 12-month period must not exceed$250. A gift that exceeds either value must be approved by an officer.

> The item is customary and does not create any appearance of impropriety.

> The item imposes no sense of obligation on the receiver.

> The item results in no special or favored treatment.

> The item could not be considered extravagant, excessive, or too frequent considering all of the circumstances, including the recipient’sability to reciprocate.

> The item is not concealed in any way.

If circumstances make it appropriate to give a gift that exceeds the employee’sauthority to approve, the officer granting approval must retain the following documentation:

> The identities of the giver and recipient of the gift,

> The date the officer approved the gift,

> A brief description of the gift,

> The business reason for the gift, and

> An estimated value of the gift.

“Customary business meals” generally are not considered gifts. These are routine meals of reasonable cost provided for business contacts. However, a business meal for an elected or appointed governmental official may be considered a gift under the laws governing the conduct of public officials. Please refer to the Working with Government Officials: Compliance with Political Laws handbook.

Special rules apply in certain gift-giving situations:

> All gifts to non-profit entities must be approved by the CharitableContributions Department.


> A gift to a political candidate, committee, governmental entity, or elected or governmental figure must be approved by the GovernmentalRelations Department. (For more information, see the Political sectionof this handbook and the compliance booklet, Working withGovernment Officials: Compliance with Political Laws.)

> An “in-kind” gift (e.g., used construction or office equipment) also is considered a disposal of a corporate asset. (For more information,see the Corporate Assets section of this handbook.)

> Federal law governs gift giving when working outside the USA or with a representative of a foreign government. (For more information,review the Foreign Corrupt Practices Act section of this handbook and the compliance booklet, Conducting Business Outside the USA:Compliance with Foreign Business Laws.)

Loans, Advances, or Guarantees of ObligationsPG&E prohibits loans or advances of corporate funds to its employees, officers,or Board members, and does not guarantee their obligations. It also prohibitsloans, advances, or guarantees for friends and family members. This policy doesnot apply to employees participating in programs that are broadly availableincluding, but not limited to, relocation benefits, the cashless exercise of stockoptions, education reimbursements, 401-K loans, the corporate credit card program, and expense advances.

Holding an Elected or Appointed Office If you hold an elected or appointed office while employed by PG&E, notify the Law Department and excuse yourself from involvement with any issue or decision that could create or appear to create a conflict of interest. Seek advicefrom your civic organization’s legal counsel and from the Law Department.

If you hold a public office, your first responsibility during work hours remainsyour job. Your supervisor may, however, from time to time and work load permitting, authorize you to perform public service on company time.

Outside EmploymentYou must take special care when engaging in outside employment activities.You’re not permitted to have outside activities that compete with products orservices offered by PG&E. (If you’re represented by a bargaining unit, thisrestriction applies only to products or services offered by your line of business.)

The types of activities to avoid includethe planning, design, manufacture, sale,installation, or maintenance of any commodity, equipment, or service that our lines of business currently provide or have known plans to provide.

Also, even if these requirements are met,you should take the following precautionsto avoid a conflict of interest:

> Don’t participate in an outside employment activity that could have an adverse effect on your ability to perform your duties for PG&E.

> Don’t use company time or assets for your own business or other job.

> Don’t solicit work from PG&E for your business or other employerbased on inside knowledge of the company or contacts, and don’tsolicit PG&E employees, vendors, or customers while at work. Localmanagement has discretion to allow passive solicitation, such as aposter on a bulletin board or a catalogue on a lunchroom table.

> If, during non-business hours, you solicit vendors or customers withwhom you interact for PG&E, you must ensure that your solicitationdoes not create an appearance of impropriety or in any way imply thatthe vendor’s or customer’s dealings with PG&E will be affected by theresponse to your solicitation.

Discuss questions about permissible outside employment activities with yoursupervisor and document your joint conclusion.


Each of us is required to fully comply with all laws and regulations applicable to PG&E’s business activities. In addition, all disclosures, documents, or reports provided to any government agency or in any other publiccommunication must be, to the extent possible,full, fair, timely, and understandable.

Violations of PG&E policies or legal and regulatory requirements must be reportedpromptly to your supervisor, anotherinvolved department, or the Compliance andEthics Helpline.

Federal Securities Laws As companies with publicly traded securities3, PG&E Corporation and Pacific Gasand Electric Company must each comply with federal laws and regulations thatrequire the disclosure of certain information in periodic financial and otherreports that are filed with the Securities and Exchange Commission (SEC). If youare asked to review a draft SEC report, you are expected to respond promptly tohelp ensure that the SEC reports are accurate and complete.

The securities laws also impose requirements regarding recordkeeping andthe establishment, maintenance, and evaluation of “disclosure controls and procedures” as well as “internal control over financial reporting,” as those terms aredefined in the Sarbanes-Oxley Act of 2002. These laws require the Chief ExecutiveOfficer and the Chief Financial Officer to certify, among other things, the accuracyand completeness of information in the SEC reports and the effectiveness of disclosure controls and procedures, and that they have disclosed any fraud that

AREAS KEY COMPLIANCE

3PG&E Corporation's common stock is listed on the New York Stock Exchange and the PacificExchange and Pacific Gas and Electric Company's preferred stock is listed on the American StockExchange and the Pacific Exchange.


involves management or other employees who have a significant role in internalcontrol over financial reporting.

PG&E Corporation’s and Pacific Gas and Electric Company’s internal controls overfinancial reporting are regularly tested, and if any deficiencies are identified, the controls are corrected and re-tested until they are effective. While the ChiefExecutive Officer and Chief Financial Officer are ultimately responsible forestablishing and maintaining internal controls, the primary burden of complyingwith and testing controls falls on us. As such, you are expected to perform andtest controls with due care.

If you have a concern about questionable accounting or auditing matters orinternal controls (collectively, “accounting complaints”), contact the Complianceand Ethics Helpline at 1-888-231-2310. The PG&E Corporation Senior VicePresident and General Counsel reviews all such accounting complaints. TheChairs of the Audit Committees of the Boards of Directors are informed of anysignificant and material accounting complaints.

Insider TradingNever make investment decisions regarding any equity or debt securities basedon information obtained in the course of your employment if the information 1) has not been publicly disseminated and 2) could have a material effect on the value of the investment. Examples of such information include expansionplans, major management changes, dividendrates, earnings, mergers, and significantnew contracts or projects. Using this information is against PG&E’s policy andmay violate laws or regulations.

If you would like more information on insidertrading, review PG&E’s compliance booklet,Insider Trading: An Overview of Laws andCorporate Policies. You can access it on theCompliance and Ethics Intranet site orrequest a copy by calling 1-415-973-8685.


Affiliate RulesThe California Public Utilities Commission (CPUC) and the

Federal Energy Regulatory Commission (FERC) haveimplemented affiliate rules to ensure that resources

and assets of the regulated members of the corporate family are not used to subsidize or give

an unfair advantage to our other lines of business.Failure to comply fully with the rules can result in

sanctions, fines, or other serious measures.

If you’re in a position that requires any interaction with other PG&E lines of business, current customers, or potential customers,

you should be familiar with the affiliate rules. One source of information is thePG&E compliance booklet, Interactions in the Corporate Family: An Overview of Affiliate Rules. You can access it on the Compliance and Ethics Intranet site,or request a copy by calling 1-415-973-8685.

Refer specific questions about the rules to the Affiliate Rules Helpline at 1-415-972-7272.

Antitrust Laws Antitrust laws were established to promote economic competition amongbusinesses. Activities that limit competition, restrict trade, or otherwise dominatea market may violate federal or state antitrust laws. Such violations can exposePG&E and individual employees to criminal penalties, large fines, and civil lawsuits.

To avoid potential problems, follow these rules:

> Don’t fix prices or divide markets with competitors unless the agreement will be actively supervised and approved by the appropriateregulatory body.

> When attending meetings or social events with competitors or potentialcompetitors, avoid discussing any of the following information if it’s notpublicly available:

• Prices, pricing policy, contract terms or conditions;

CAUTION


• Costs, inventories, marketing and service plans, market surveysand studies;

• Capacity plans and capabilities, territorial agreements; or

• Any other proprietary or confidential information.

> Don’t suggest or imply to any vendor that it must purchase servicesfrom PG&E in order to sell products or services to PG&E.

> Be careful that any negative or critical comments you make about acompetitor are accurate.

> Don’t use PG&E’s size to intimidate or threaten any individual or organization.

PG&E has developed a booklet and training program on antitrust compliance,which are accessible on the Compliance and Ethics Intranet site. The booklet iscalled Rules for Fair and Legal Competition: An Overview of Antitrust Laws, andmay be requested by calling 1-415-973-8685.

For more specific questions or concerns, ask your supervisor, local compliancerepresentative, or Law Department.

Environmental Laws and RegulationsPG&E is a recognized environmental leader and is committed to conducting itsbusiness in an environmentally sensitive manner. This commitment is consistentwith our Core Values and makes good business sense. Make sure that the decisions you make on behalf of PG&E reflect this commitment.

If you would like more information on environmental compliance, review the PG&E compliance booklet, Protecting theEnvironment: An Overview of EnvironmentalLaws. You can request a copy of the bookletby calling 1-415-973-8685 or access it on theCompliance and Ethics Intranet site. For specific environmental questions or concerns,ask your supervisor, local environmentalspecialist, or the Law Department.



Political LawsGovernment officials shape the legal and regulatory environment in which PG&Eoperates. If you interact with government officials or candidates for public office,or if you provide gifts or contributions to such individuals, you must understandthe laws that control the corporation’s participation in the political process. You should obtain a copy of the compliance booklet, Working with GovernmentOfficials: Compliance with Political Laws, which covers limitations on gifts, theapproval process for contributions, regulatory reporting requirements, and otherimportant information. You can request a copy by calling 1-415-973-8685 oraccess it on the Compliance and Ethics Intranet site.

The Governmental Relations Department, the Charitable ContributionsDepartment, and the Law Department coordinate all contributions and giftsmade to government officials on behalf of PG&E. Don’t make commitments for contributions or provide gifts without consulting them (contributions, 1-415-973-2177 and gifts, 1-415-973-1456).

Remember, giving out squeeze lights or hard hats, allowing public officials to use a PG&E meeting room, or hanging a banner with a bucket truck can constitute making a gift.

Copyright Laws Copyrighted works include, but aren’t limited to, newsletters, magazine articles,newspapers, books, videotapes, drawings, musical recordings, and software.Copyright law protects such works even if they do not include a copyright notice.If you would like to copy material for distribution at work, make sure you havepermission from the copyright holder before making copies.

Before you reproduce a newspaper or magazine article for distribution withinPG&E, check the Copyright Quick Reference List, which includes about 150 publications from which we may make copies. The Quick Reference List is available on PG&E’s Compliance and Ethics Intranet site, and also is posted next to most copy machines. You also may check the Copyright Clearance Center at www.copyright.com or call the publisher to get needed approvals.

Computer software is covered by licensing agreements that typically prohibitunauthorized use or copying. Never make unauthorized copies of software that

is licensed to PG&E. Also, never load unlicensed software onto PG&E computerequipment or download unauthorized software from the Internet. You may, however, install personal software on your company-assigned computer if twoconditions are met: 1) you must hold a software license that permits such aninstallation, and 2) you must have the approval of your supervisor and the localcomputer system administrator.

If you would like more information on copyright compliance, review the PG&Ecompliance booklet, Copying Publications and Software: Compliance WithCopyright Laws. You can access it on the Compliance and Ethics Intranet site, or request a copy by calling 1-415-973-8685.

Foreign Corrupt Practices Act United States companies and their agentsdoing business outside the United Statesmust comply with the provisions of theForeign Corrupt Practices Act (FCPA). TheFCPA prohibits giving or offering anything ofvalue to a foreign official to induce therecipient to misuse his or her official positionto obtain or retain business or secure someimproper advantage. “Anything of value” isdefined broadly, and includes gifts, moneyand services. The prohibition extends to the official’s friends and family members,and includes political parties, party officials, and candidates for political office.

The FCPA also requires accurate records of foreign transactions and reasonableaccounting controls so FCPA issues can’t be disguised or hidden.

Therefore, contact the Law Department before providing any gift, money, or service to a foreign official. Also, keep in mind that simple business courtesiessuch as meals, entertainment, or travel, may be illegal under the FCPA or thelaws of the host country. When doing business in a foreign country or with arepresentative of a foreign country, always maintain detailed records of transactions involving PG&E.


For more information, review PG&E’s FCPA compliance booklet, ConductingBusiness Outside the USA: Compliance With Foreign Business Laws. You canaccess it on the Compliance and Ethics Intranet site, or request a copy by calling 1-415-973-8685.

Facilities Management Operate all company facilities in full compliance with applicable codes, regulations, and laws.If you have a concern or suspect a violation,immediately discuss it with your supervisor orfacility management representative.

Government ContractsGovernment contracts may have special provisions and reporting requirements.Be aware of those special provisions and immediately contact the LawDepartment if any questions arise. Fraudulent or dishonest acts in fulfilling agovernment contract can trigger severe penalties, including fines and jail time,under the False Claims Act.



When faced with a business decision for which there’s no set policy or clearcourse of action, use the Core Values (discussed on page 1) and your own goodjudgment to determine the best approach. In addition, ask yourself the followingquestions:

> Will I feel comfortable with my decision?

> Could I explain it to my parents or children?

> How would it look in a newspaper?

> Have I made a decision that is fair and just?

> Have I verified the significant facts?

> If I’m not sure, have I asked?

> Have I determined if it’s legal and within policy?

CHECKLIST

COMPLIANCE AND ETHICS

DECISION-MAKING

The conduct and compliance standards in this handbook help ensure that all business decisions comply fully with laws, rules, and regulations and demonstrate high standards of ethical conduct. PG&E does not grant waivers to its conduct and compliance standards.

WAIVERS OF

CODE OF CONDUCT


PG&E compliance booklets issued by the Compliance and EthicsDepartment.

AND

RESOURCESREFERENCES

1

These booklets are available from three sources:

> On the Compliance and Ethics Intranet site

> In racks in many facilities throughout PG&E

> By calling the Compliance and Ethics Department at 1-415-973-8685.

Affiliate Rules Interactions In The Corporate Family: An Overview of Affiliate Rules

Antitrust Rules for Fair & Legal Competition: An Overview of Antitrust Laws

Copyright Copying Publications & Software: Compliance With Copyright Laws

Environmental Protecting the Environment: An Overview of Environmental Laws

Foreign Corrupt Conducting Business Outside the USA:Practices Act Compliance With Foreign Business Laws (FCPA)

Insider Trading Insider Trading: An Overview of Laws and Corporate Policies

Political Working with Government Officials: Compliance With Political Laws

The Compliance and Ethics Helpline at 1-888-231-2310.

For more information on the Compliance and Ethics Helpline, contact theCompliance and Ethics Department at 1-415-973-6132.

The Compliance and Ethics Intranet site.

The Compliance and Ethics Intranet site includes the Code of Conduct,information about the Helpline, and on-line compliance training courses.

The Compliance Education Center (CEC) on the Compliance andEthics Intranet site.

The CEC has 30-minute self-paced courses on several compliance topics.Each course highlights key areas of risk and includes a 12-questionchallenge to help you test your understanding of the material. The coursesavailable as of late 2006 are:

> Equal Employment Opportunity > OSHA Injury and Illness Reporting

> Code of Conduct > CPUC Affiliate Rules

> Copyright Laws > Political Laws

> Insider Trading > Antitrust Laws

> Environmental Laws

Other courses will be added over time.

The information provided and procedures set forth in this publication do not confer contractual rightsof any kind on any employee or third party, or create contractual obligations of any kind for PG&E.

2

3

4

If you have questions, contact your supervisor or human resources representative, or call the Compliance and Ethics Helpline at 1-888-231-2310.

> > >

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NOTES


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Printed in USA on Recycled PaperRevised January 2007

Documents

A CULTURE FOUNDED ON INTEGRITY STANDARDS · 2008-10-28 · 1In this handbook, the term “PG&E” refers to PG&E Corporation and its affiliates and subsidiaries, including Pacific