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Page 1: Supplier Diversity · its Supplier Diversity Program. • PG&E’s overall purchase base in 2007 increased significantly over 2006 – by more than $487 million—a 2 .45 percent

Supplier Diversity2007 Annual Report • 2008 Annual Plan

Page 2: Supplier Diversity · its Supplier Diversity Program. • PG&E’s overall purchase base in 2007 increased significantly over 2006 – by more than $487 million—a 2 .45 percent

PG&E's headquarters, 245 Market Street, in SanFrancisco received Gold-level LEED™ for ExistingBuildings certification from the U.S. Green BuildingCouncil in 2007. Key attributes include access toalternative transportation; water conservation;efficient heating, ventilation and cooling systems;recycling, composting and use of recycled materials;and use of green cleaning practices.

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� 2007 Annual Report G.O. #�56

BEFORE THE PUBLIC UTILITIES COMMISSIONOF THE STATE OF CALIFORNIA

Order Instituting Rulemaking Into Implementation of Public Utilities Code Sections 828�-8286 Relating to Women Minority – Disabled Veteran Business Enterprises

R. 9�-02-0��

PACIFIC GAS AND ELECTRIC COMPANY (U 39 M)

ANNUAL WOMEN – MINORITY – DISABLED VETERAN BUSINESSENTERPRISES REPORT FOR CALENDAR YEAR 2007

Pacific Gas and Electric CompanyPost Office Box 770000San Francisco, CA 94�77Telephone: (4�5) 973-7000

March �, 2008

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2Pacific Gas and Electric Company

Pacific Gas and Electric Company

2007 Annual Report • G.O. 156

TABLE OF CONTENTS

Section Description Page No.

Annual Report Letter from the President and CEO 3 Introduction and Summary 49.�.� Description of Internal and External Program Activities 59.�.2 Statistical Reports – Index and Reports �49.�.3 Program Expenses 229.�.4 Description of Progress in Meeting or Exceeding Set Goals 229.�.5 Summary of Utilization of WMDVBE Subcontractors 239.�.6 A List of Complaints Received and Current Status 239.�.7 Section 9.�.7 on ‘Excluded Categories’ is no longer applicable9.�.8 Description of Efforts to Recruit WMDVBEs in Low Utilization Categories 249.�.9 Justification for the Continued Existence of Any Excluded

Category 26

Annual Plan�0.�.� Short-Term, Mid-Term and Long Term Goals 26�0.�.2 Description of Planned Program Activities –

Internal and External 26�0.�.3 Plans for Recruiting WMDVBEs in Low Utilization Areas 28�0.�.4 (The former section �0.�.4 on ‘Plans for Recruiting WMDVBEs

in Excluded Categories’ is no longer applicable)�0.�.5 Plans for Subcontracting 28�0.�.6 Plans for Complying with Program Guidelines 29

Fuels Report9.�.�0 Fuels Procurement (Electric Fuel) 29 Fuel Procurement (Gas Fuel) Table I – WMDVBE Purchases Table II – WMDVBEs by Certification Types Table III – WMDVBEs Ethnic & Gender Classification Table IV a – WMDVBE Natural Gas Purchases (Total Canadian and Domestic) Table IV b – WMDVBE Purchases (Canadian Source Only) Table IV c – WMDVBE Natural Gas Purchases (Canadian Source Only) Table V – WMDVBE Participation Goals, 2005 and Beyond Fuels Procurement (Nuclear Fuel)

Photos 36

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3 2007 Annual Report G.O. #�56

LETTER FROM CEO

PG&E SUPPLIER DIVERSITY COMMITMENT

Pacific Gas and Electric Company’s commitment to diversity and a culture of inclusion is central to the way we approach each employee, customer and business partner. Our focus on diversity allows us to anticipate, understand and better respond to the needs of our �5 million customers in the thousands of California communities we serve. We see this as a competitive advantage and a fundamental part of the way we conduct our business.

As a major purchaser of goods and services, PG&E promotes economic vitality by utilizing women-, minority- and service-disabled-veteran-owned businesses. PG&E is committed to integrating diverse suppliers into our supply chain, and we will continue to raise the bar and set aggressive targets. One of our stated values as a company is to “respect each other and celebrate diversity,” which we believe is essential to achieving our vision to become the leading utility in the Unites States.

Bill MorrowPresident and CEOPacific Gas and Electric Company

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4Pacific Gas and Electric Company

INTRODUCTION AND HIGHLIGHTS

For the second year in a row, PG&E exceeded the CPUC 2�.5 percent goal, achieving 2�.7 percent in women, minority, disabled veteran business enterprise (WMDVBE) spend. The company spent almost $600 million with WMDVBEs, the most in the 27-year history of its supplier diversity program. This spend was more than $�00 million more than in 2006.

2007 was a challenging year, and PG&E rose to the challenge. Several corporate strategic initiatives to enhance service to customers and provide value to shareholders created significant hurdles for the Sourcing and Supplier Diversity teams. These initiatives often made it difficult to introduce new WMDVBEs directly into the procurement process. Few WMDVBEs were large enough independently to handle major projects in the generation area, such as replacing old equipment with improved technology. Sourcing and Supplier Diversity worked with prime suppliers to introduce the WMDVBEs into their work process.

Highlights of PG&E’s success:

• PG&E spent almost $600 million with WMDVBEs in 2007, the most in the 27-year history of its Supplier Diversity Program.

• PG&E’s overall purchase base in 2007 increased significantly over 2006 – by more than $487 million—a 2�.45 percent increase. At the same time, working together, Sourcing and Supplier Diversity were able to increase PG&E’s WMDVBE spend by almost $�07 million, a 2�.72 percent year over year increase. PG&E’s WMDVBE spend thus grew at a slightly faster rate than the purchase base.

• PG&E was able to increase its spend in all three categories, minority business enterprise (MBE), women business enterprise (WBE) and disabled veteran business enterprise (DVBE). Overall MBE spend increased almost $68 million, 20.28 percent; WBE spend increased more than $38 million, 28.27 percent; and DVBE spend increased almost $400,000, a �.8� percent increase.

• In 2007, PG&E continued to set targets for its prime suppliers to identify opportunities for smaller WMDVBEs. PG&E hosted and attended events to introduce WMDVBEs to primes. These efforts resulted in a tremendous increase in subcontracting results, which increased almost $46 million, a 32.0� percent increase over 2006.

• PG&E improved significantly year over year in two of the four ethnic categories.

• Asian Pacific spend increased more than $40 million, 38.89 percent. • Hispanic spend increased almost $29 million, 26.9 percent. • Black spend remained at more than $�07 million. • Native American spend slightly declined because a contract with a Native American supplier expired. This supplier chose not to participate in the new bid opportunity.

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5 2007 Annual Report G.O. #�56

Sec. 9.1.1 – A description of WMDVBE activities engaged in during the previous calendar year. This description shall include both internal and external activities.

I. INTERNAL ACTIVITIES

STAFFINGIn 2007, PG&E broadened the knowledge and expertise of its Supplier Diversity team by hiring five new staff members with extensive supplier diversity and community experience. Of the five, PG&E hired three senior Supplier Diversity consultants to support the Hispanic, Asian and Service Disabled Veteran community and key lines of business including Information Systems Technology Services, Energy Procurement, Staff Augmentation, Business Consulting, Energy Delivery Materials, Customer Energy Efficiency, Corporate Real Estate and Transportation. The team also brought on a new manager whose primary responsibility is to increase PG&E’s visibility amongst suppliers, community partners and employees through outreach and advertising. PG&E also promoted a team member to a manager role to focus on ways to promote supplier diversity internally. Finally, PG&E added a supervisor to the team to take a holistic view of PG&E’s internal reporting mechanisms and to recommend areas for improvement.

SUPPLIER SUCCESS STORIESThe most important measure of PG&E’s supplier diversity success is the first and second tier contract and procurement opportunities extended to WMDVBEs. It takes the effort of PG&E’s entire organization, and especially collaboration between Sourcing and Supplier Diversity to integrate new WMDVBEs into the supply chain while increasing business with established suppliers. To identify potential contract awardees, PG&E worked closely with community partners, who provide a steady stream of viable WMDVBEs through their outreach and mentoring activities. The examples below demonstrate some of the efforts PG&E has made to increase opportunities for WMDVBEs.

Agile Sourcing PartnersPG&E’s prime supplier McJunkin is doing business with Agile Sourcing Partners, a WMVBE, that is currently providing the kitting for multiple products. Agile also coordinates the new zinc coating of certain fittings and provides McJunkin with the finished product. McJunkin is mentoring Agile so that it will have more of a footprint in the industry. McJunkin spent $453,000 with Agile in 2007.

All American LogisticsIn 2007 the Supplier Diversity team identified WMDVBE All American Logistics and referred them as a potential resource for the Transportation group. All American Logistics is a woman-owned and operated logistics company based in Manteca, California. Supplier Diversity encouraged this WBE supplier to apply for Clearinghouse certification. As a result, All American Logistics was verified last year. They have been instrumental in assisting PG&E in streamlining freight handling, as well as increasing supplier diversity and small business mentoring programs.

Appraisal, Consulting, Research, Training Inc. (ACRT)PG&E’s prime supplier ACRT reported only $�02,000 (�.25 percent) in WMDVBE subcontracting out of $8.5 million through July 2007. Representatives from the lines of business, Supplier Diversity and Sourcing met with an ACRT representative to discuss how ACRT could increase WMDVBE subcontracting. As a result, PG&E connected ACRT with Pacific Rim Capital, a vehicle leasing company, and several other WMDVBEs. ACRT was able to consolidate all of its leases and subcontracted with Pacific Rim. Through this relationship, ACRT spent $505,000 in 2007 with Pacific Rim Capital and plans to spend more than $2 million with the firm in 2008.

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6Pacific Gas and Electric Company

Bjork Construction Company, Inc.A senior procurement specialist for PG&E was proactive in ensuring WMDVBE participation for Boardwalk jobs worth approximately $�5 million. This employee encouraged Bjork Construction Company, Inc., to complete the certification process. As a result, Bjork Construction is now a qualified WBE for PG&E, contributing $�5 million to PG&E’s supplier diversity results. The purpose of the Boardwalk Project is to replace deteriorated boardwalks to enhance access to transmission lines by providing a means to inspect and maintain PG&E facilities, thereby reducing the risks that lead to outages.

Corestaff ServicesCorestaff Services, a prime supplier with PG&E since �998, recorded the largest percentage contribution ever of WMDVBE subcontracting dollars to PG&E. Through Corestaff’s strategic alliance with WMDVBEs and a commitment to the mentoring and development of traditionally disadvantaged businesses, 2007 resulted in significant growth in WMDVBE spend. Their efforts in 2007 resulted in an increase from 47.4 percent in 2006 to 55.5 percent in 2007, an overall $�4 million contribution to PG&E’s supplier diversity results.

Environmental Business Solutions (EBS)PG&E contacted prime supplier PSC in 2007 to demolish the PG&E Drouin Compressor Station. In support of PG&E’s supplier diversity initiatives, PSC contacted all of its suppliers to see if there were any WMDVBEs that could be considered for subcontracting opportunities. PSC selected certified supplier Environmental Business Solutions (EBS) based on their qualifications compared to other companies. The initial spend with EBS was $299,000 and increased by an additional $60,000. In 2008, PSC will demolish the Brannan Island Compressor station. The total value of the contract award to PSC for this project is $562,000.

Exigis LLCPG&E’s Risk Management department partnered with Exigis LLC, a WMDVBEs, to support PG&E’s insurance certificate tracking system. Exigis LLC provides a Web site that allows PG&E to register its suppliers. Exigis then contacts the supplier and its insurance agent to provide required insurance certificates, which Exigis reviews. Exigis communicates any non-compliance items to the supplier and works with them until the certificate is issued correctly. The contract for 2007 is $75,000 and will be approximately $50,000 in subsequent years. The contract with Exigis will represent 85 percent of the Risk Management department’s budgeted contracting dollars.

Lynx Consulting and Luitporia SoftwareIn November 2007, IT Sourcing reviewed subcontracting opportunities with current PG&E suppliers to determine ways to increase WMDVBE spend in the area of SAP-based solutions or consulting services that specialize in SAP technology. SAP is a software company and does not focus on providing consulting resources. Supplier Diversity assisted IT Sourcing with finding qualified WMDVBEs with SAP-based solutions/consulting services experience. The team conducted an in-depth review including six WMDVBEs and, subsequently, issued a Request for Proposal. PG&E selected two WMDVBE providers, Lynx Consulting and Luitporia Software, to provide SAP-based resources. Each received a contract valued at $�.5 million.

One Source DistributorsOne Source Distributors, a WMDVBE that provides electrical materials for MRO, construction, automation and OEM applications received the Supply Chain Excellence Award at PG&E’s 2007 Supplier Conference. One Source Distributors partnered with PG&E to launch a Vendor Managed Inventory pilot for electrical connectors. One Source’s industry leading business practices, nimble response to special needs and focus on customer service led to their selection for the electrical connector pilot. The pilot was successfully launched on October 22, 2007. The expected pilot benefits include enhanced customer service, as well as reduced inventory and cost of ownership.

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7 2007 Annual Report G.O. #�56

Sodexho America, LLCIn 2007, PG&E’s prime supplier Sodexho America LLC made a significant increase in its level of supplier diversity spend with CPUC-certified suppliers. Sodexho America is nationally recognized for its commitment to diversity. PG&E worked closely with Sodexho to encourage its WMDVBEs to become Clearinghouse certified and to develop new contractual opportunities with certified suppliers. As a result, Sodexho’s spending with certified suppliers increased to �2 percent. Sodexho has committed to increasing this percentage in 2008.

TTR Inc.Majority supplier TTR Inc. submitted a proposal to assemble and install security equipment at PG&E’s Midway and Vacaville Dixon Substations. TTR served as the prime contractor for the job and DC Construction Group Inc. (DCC), a WMDVBE, served as a subcontractor. TTR indicated in its proposal that it wanted to support PG&E’s supplier diversity initiatives by working with DCC, who was already a strategically sourced supplier to PG&E. As a result, DCC received a contract for $92�,000 to provide project management support.

WEB SITES -INTRANETPG&E seeks continuous improvement for both its internal and external supplier diversity Web sites. The internal Web site supports decision-makers seeking opportunities to do business with WMDVBEs. It includes contact information, supplier forms and other resources. The Supplier Diversity team effectively leverages the PG&E intranet to provide basic information to employees.

TRAININGPG&E LeadershipIn the fall of 2006, PG&E’s officers were interviewed by Sarah Lyu Consulting, an Asian, woman-owned supplier who assists corporations with developing, implementing and enhancing supplier diversity programs and provides technical training and certification assistance to WMDVBEs. The interviews revealed that officers felt increased training could help PG&E reach its 2007 company-wide goal of 25 percent. As a result, the company launched a new Supplier Diversity internal education and training program, which focused on the supplier diversity business case, goals and metrics, good faith efforts, accountability, roles and responsibilities, and tools and resources. To help guide the training, Sentenium, a third party WMDVBEs specializing in survey research and data collection, sent participants a survey to gauge their understanding of supplier diversity so that the training could be tailored to the group’s specific needs. As part of the training, participants used personal digital assistants (PDAs) to answer questions to test their knowledge of the material.

Supplier Diversity trained the following PG&E Leadership Teams in 2007:

• Civic Partnership and Community Initiatives • Customer Care • Energy Delivery and Engineering and Operations • Energy Procurement • Finance • Information Systems Technology Services • Legal • Risk Management • Shared Services

In addition to leadership group meetings, the Supplier Diversity director met quarterly with officers to update them on results. More frequent meetings occurred between designated supplier diversity champions and their responsible supplier diversity representatives. On October ��, champions

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8Pacific Gas and Electric Company

participated in a training session about year-to-date results, challenges and opportunities. The training was beneficial because the champions had the opportunity to share information about the activities that have helped their organizations succeed.

Supplier Diversity TeamIn 2007, the Supplier Diversity team continued to work with WMDVBE Jeff Hatchell, President of Over the Top Coaching, on professional coaching and facilitation services, sales and presentation skills. The team also participated in the Senn Delaney cultural workshop, which focused on leadership, teambuilding and cultural-shaping efforts.

The Supplier Diversity director attended the National Minority Supplier Development Council Program Manager’s Seminar, which is an opportunity for supplier diversity professionals nationwide to share best practices. One of the department’s managers participated in PG&E’s Leadership Academy, an internal program designed to further ongoing development.

One of PG&E’s senior Supplier Diversity consultants received Lean Six Sigma Green Belt training in 2007. Lean Six Sigma is a data-driven and disciplined problem-solving approach that uses a proven set of tools and techniques to improve business performance. This approach focuses on getting to the root cause of a problem and resolving it, and ensuring new services and processes are designed right the first time. The training is of great value to the Supplier Diversity team because it promotes alignment with organizational strategies, goals and objectives.

The team also takes advantage of opportunities to learn at workshops held in conjunction with various conferences and supports internal diversity initiatives, such as PG&E’s Employee Associations. The team embraces opportunities to enhance professional skills to better perform their jobs.

ChampionsThe Supplier Diversity team conducted a 50-minute training with PG&E Supplier Diversity champions after the Supplier Diversity Celebration on October ��. The training covered a historical overview, Supplier Diversity business case, goals and metrics, good faith efforts, tools and resources, and commonly asked questions regarding reporting and certification. The training set the stage for 2008 champion strategy and planning, and provided champions the opportunity to share information on improving results.

PG&E SuppliersThe Supplier Diversity team conducted a breakout session on supplier diversity at the annual PG&E Supplier Conference held in San Francisco on December 4-5, 2007. Suppliers learned about PG&E’s supplier diversity goals and how to use the subcontracting reporting tools. Bill Harper, Vice President of Shared Services, Chief Safety Officer and Chief Procurement Officer, and Charles Twamugabo, Senior Director of Supply Chain, reinforced increased accountability for supplier diversity performance at the awards ceremony. Several of PG&E’s prime suppliers participated in matchmaking sessions to gain exposure to WMDVBEs, some of whom were already doing direct business with PG&E. Other WMDVBEs were invited because they provide products and services required by PG&E’s prime contractors.

CERTIFICATIONIn 2007, the Supplier Diversity team designated one point of contact for Asian, Inc., and for any employee needing support to certify a business as WMDVBE-owned. By designating one point of contact, the team was able to reduce the number of calls that Asian, Inc., received directly from PG&E. Having a primary contact also helps PG&E better prioritize and track the progress of a certification and provide the status to key stakeholders. The team initiated a meeting with Asian, Inc., Sourcing managers and Supplier Diversity to help increase the group’s understanding of the certification process and changes to the rules and requirements. PG&E helped Asian, Inc., organize a site visit to its new location in San Francisco by the Joint Utilities, a committee that meets regularly to discuss subjects related to supplier diversity.

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9 2007 Annual Report G.O. #�56

RECOGNITIONSupplier Diversity Celebration On October ��, 2007, Vice President of Shared Services, Chief Safety Officer and Chief Procurement Officer Bill Harper kicked off PG&E’s Supplier Diversity Celebration to recognize those individuals and teams responsible for positively impacting 2006 supplier diversity results. Senior Director of Supply Chain Charles Twamugabo presented the Team and Ambassador Awards. Bill Morrow, Pacific Gas and Electric Company President and CEO, presented the awards for the Leadership and President categories. The event attendees included Supplier Diversity champions, community partners, suppliers and over �5 PG&E officers. Meskerem “Meski” Tadesse, President of the Optimize Group, was the guest speaker. She complimented PG&E on its 2006 supplier diversity achievements and urged the company to think of supplier diversity not as a social responsibility, but as a business imperative that ties to the company’s bottom line. Melanie Shelby, director of Supplier Diversity, recognized representatives from the San Francisco and California Black Chambers of Commerce, California Utilities Diversity Council, California Hispanic Chamber of Commerce, Asian Inc. and the California Public Utilities Commission.

The Diablo Canyon Power Plant (DCPP) team of Mike Meko, Art Madson, Donna Jacobs, John Brower, Pierre Dube, Eric Nelson and Randy Doggett received the Team Award. In 2006, Diablo Canyon achieved breakthrough WMDVBE spending results. The DCPP team, with the assistance of Supplier Diversity, hosted a meeting in San Luis Obispo with prime suppliers, who represent approximately $70 million in annual spend with PG&E. As a result of this meeting, subcontracting results increased from $4,000 in 2005 to $3.8 million in 2006, and a WMDVBE received a $� million janitorial contract.

The Ambassador Award is reserved for individuals who have been steadfast in their efforts to increase spending with WMDVBE businesses. Annette Perazzo, Daran Santi, James Sprecher and Wayne Ciardella received this recognition.

Sandy Hartman, Jeff Butler and Dave Gilbert were recognized in the leadership category for being advocates of supplier diversity in their respective organizations, including holding their employees accountable for achieving established goals and objectives.

Bill Morrow presented the prestigious President’s Award to Portfolio Manager Rudy Promani for his tireless support of supplier diversity. Bill stated that Rudy, “initiates meet-and-greets with WMDVBEs every year for his portfolio. He supports major outreach functions and follows-up with key suppliers that he meets when he has a contracting opportunity. In addition, he works with his primes to identify WMDVBEs that they work with and holds those primes accountable for results. Rudy is also so well-versed in supplier diversity that he can give a full presentation without a Supplier Diversity consultant present.”

The recognition event and champion training were a great opportunity to showcase the accomplishments and innovative approaches to achieving supplier diversity results. In addition, the event reaffirmed PG&E’s commitment to focus on increasing contracts and procurement with WMDVBEs.

Supplier ConferencePG&E acknowledged CH2M Hill with the Supplier Diversity Award at its Supplier Conference on December 4, 2007, for reporting over 33 percent in WMDVBE subcontracting and for its supplier diversity leadership within the environmental industry. WMDVBE One Source Distributors also received the Supply Chain Excellence Award for working with PG&E to launch the Vendor Managed Inventory pilot for electrical connectors.

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�0Pacific Gas and Electric Company

II. EXTERNAL ACTIVITIES

RECOGNITIONA testimony to PG&E’s supplier diversity achievements is the recognition that it received in 2007 from partner organizations. One of the highlights of 2007 was receiving the Hall of Fame Award from the Northern California Supplier Development Council (NCSDC) on March 30, 2007. NCSDC recognized PG&E for its financial support, donated resources and for dollars paid to its members, which equaled a 700 percent increase over the previous year.

In 2007, PG&E received the following additional recognition:

• Asian Enterprise Magazine: Top Corporation for Asian Pacific American Suppliers • Black Enterprise Magazine: One of �5 companies recognized for Supplier Diversity with African American Suppliers • California Black Chamber of Commerce: Diversity and Procurement Outreach Award • California Black Legislative Caucus Foundation: Diversity Award • Diversity Careers in Engineering & Information Technology: Supplier Diversity Award • Hispanic Business Magazine: Number �8 on its list of Diversity Elite • Minority Business News USA: First Ladies of Diversity Award • Northern California Supplier Development Council: Hall of Fame Award

LEADERSHIPBesides providing monetary support to PG&E’s partnership organizations, the Supplier Diversity team was active in several organizations:

• California Hispanic Chamber of Commerce: Corporate Advisory Board • Centro Latino de San Francisco Inc.: Board Member • Congressional Black Caucus: Corporate Advisory Member • Disabled Veteran Business Enterprise (DVBE) Alliance: Corporate Advisory Board Member • Elite Service Disabled Owned Business (SDVOB) Network: Board Member • Northern California Supplier Development Council: Certification Committee, Board Member • San Francisco Hispanic Chamber of Commerce: Advisory Board • United States Hispanic Chamber of Commerce: Corporate Advisory Board

Sourcing employees supported the Supplier Diversity team by speaking to prospective WMDVBEs at trade fairs and attending recognition events. The team was also more successful this year partnering with other lines of business including PG&E’s Customer Care, Government Relations and the Civic Partnership and Community Initiative organization. These groups are an extension of the Supplier Diversity team because they also work very closely with the community. By leveraging resources outside of Supplier Diversity, suppliers gain access to key decision-makers and influencers within PG&E. Participants from these PG&E organizations gain a greater understanding of supplier diversity and are able to disseminate information to potential suppliers when they are out in the community.

COMMUNICATIONPG&E continued to produce its quarterly newsletter. The newsletter is distributed widely to both internal and external audiences. In 2007, the newsletter featured contributions by CEO Bill Morrow and Vice President Sandy Hartman. Bill shared how firsthand experience with diversity has made him take personal ownership for driving diversity and “walking the talk.” Sandy answered questions related to the Law Department’s efforts to increase supplier diversity, including ensuring that WMDVBE law firms are successful at PG&E. The newsletter also included supplier success stories, quarterly results, diversity spotlight, community involvement and upcoming events.

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�� 2007 Annual Report G.O. #�56

WEBSITES -INTERNETThe Supplier Diversity team further updated the PG&E intranet to make it easier for suppliers to certify their businesses with the CPUC Clearinghouse and learn how to do business with PG&E. Toward the end of the year, one of PG&E’s senior Supplier Diversity consultants worked closely with PG&E’s Web Channel group to prepare for a full pge.com Web site re-launch. Some of the enhancements will include a new supplier registration portal, which will enable suppliers to manage and update their profiles. Ultimately, PG&E hopes to have one of the highest-rated supplier diversity Web sites. PG&E will unveil the new supplier diversity Web site in the first quarter of 2008.

ADVERTISINGIn 2007, PG&E worked with Susan Yates Advertising, a woman-owned supplier, to develop a new ad affirming the company’s commitment to supplier diversity. Yates updated the ad to include emblems from the various publications that recognized PG&E as a top company for supplier diversity. Last year PG&E’s ads appeared in the following publications and conference program booklets:

Publications • ALC Daily • African American Business Summit Turning Point Magazine • Bay Area Black Yellow Pages • Black Enterprise Magazine • Diversity/Careers in Engineering • Hispanic Business Magazine • Minority Business Magazine • Minority Business News • Veterans Business Journal

Event Program Booklets • 4th Annual Economic Development Conference • American Association of Blacks in Energy National Conference • American Association of Blacks in Energy Western Region Conference • American Indian Expo • Asian Enterprise Dinner • Astra Advertisement Seattle Conference • Astra Workshop • Bay Area Capital Connection • Black Business Association Convention • California Black Caucus Foundation Golf and Tennis Classic • California Black Chamber of Commerce Convention • California Hispanic Chamber of Commerce Convention • City of Fresno Business Match • Disabled Veteran Business Enterprise Alliance Conference • East Bay Small Business Development Workshop • Edison Electric Institute Conference • Legislative Black Caucus • Madame CJ Walker Luncheon • National Council of La Raza Conference • National Minority Supplier Development Council 35th Anniversary Conference Journal • National Veteran Expo • Northern California Supplier Development Council Business Expo • Northern California Supplier Development Council Gala • Regional Med Week Dinner • United States Hispanic Chamber of Commerce Program

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�2Pacific Gas and Electric Company

Exhibit BoothIn 2007, PG&E worked with Ad Pro, a native American-owned company, to develop a new exhibit booth that better showcased PG&E at external events. At conferences, the team played a video describing how potential suppliers could learn more about PG&E and how their product or service could add value to the company.

ORGANIZATION MEMBERSHIPSIn 2007, PG&E participated in over �00 outreach events. PG&E relies on its relationships with external partners such as the ethnic chambers of commerce, National Minority Supplier Development Council and Women’s Business Enterprise National Council and their local affiliates in order to match WMDVBEs with key decision-makers. These organizations play an integral part in helping PG&E locate WMDVBEs to participate in Request for Proposals. PG&E’s support enables these organizations to fulfill their mission to help WMDVBEs become viable competitors for corporate business. PG&E’s external partners also play a key role in celebrating and marketing the accomplishments of their members.

These memberships include: • �00 Black Women • Alliance for Community Development and the Bay Area Council • American Association of Blacks in Energy • American Indian Chamber of Commerce • Asian Business Association • Asian Enterprise • Astra Women’s Business Alliance • Bay Area 2007 Black Expo • Black Business Association • Black Enterprise • Cal State East Bay Small Business Development Center • California Black Chamber of Commerce • California Department of General Services • California Disabled Veteran Business Enterprise Alliance • California Hispanic Chamber of Commerce • California Utilities Diversity Council • Centro Latino De San Francisco • City of Fresno Hispanic Chamber of Commerce • Congressional Black Caucus Foundation • Edison Electric Institute • Electric Utilities Consultants, Inc. • Elite Disabled Veteran Business Enterprise Alliance • Information Technology Senior Management Forum • Mabuhay Alliance • Metro Chamber Hispanic Chamber of Commerce • Minority Enterprise Development Week • National Association of Women Business Owners • National Center for American Indian Enterprise Development • National Council of La Raza • National Council of Minorities in Energy, Inc. • National Minority Supplier Development Council • National Urban League • Northern California Supplier Development Council • Northern Region California Hispanic Chamber of Commerce • Oakland Black Board of Trade & Commerce

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�3 2007 Annual Report G.O. #�56

• Sacramento Asian Pacific Chamber of Commerce • Sacramento Hispanic Chamber of Commerce • San Francisco African American Chamber of Commerce • Service Disabled Veterans Institute • Silicon Valley Black Chamber of Commerce • Silicon Valley Hispanic Chamber of Commerce • Southern California Minority Business Development Council • Turning Point Magazine • United States Hispanic Chamber of Commerce • United States Pan Asian American Chamber of Commerce • University California Los Angeles MDE Anderson School • Utility Market Access Partnership • Veteran Small Business Federal Interagency Council • Women’s Business Enterprise National Council • Women’s Leadership Exchange/NAWBO California Conference

NATIONAL UTILITIES DIVERSITy COUNCIL PG&E was one of the first utilities to sponsor and support the formation of the National Utilities Diversity Council (NUDC). NUDC is a non-profit organization which focuses on advising and assisting the National Association of Regulated Utility Commissioners (NARUC) and utility corporations to reach their diversity goals in areas of corporate governance, philanthropy, employment, procurement, language access and customer service.

ANDERSON SCHOOLOne way PG&E supports the growth and development of WMDVBEs is through its partnership with the UCLA Anderson School of Management, which helps its students build business, marketing, finance and management skills. In addition to providing monetary support, PG&E sponsored three businesses – Luitporia, Over the Top Coaching and Baymark Signs – for the 4-day program. PG&E celebrated the successful completion of the program with these three WMDVBEs and others at the graduation and reception on May 30, 2007 in San Ramon, California.

Page 16: Supplier Diversity · its Supplier Diversity Program. • PG&E’s overall purchase base in 2007 increased significantly over 2006 – by more than $487 million—a 2 .45 percent

�4Pacific Gas and Electric Company

Sec. 9.1.2 – Statistical Reports – Index and Reports

Supplier Diversity Annual Results By Ethnicity

2007

Direct $ Sub $ Total $ %

MinorityMen

Asian-Pacific 87,30�,495 25,38�,4�4 ��2,682,909 4.�0%

Black 93,259,�68 5,902,396 99,�6�,564 3.60%

Hispanic 68,��8,875 35,073,�99 �03,�92,074 3.74%

Native-American �,455,375 4,669,748 6,�25,�23 0.22%

Other 49,�95 2,728,972 2,778,�67 0.�0%

Total Minority Men 250,�84,�09 73,755,729 323,939,838 ��.74%

MinorityWomen

Asian-Pacific �,960,��5 30,397,459 32,357,574 �.�7%

Black 2,922,664 5,547,28� 8,469,945 0.3�%

Hispanic 25,948,270 7,223,092 33,�7�,362 �.20%

Native-American �30,968 3,47�,�33 3,602,�0� 0.�3%

Other 0 �,096 �,096 0.00%

Total Minority Women 30,962,0�8 46,640,06� 77,602,079 2.8�%

Total Minority Business Enterprise (MBE)

28�,�46,�26 �20,395,789 40�,54�,9�7 �4.55%

Women Business Enterprise (WBE)

�27,595,850 48,407,747 �76,003,597 6.38%

Subtotal Women, Minority Business Enterprise (WMBE)

408,74�,975 �68,803,536 577,545,5�� 20.93%

Service Disabled Veteran Business Enterprise (DVBE)

909,685 20,392,694 2�,302,379 0.77%

TOTAL WMDVBE 409,651,661 189,196,230 598,847,891 21.70%

Gross Procurement 2,759,235,519

Exclusions

Net Procurement 2,759,235,519

*Totals may not add due to rounding.

Page 17: Supplier Diversity · its Supplier Diversity Program. • PG&E’s overall purchase base in 2007 increased significantly over 2006 – by more than $487 million—a 2 .45 percent

�5 2007 Annual Report G.O. #�56

Supplier Diversity Procurement by Product and Service Categories

(000’s)

Products Services TOTAL

$ % $ % $ %

Min

ority

Men

Asian-Pacific Direct 64,3�4,�34 6.48% 22,987,36� �.30% 87,30�,495 3.�6%

Black Direct �5,696,�36 �.58% 77,563,032 4.39% 93,259,�68 3.38%

Hispanic Direct 52,984,5�3 5.34% �5,�34,363 0.86% 68,��8,876 2.47%

Native-American Direct ��3,994 0.0�% �,34�,382 0.08% �,455,376 0.05%

Other Direct 44,6�5 0.00% 4,580 0.00% 49,�95 0.00%

Total Minority Men

Direct 133,153,393 13.41% 117,030,716 6.63% 250,184,109 9.07%

Min

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Wom

en

Asian-Pacific Direct �,049,466 0.��% 9�0,649 0.05% �,960,��5 0.07%

Black Direct 2,426 0.00% 2,920,238 0.�7% 2,922,664 0.��%

Hispanic Direct 584,437 0.06% 25,363,833 �.44% 25,948,270 0.94%

Native-American Direct 0 0.00% �30,968 0.0�% �30,968 0.00%

Other Direct 0 0.00% 0 0.00% 0 0.00%

Total Minority Women

Direct 1,636,329 0.16% 29,325,689 1.66% 30,962,018 1.12%

Total Minority Business Enterprise (MBE)

Direct 134,789,722 13.57% 146,356,405 8.29% 281,146,127 10.19%

Women Business Enterprise (WBE)

48,476,671 4.88% 79,119,178 4.48% 127,595,849 4.62%

Total Women, Minority Business Enterprise (WMBE)

Direct 183,266,393 18.45% 225,475,583 12.77% 408,741,976 14.81%

Service Disabled Veteran Business Enterprise (DVBE)

Direct 558,557 0.06% 351,128 0.02% 909,685 0.03%

TOTAL WMDVBE Direct 183,824,949 18.51% 225,826,711 12.79% 409,651,661 14.85%

Gross Procurement 2,759,235,519

Exclusions

Net Procurement 2,759,235,519

Total Product Procurement 993,107,808

Total Service Procurement 1,766,127,721

Net Procurement 2,759,235,519

*Totals may not add due to rounding.

Page 18: Supplier Diversity · its Supplier Diversity Program. • PG&E’s overall purchase base in 2007 increased significantly over 2006 – by more than $487 million—a 2 .45 percent

�6Pacific Gas and Electric Company

Supplier Diversity Procurement by Product and Service Categories

Products Services TOTAL

$ % $ % $ %

Min

ority

Men

Asian-Pacific sub N/A N/A 25,38�,4�4 N/A 25,38�,4�4 0.92%

Black sub N/A N/A 5,902,396 N/A 5,902,396 0.2�%

Hispanic sub N/A N/A 35,073,�99 N/A 35,073,�99 �.27%

Native-American sub N/A N/A 4,669,748 N/A 4,669,748 0.�7%

Other sub N/A N/A 2,728,972 N/A 2,728,972 0.�0%

Total Minority Men sub N/A N/A 73,755,729 N/A 73,755,729 2.67%

Min

ority

Wom

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Asian-Pacific sub N/A N/A 30,397,459 N/A 30,397,459 �.�0%

Black sub N/A N/A 5,547,28� N/A 5,547,28� 0.20%

Hispanic sub N/A N/A 7,223,092 N/A 7,223,092 0.26%

Native-American sub N/A N/A 3,47�,�33 N/A 3,47�,�33 0.�3%

Other sub N/A N/A �,096 N/A �,096 0.00%

Total Minority Women sub N/A N/A 46,640,061 N/A 46,640,061 1.69%

Total Minority Business Enterprise (MBE)

sub N/A N/A 120,395,789 N/A 120,395,789 4.36%

Women Business Enterprise (WBE)

sub N/A N/A 48,407,747 N/A 48,407,747 1.75%

Total Women, Minority Business Enterprise (MWBE)

sub N/A N/A 168,803,536 N/A 168,803,536 6.12%

Service Disabled Veteran Business Enterprise (DVBE)

sub N/A N/A 20,392,694 N/A 20,392,694 0.74%

TOTAL WMDVBE sub N/A N/A 189,196,230 N/A 189,196,230 6.86%

Gross Procurement 2,759,235,519

Exclusions

Net Procurement 2,759,235,519

Total Product Procurement 993,107,808

Total Service Procurement 1,766,127,721

Net Procurement 2,759,235,519

*Totals may not add due to rounding.

Page 19: Supplier Diversity · its Supplier Diversity Program. • PG&E’s overall purchase base in 2007 increased significantly over 2006 – by more than $487 million—a 2 .45 percent

�7 2007 Annual Report G.O. #�56

Table 6ASummary of Procurement from Women: 2007 Minority and Caucasian Women (in Dollars as a Percentage of Large Utilities’ Total Corporate Expenditures)

PG&E Minority Women Caucasian Women Combined Women Total Corporate

direct$30,962,0�8 $�27,595,850 $�58,557,868

�.�2% 4.62% 5.75%

subcontracting$46,640,06� $48,407,747 $95,047,808

�.69% �.75% 3.44%

combined$77,602,079 $�76,003,597 $253,605,676 $2,759,235,5�9

2.8�% 6.38% 9.�9%

Table 7A2007 DVBE Procurement for Large and Small Utilities(in Dollars and as Percentage of Total Corporate Procurement)

DVBE Procurement Total Procurement

PG&E $2�,302,379 0.77% $2,759,235,5�9

Table 1A2007 Supplier Diversity Procurement Results for Large Utilities

2006 Total Procurement

MBE WBE DVBETotal

WMDVBE

PG&E

Direct$409,65�,66� $28�,�46,�26 $�27,595,850 $909,685 $409,65�,66�

46.95% 2�.3�% 0.�5% 68.4�%

Subcontracting$�89,�96,230 $�20,395,789 $48,407,747 $20,392,694 $�89,�96,230

20.�0% 8.08% 3.4�% 3�.59%

Combined$598,847,89� $40�,54�,9�5 $�76,003,597 $2�,302,379 $598,847,89�

�00.00% 67.05% 29.39% 3.56% �00.00%

*Totals may not add due to rounding.

Page 20: Supplier Diversity · its Supplier Diversity Program. • PG&E’s overall purchase base in 2007 increased significantly over 2006 – by more than $487 million—a 2 .45 percent

�8Pacific Gas and Electric Company

PACIFIC GAS & ELECTRIC COMPANY

CALENDAR YEAR 2007

G.O. #�56 Sec. 9.�.2

Major Group Code Major Group Description Description of Items

07 Agricultural ServicesOrnamental Shrub and Tree Services, Ornamental floriculture

�5 General Business ContractorsIndustrial Buildings and Warehouses,Residential Building, Other Than Single-Family

�7 Special Trade ContractorsCarpentry Work,concrete,electrical,excavation

24 Lumber and Wood Products Wood poles

25 Furniture and Fixtures Office furniture, metal household furniture

26 Paper and Allied Products Envelopes, coated paper, paper mills

27 Printing and PublishingBookbinding and Related Work, typesetting,commercial printing

28 Chemicals and Allied ProductsChemical preparation,Industrial chemicals,paints,varnishes

29 Petroleum and Coal Products Lubricating oils and greases

30 Rubber and Misc. Plastics Products Plastic products,rubber and plastic hoses

32 Stone, Clay, and Glass ProductsConcrete products, ready-mixed concrete,cement

33 Primary Metal Industries Primary metal products,steel pipe

34 Fabricated Metal ProductsHeating Equipment,Fabricated Structural Metal,Miscellaneous Fabricated Wire Products

35 Industrial Machinery and EquipmentMechanical Power Transmission Equipment,Steam, Gas, and Hydraulic Turbines, and Turbine Generator Set Units

36Electronic & Other Electric Equipment

Switchgear and Switchboard Apparatus,Power, Distribution, and Speciality Transformers

37 Transportation EquipmentTruck and Bus Bodies,Aircraft Engines and Engine Parts

38 Instruments and Related ProductsInstruments for Measuring and Testing of Electricity and Electrical Signals

39Miscellaneous Manufacturing Industries

Signs and Advertising Specialties,Marking Devices

42 Trucking and Warehousing Local Trucking

45 Transportation By Air Air Transportation

46 Pipelines, Except Natural Gas Pipelines

47 Transportation ServicesArrangement of Transportation of Freight and Cargo

48 CommunicationsTelephone Communications,Communications Services

WMDVBE Procurement SIC Code Legend

Page 21: Supplier Diversity · its Supplier Diversity Program. • PG&E’s overall purchase base in 2007 increased significantly over 2006 – by more than $487 million—a 2 .45 percent

�9 2007 Annual Report G.O. #�56

49 Electric, Gas, and Sanitary ServicesRefuse Systems,Electric Services (hydroelectric power generation)

50 Wholesale Trade-Durable GoodsElectrical Apparatus and Equipment, Wiring Supplies and Construction Materials,computers

5� Wholesale Trade-Nondurable GoodsPetroleum and Petroleum Products Wholesalers,Stationery and Office Supplies

52Building Materials & Garden Supplies

Hardware Stores,Lumber and Other Building Materials

55Automotive Dealers & Service Stations

Motor Vehicle Dealers

56 Apparel and Accessory StoresMiscellaneous Apparel and Accessory Stores

58 Eating and Drinking Places Eating and Drinking Places

63 Insurance Carriers Fire, Marine, and Casualty Insurance

65 Real Estate Real Estate Agents Managers

72 Personal Services Hotels and Motels

73 Business ServicesHelp Supply Services,Computer Programming Services,Advertising Agencies

75 Auto Repair, Services, and ParkingTop, Body, and Upholstery Repair Shops and Paint Shops,Automotive Repair Shops

76 Miscellaneous Repair Services Electrical and Electronic Repair Shops

78 Motion Pictures Motion Picture and Video Tape Production

80 Health Services Offices and Clinics of Doctors of Medicine

8� Legal Services Law firms

87 Engineering & Management ServicesEngineering Services,Accounting, Auditing, and Bookkeeping Services,Management Consulting Services

Page 22: Supplier Diversity · its Supplier Diversity Program. • PG&E’s overall purchase base in 2007 increased significantly over 2006 – by more than $487 million—a 2 .45 percent

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Page 23: Supplier Diversity · its Supplier Diversity Program. • PG&E’s overall purchase base in 2007 increased significantly over 2006 – by more than $487 million—a 2 .45 percent

2� 2007 Annual Report G.O. #�56

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Page 24: Supplier Diversity · its Supplier Diversity Program. • PG&E’s overall purchase base in 2007 increased significantly over 2006 – by more than $487 million—a 2 .45 percent

22Pacific Gas and Electric Company

Sec. 9.1.3 – Program Expenses

Expense Category 2007 (Actual $)Wages �,202,794Other Employee Expenses �92,2�2Program Expenses 834,740Reporting Expenses �5,000Training 78,090Consultants 3�8,0�5Other 75,699Total 2,7�6,55�

• Wages: Salary and payroll related costs of employees working on WMDVBE matters. • Other Employee Expenses: Office space, travel and other non-wage costs • Program Expenses: Printing, postage, supplies, outreach, and other costs directly related to programs • Reporting Expenses: Computer, accounting, printing, and other expenses in preparing reports to the Commission. • Training: Costs related to training employees (internal) and suppliers (external)

Sec. 9.1.4 – Description of Progress in Meeting or Exceeding Set Goals

Category Current Year Results Current Year Goals

Minority Men ��.74% �2.0%

Minority Women 2.8�% 3.0%

Minority Business Enterprise (MBE) �4.55% �5.0%

Women Business Enterprise (WBE) 6.38% 5.0%

Subtotal Women, Minority Business Enterprise (WMBE) 20.93% 20.0%

Service Disabled Veteran Business Enterprise (DVBE) 0.77% �.5%

Total WMDVBE 21.70% 21.5%

*Totals may not add due to rounding.

For the second year in a row, PG&E exceeded the 2�.5 percent CPUC WMDVBE goal, achieving 2�.7 percent. This is a significant achievement for PG&E, as the 2007 base grew more than 2� percent, or $487 million, over 2006. PG&E achieved 2�.7 percent by spending an additional $�07 million with WMDVBEs, for a total of almost $600 million.

Page 25: Supplier Diversity · its Supplier Diversity Program. • PG&E’s overall purchase base in 2007 increased significantly over 2006 – by more than $487 million—a 2 .45 percent

23 2007 Annual Report G.O. #�56

Line No.

2 Minority MenMinority Women

Minority Business

Enterprise (MBE)

Women Business

Enterprise (WBE)

Women, Minority Business

Enterprise (WMBE)

Service Disabled Veterans Business Enteprise

(DVBE)TOTAL

WMDVBE

3 Direct $ 250,�84,�09 30,962,0�8 28�,�46,�26 �27,595,850 408,74�,975 909,685 409,65�,66�

4 Subcontracting $ 73,755,729 46,640,06� �20,395,789 48,407,747 �68,803,536 20,392,694 �89,�96,230

5 Total $ 323,939,838 77,602,079 40�,54�,9�7 �76,003,597 577,545,5�� 2�,302,379 598,847,89�

6

7 Direct % 9.07% �.�2% �0.�9% 4.62% �4.8�% 0.03% �4.85%

8 Subcontracting % 2.67% �.69% 4.36% �.75% 6.�2% 0.74% 6.86%

9 Total % ��.74% 2.8�% �4.55% 6.38% 20.93% 0.77% 2�.70%

�0

��Gross Procurement $2,759,235,5�9

�2 Exclusion

�3 Net Procurement $2,759,235,5�9

Summary of prime contractor utilization of WMDVBE subcontractors

Sec. 9.1.5 – Summary of Utilization of WMDVBE Subcontractors

Description of progress in meeting and exceeding goalsLarge required investments in infrastructure projects posed a major challenge to PG&E’s supplier diversity efforts during 2007. PG&E attempted to address this challenge by focusing on increasing subcontracting. Starting mid-year, the company began holding weekly Trend Analysis meetings where the team conducted a root cause analysis to assess the data and to develop a course of action. PG&E learned that some of its largest prime contractors were not meeting subcontracting expectations, which was adversely affecting PG&E’s supplier diversity results.

To address this, PG&E began contacting primes while continuing to search for opportunities to increase direct contracting with WMDVBEs. The team sent letters to PG&E’s top 60 prime suppliers who had reported 5 percent or less achievement against their goal with WMDVBEs, requesting that they work harder toward meeting subcontracting expectations. They were also asked to submit a subcontracting plan. The team briefed officers responsible for these prime suppliers, copied them on the letter and asked them to make follow-up calls as needed. The team tracked the results and reported the status at each weekly meeting. As a result of this effort, WMDVBE subcontracting increased $32.8 million.

Working with primes to improve subcontracting results is an ongoing effort at PG&E. Supplier Diversity expectations are communicated at bid meetings, account reviews and at PG&E’s Annual Supplier Conference. Sourcing professionals, lines of business and Supplier Diversity will continue to emphasize WMDVBE subcontracting as critical to helping the company meet its goals.

Sec. 9.1.6 – A list of WMDVBE complaints received during the past year accompanied by a brief description of the nature of each complaint and its resolution or current status.

COMPLAINTSPG&E is proactive in resolving issues that arise as a result of direct or subcontracting relationships. The company did not receive any formal complaints in 2007.

*Totals may not add due to rounding.

Page 26: Supplier Diversity · its Supplier Diversity Program. • PG&E’s overall purchase base in 2007 increased significantly over 2006 – by more than $487 million—a 2 .45 percent

24Pacific Gas and Electric Company

Sec. 9.1.8 – A description of any efforts made to recruit WMDVBEs of products or services in procurement categories where WMDVBE utilization has been low, such as legal and financial services, fuel procurement, and areas that are considered highly technical in nature.

LEGALIn February 2007, the Law Department established a new, more broad-based diversity committee that is open to all attorneys in the department. Each team member is responsible for maintaining and expanding the department’s relationship with a particular minority bar group as well as looking for new opportunities, such as meeting with WMDVBE members. Currently the department works with �9 minority bar groups. This committee also coordinates the newly re-established summer law student program.

The summer law student program is designed to give first year law students who have demonstrated a commitment to diversity the opportunity to gain legal experience relevant to the energy industry. Last summer four students participated in the four week program. The Law Department enriched the experience by arranging for the students to meet with personnel at outside firms and with the CPUC’s summer law students. PG&E will sponsor a similar program in 2008.

In 2007, the Law Department participated in the following activities to increase the utilization of WMDVBEs and strengthen contacts in the minority legal community:

• Attended the annual meetings of the National Bar Association, the Hispanic National Bar Association and the National Asian Pacific American Bar Association.

• Remained actively engaged in the California Minority Counsel Program (CMCP). Members of the department attended the CMCP conference and interviewed diverse counsel for future consideration.

• Attended and moderated a portion of the Minority Corporate Counsel Association West Coast Diversity Dinner.• Continued its involvement with local diverse bar associations (e.g., Asian American Bar Association of

the Bay Area, La Raza, and the Charles Houston Bar Association) by attending events and networking with members of the organizations.

• Expanded the WMDVBE law firm database it maintains and shared the information with Southern California Edison and Sempra to provide additional opportunities for WMDVBE law firms.

• Continued its internal practice of ensuring consideration of WMDVBEs when procuring legal services.• Met regularly with Supplier Diversity representatives to review department procurement spending

and identify areas of opportunity to increase utilization of WMDVBE firms.• Continued to sponsor the Vault website, which provides information regarding diversity at majority

owned firms.• Added more WMDVBE law firms to the Law Department database.• Continued to discuss and seek partnering opportunities for WMDVBE law firms to work with majority

owned law firms.• PG&E and other IOUs jointly hosted quarterly meetings designed to introduce minority owned firms

to members of the Law Department and to personnel from majority owned firms who might be able to offer partnering opportunities. One such event featured a panel discussion of the “dos and don’ts” of partnering.

• Provided support to a Law School Admissions Workshop held at the University of California at Berkeley hosted by the WMDVBE law student organizations at Boalt Hall School of Law. This event was designed to encourage WMDVBE undergraduate students considering applying to law school.

The Law Department’s 2007 memberships included:

• ABA Minority Counsel Program• Asian American Bar Association• Asian Law Caucus• California Minority Counsel Program• Charles Houston Bar Association• Filipino Bar Association of Northern California• Hispanic National Bar Association

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25 2007 Annual Report G.O. #�56

• Korean American Bar Association• Minority Corporate Counsel Association• National Asian Pacific American Bar Association• National Association of Minority and Women Owned Law Firms• National Association of Women Lawyers• National Bar Association• National Native American Bar Association• San Francisco La Raza Lawyers Association• Wiley Manuel Law Foundation

PG&E’s Utilization of WMDVBE Lawyers and Paralegals at Non-WMDVBE Law Firms

The following table shows the extent to which non-WMDVBE law firms retained by PG&E’s Law Department have assigned WMDVBE lawyers and paralegals to work on PG&E engagements. This data has been supplied and certified by law firms that together account for approximately 75 percent of the law department’s payments to non-WMDVBE firms in 2007 for lawyer and paralegal services.

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26Pacific Gas and Electric Company

FINANCE• Designed a multi-year strategy to increase WMDVBE Spend.• Added The Williams Capital Group as a commercial paper dealer in 2007. • Added two qualified WMDVBE institutional money market funds to “approved list” for short-term

investments - The Williams Capital Group and Utendahl Capital Management.• Amended short-term investment policy to waive credit rating requirements in order to allow for investment

in WMDVBE and community bank certificates of deposit, bankers acceptances and time deposits.• The Investments and Benefit Finance (IBF) recommended that the Employee Benefit Committee

(EBC) retain two WMDVBEs as managers of emerging managers to oversee accounts totaling $�50 million in the retirement plan’s US equity portfolio. The EBC retained two such managers.

• Added a qualified WMDVBE investment portal to facilitate the purchase of institutional money market funds - Capital Network Inc.

• Loop Capital Markets, Inc., and The Williams Capital Group, LP, co-managed a PG&E bond offering. • CastleOak Securities and Utendahl Capital co-managed a PG&E bond offering.• Used a minority co-manager, E.J. De La Rosa, on the re-marketing of the PC2004 series.

Sec. 9.1.9 – A justification for the continued existence of any “excluded category” of products or services which has been removed from the procurement dollar base used to set goals because of established unavailability of WMDVBEs. Such justification must include description of any efforts made to find any/or recruit WMDVBEs of products or services in the excluded category.

No categories of products or services have been removed from the procurement dollar base used to set goals because of established unavailability of WMDVBEs.

Sec. 10.1.1 – WMDVBE Annual Short, Mid and Long Term Goals By Products and Service Category

PG&E will continue to attempt to increase dollars spent with WMDVBEs over the previous year and maintain compliance with GO �56. As a company striving to become the leading utility in the United States, PG&E will also continue to challenge itself to adopt best practices and institute stretch goals internally. For PG&E, supplier diversity is about more than compliance; it is about promoting economic vitality. To that end, PG&E commits to a long-term goal of 30 percent with WMDVBEs by 20�0.

PG&E Corporate GoalsShort-term 25.0%Mid-term 27.5%Long-term 30.0%

Sec. 10.1.2 – A description of supplier diversity program activities planned for the next calendar year which includes internal and external program activities.

In 2008, a top priority for PG&E’s Sourcing and Supplier Diversity teams will be to work collectively to exceed the CPUC’s goal of 2�.5 percent through rigorous monitoring and measurement of direct and subcontracting results. In addition, PG&E will strengthen its partnerships with key organizations that have demonstrated success in developing and referring viable WMDVBEs for participation in Request for Proposals.

During the third and fourth quarter of 2007, the team began to identify specific direct and subcontracting projects for WMDVBE participation and to estimate the projected spend for 2008. Blitz teams, comprised of participants from Sourcing, Supplier Diversity, and, in some cases, the lines of business, were created to work with Corporate Services, Maintenance Repair Operations (MRO) and Energy Delivery, Information

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27 2007 Annual Report G.O. #�56

Systems Technology Services, Transportation and Logistics and Technical Services. The team will continue to meet weekly to ensure tasks are on track and to discuss new opportunities. Moving forward, this collective effort and proactive approach helps PG&E ensure that supplier diversity remains a priority.

Other activities that PG&E plans to resume or begin in 2008 include the following:

Champion Program • Enhance the Champion Program to build supplier diversity awareness and officer support within the

lines of business.• Provide more frequent training and support to help champions identify opportunities, set goals and

utilize internal tools such as sourcing databases to identify potential WMDVBEs.

Internal and External Communications • Work with PG&E’s Web Channel group to improve internet and intranet capabilities so that these

sites provide suppliers and employees with a quick and easy means to locate resources.• Seek increased communications with all employees to ensure WMDVBEs are always considered

when sending a Request for Proposal, writing a contract or performing any other procurement function.

• Expand the reach of the employee newsletter electronically and continue to communicate best practices, showcase officer commitment, share success stories and community involvement.

Procurement Process• Provide regular supplier diversity training to procurement specialists. • Ensure compliance with policies, including posting bid opportunities on the PG&E internet and

properly allocating supplier diversity points in the bid scoring process.

Metrics • Continue to enhance reporting capabilities.• Ensure that the data provided to internal and external audiences is timely and accurate.

Subcontracting• Ensure that prime contractors comply with subcontracting plans and goals.• Continue to communicate PG&E’s supplier diversity expectations and offer support to prime

contractors.• Provide greater integration of the Supplier Diversity team within the subcontracting process.

Supplier Development• Continue to offer scholarships for WMDVBEs to attend formal training programs such as the UCLA

Anderson School of Business. • Find opportunities to sponsor WMDVBEs to attend conventions and tradeshows to facilitate

networking opportunities and small business training. • Find opportunities for prime suppliers to mentor WMDVBEs to help them gain insight on doing

business with PG&E and other utilities.• Promote the utilization of Value Added Resellers within the procurement process.

Certification• Take a proactive approach to certifying and re-certifying suppliers to ensure PG&E is receiving full

credit for all WMDVBEs used throughout the Company.• Continue to provide internal and external education about the certification process, including

updates on any rule changes via PG&E communication tools and training venues.

Outreach• Empower community partners to strengthen their organizations by sharing best practices so that

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28Pacific Gas and Electric Company

they are equipped to help PG&E meet its supplier diversity goals through increased access to viable suppliers who are ready to add value to PG&E’s supply chain.

• Increase focus on industry specific events that give WMDVBEs the opportunity to meet with PG&E decision-makers and prime contractors in similar commodity and service areas.

• Engage and partner with community organizations: California Utilities Diversity Council and National Utilities Diversity Council. Continue to benchmark with other utilities through involvement with the Joint Utilities committee.

Sec. 10.1.3 – Plans for recruiting WMDVBEs of products or services where WMDVBE utilization has been low, such as legal and financial services, fuel procurement, and areas that are considered highly technical in nature.

PG&E recognizes the importance of utilizing WMDVBEs in low utilization areas in order to increase supplier diversity. The Supplier Diversity team will continue to promote mentorship and development with decision-makers who oversee these product and service categories. Below are specific recruitment activities planned in the areas of legal and finance.

2008 WMDVBE legal recruitment plans include:• Hire four summer law students for eight weeks.• Continue to be actively engaged with the organizations and WMDVBE bar associations listed above. • Identify additional WMDVBE law firms for inclusion in the Law Department database.• Continue jointly hosting quarterly networking meetings with other IOUs. • Continue to sponsor and use Vault. • Ensure consideration of WMDVBE firms when procuring legal services.• Monitor the diversity of its majority firms.• Meet regularly with a Supplier Diversity representative to review department procurement spending

and identify areas of opportunity to increase utilization of WMDVBE firms.• Continue to discuss and look for "partnering" opportunities.• Expand the Department Diversity Committee to increase outreach efforts and expand pipeline support.

2008 WMDVBE finance recruitment plans include:• Commit to qualify at least one WMDVBE in the commercial paper dealer program each year. • Review potential for WMDVBEs to eventually lead-manage a PG&E bond offering.• Explore the feasibility of setting up a small letter of credit facility with a syndicate of WMDVBEs and

local community banks; WMDVBEs and/or community banks to serve as lead arrangers for letter of credit facility.

• IBF to express annually its interest in employee benefit plan money managers using WMDVBE brokers subject to best trade execution. Managers are referred to the CalPers database of qualified brokers to source potential trading partners.

• Participate in Financial Services Forums to meet WMDVBEs with potential to service PG&E.

Sec. 10.1.5 – Plans for encouraging both prime contractors and grantees to engage WMDVBEs in subcontracts in all categories, which provide subcontracting opportunities.

PG&E set forth in its 2006/2007 Annual Report several objectives to engage WMDVBEs in subcontracting. The team has made progress in implementing many of these steps, including:

• Conducting leadership training with the lines of business and emphasizing the importance of subcontracting with WMDVBEs. In addition, the Supplier Diversity team worked directly with Sourcing representatives to increase accountability for subcontracting reporting.

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29 2007 Annual Report G.O. #�56

• Including subcontracting as a key component in supplier scorecards and ensuring that Sourcing monitors the results versus the goal at account review meetings.

• Recognizing a prime supplier at the annual supplier conference, which also included a matchmaking session between primes and WMDVBEs.

• Participating regularly in bid meetings to communicate supplier diversity expectations.

In 2008, PG&E plans to continue these activities and to find new and creative ways to introduce primes to WMDVBEs. These activities include partnering with primes at outreach activities and encouraging mentoring and development of WMDVBEs. PG&E’s leadership will continue to hold primes accountable for reporting accurate and timely subcontracting spend.

Sec. 10.1.6 – Plans for complying with the Supplier Diversity program guidelines established by the Commission as required by Public Utilities Section 8283 (C). The Executive Director’s Office will be responsible for developing, periodically refining, and recommending such guidelines for the Commissions adoption.

PG&E will continue to engage the California Public Utilities Commission, Joint Utilities Committees, PG&E’s Law Department and other entities that provide oversight, to ensure that it is compliant with G.O. �56.

Sec. 9.1.10 – Fuels Report

INTRODUCTION

PG&E purchases natural gas to serve its core, residential and small commercial gas customers. This section provides PG&E’s Annual Utility Supplier Diversity Program Fuels Report for PG&E’s core natural gas portfolio for 2007 and the Fuels Plan for 2008 as required by G.O. �56. The Fuels Report documents PG&E’s Core Gas WMDVBE natural gas purchases during 2007, and the Fuels Plan submitted with this report reflects PG&E’s strategies and objectives for core natural gas purchases from WMDVBEs in 2008.

PG&E’s Core Gas Supply department purchased $�89,548,�99 of natural gas supplies from WMDVBEs during 2007. The percentage of WMDVBE gas costs compared to total gas costs were 9.29 percent in 2007 (Table I). However, Core Gas Supply purchases the majority of its core natural gas supplies in Alberta, Canada, where there are limited opportunities for US WMDVBEs to conduct business. Excluding Canadian purchases, Core Gas Supply awarded 27.�6 percent of purchases to WMDVBEs in 2007. As discussed in more detail under the section entitled Solicitation List, the number of active WMDVBEs increased from ten in 2006 to �4 during 2007. These statistics are explained further in PG&E’s Core Gas Supply 2007 WMDVBE Natural Gas Purchase Overview, below.

Table I -- PG&E Core Natural GasWMDVBE Purchases, 2007

Annual WMDVBE Purchase Costs Percent of Total Annual Supply Costs

U.S. and Canadian $�89,548,�99 9.29%

U.S. only $�89,547,296 27.�6%

The low “U.S. and Canadian” participation rate compared to the goal of 2�.5 percent reflect the limited opportunities of WMDVBEs to do business in Canada and the continual challenges of volatile market conditions and rigorous financial and credit requirements facing all natural gas market participants. These factors continue to challenge the natural gas industry, hampering WMDVBEs from participating fully in the market. These issues and other trends are discussed in the section entitled Adverse Market Conditions, below.

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30Pacific Gas and Electric Company

PG&E’s 2007 WMDVBE NATURAL GAS PURCHASE OVERVIEW

In 2007, PG&E’s Core Gas Supply department purchased $�89,548,�99 of natural gas supplies from WMDVBEs. This figure represented 9.29 percent of total natural gas purchases by cost, and 9.66 percent of total purchases by volume (see Table IVa). However, during 2007, Core Gas Supply purchased the majority of its supplies from Alberta, Canada. Core Gas Supply’s Canadian supplies represented 66 percent of total annual supply costs, while purchases from U.S. sources represented 34 percent of total annual supply costs. Due to the difficulties of operating in the Canadian market, U.S. WMDVBEs continue to have little or no opportunity to participate in the Canadian natural gas market. During 2007, Core Gas Supply was unable to purchase any Canadian natural gas supplies directly from WMDVBEs, but paid $903 in broker fees to one WMDVBE acting as a broker for some Canadian transactions. With the one exception noted above, Core Gas Supply’s WMDVBEs instead have chosen to participate exclusively in U.S. natural gas markets. Excluding PG&E Core Gas Supply purchases from Canada, and comparing WMDVBE transactions to all purchases made solely from US markets significantly raises the participation rate of WMDVBE gas sales to 27.�6 percent. This represents a �2.28 percent increase relative to US purchases in 2006, the largest annual percentage increase since Core Gas Supply began reporting to the CPUC. In addition, Core Gas Supply did business with more WMDVBEs in 2007. Core Gas Supply transacted with �4 WMDVBEs, representing an increase of 29 percent over 2006.

DESCRIPTION OF 2007 WMDVBE PROGRAM ACTIVITIES

Throughout 2007, PG&E’s Core Gas Supply department sought supply packages with existing WMDVBEs, and attempted to forge relationships with new WMDVBEs. Core Gas Supply conducted informal outreach activities with phone solicitations and personal meetings and core gas traders routinely contacted WMDVBEs from our Solicitation List to purchase prompt month baseload supply packages as well as longer term supply packages.

Outreach ActivitiesPG&E’s Core Gas Supply allocated resources in 2007 to establish and maintain connections to WMDVBEs. The staff continued existing business relationships with WMDVBEs via communications, meetings and telephone discussions. PG&E’s Core Gas Supply analysts executed contracts, established methods of payment, provided assistance to establish credit, helped establish or restore WMDVBE certification, and enhanced banking options as stated in the “Enhanced Credit, Flexible Contracting and Payment” section. Core Gas Supply staff explained its purchase policies and practices and provided other useful information concerning natural gas industry changes and the WMDVBE purchasing program established by G.O. �56. Core Gas Supply also assisted WMDVBEs with establishing contacts with producers/suppliers, and requested cooperation and participation by producers/suppliers in PG&E’s supplier diversity program.

PG&E’s WebsiteIn an effort to reach a wider audience of WMDVBEs, PG&E maintains supplier diversity information on PG&E’s public website. There is also a link to PG&E’s Core Gas Supply Department, including the names of key contacts. These electronic connections provide a description of the CPUC’s Supplier Diversity Program, WMBE and DVBE applicant information, and a description of resources available to assist suppliers in selling products and services to PG&E and Core Gas Supply.

Additional OpportunitiesDuring 2007, PG&E’s Core Gas Supply analysts assisted WMDVBEs with a wide range of support, including promoting broker services. Broker services enable WMDVBEs to match producers/suppliers with Core Gas Supply’s gas buyers, thereby expanding opportunities beyond direct sales of gas to PG&E. WMDVBEs may add value by locating a producer/supplier willing and able to meet PG&E’s terms. The broker arranges the initial contact, and may facilitate the negotiation and assist with the administration.

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3� 2007 Annual Report G.O. #�56

Enhanced Credit, Flexible Contracting and PaymentPG&E’s Core Gas Supply analysts employed flexibility in the areas of payment, contract structure, and purchasing practices to support and promote WMDVBEs. Flexible payment practices have assisted WMDVBEs in securing firm gas supplies by providing additional assurance of payment to their producers/suppliers. During 2007, Core Gas Supply offered the following payment options to WMDVBEs and their producers/suppliers:

Pay arrangements involving Funds Transfer Agents (FTAs). PG&E continues to utilize FTA’s to provide security of payment to the producers/suppliers that a WMDVBE uses.

Third-party contracts obligate PG&E to pay the producer/supplier directly. This was offered at the request of WMDVBEs and/or their producers/suppliers in order to provide greater security of payment to the producers/suppliers enabling them to do more business with WMDVBEs.

These alternate payment options allowed the WMDVBEs greater flexibility in doing business with their producers/suppliers.

PG&E’s Core Gas Supply also accommodated the informational needs of WMDVBEs by affording supplementary staff time to discuss market information and PG&E’s procurement process and requirements.

PERSONAL CONTACTS

As noted in the section above, Core Gas Supply gas traders routinely contacted active WMDVBEs by phone each month during bid week to solicit monthly baseload supplies. PG&E Core Gas Supply management and representatives also met with and called WMDVBEs to discuss PG&E’s purchasing program, including: supplier diversity objectives, establishing and maintaining sufficient lines of credit, payment guidelines, long-term contracts and general contract administration matters. Core Gas Supply personnel also provided assistance with certification to help position these firms to conduct business with PG&E during 2007 and beyond.

In addition, Core Gas Supply continuously reaffirms our commitment to G.O.�56 and our support of WMDVBEs by encouraging producers/suppliers to work with WMDVBEs in marketing supplies and services to PG&E, other utilities and end users.

SOLICITATION LIST

Core Gas Supply maintains a list of WMDVBEs who have expressed an interest in selling gas to PG&E. Core Gas Supply uses this list to track their certification status, and to help ensure that WMDVBEs are contacted on a regular basis regarding sales opportunities. PG&E’s Core Gas Supply WMDVBE Solicitation List increased from �9 firms in 2006, to 20 in 2007. In 2007, Core Gas Supply transacted business with �4 WMDVBEs from its Solicitation List, an increase of 29 percent. In addition Core Gas Supply continued its outreach activities and encouraged inactive WMDVBEs to become an active trading partner.

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32Pacific Gas and Electric Company

Tables II and III below depict Core Gas Supply’s natural gas WMDVBE solicitation list by certification type and ethnic classification.

Table II -- WMDVBEs By Certification Type

Women-Owned 4

Minority Women-Owned 2

Minority Men-Owned �4

Disabled Veteran 0

Total 20

Table III -- WMDVBE by Ethnic and Gender Classification

Minority Female 2

Black American Male 8

Caucasian Female 4

Hispanic American Male 5

Native American Male �

Asian Pacific American Male 0

Disabled Veteran, Male 0

Total 20

NATURAL GAS PURCHASES

PG&E provides opportunities for all suppliers, including WMDVBEs, to compete for its business. In order to meet PG&E’s core natural gas demands, Core Gas Supply maintains a portfolio of supplies of different contract lengths and terms from various supply sources. In order to meet PG&E’s core gas requirements, Core Gas Supply traders typically negotiate prices or accept unsolicited proposals for longer term and prompt month baseload supplies, and purchase daily spot gas in the “swing” spot gas markets. During 2007, PG&E encouraged WMDVBEs to participate in all market activities.

Tables IVa and IVb summarize natural gas WMDVBE contract volumes and dollars awarded by PG&E during 2007. As discussed previously, PG&E’s WMDVBE natural gas purchases totaled $�89,548,�99, or 9.29 percent of PG&E’s total Canadian and domestic (US) supply costs combined, and 27.�6 percent of total domestic supply costs (US Sourced only). There were no WMDVBE purchases directly from Canadian sources. These tables also summarize gas purchases by point, by contract duration, and by ethnicity and gender.

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33 2007 Annual Report G.O. #�56

Table IV a – WMDVBE Natural Gas PurchasesTotal (Canadian and Domestic)January – December 2007

Supply Purchases Only Volume (Dth)Percent

of All Supplies

Cost (US$)Percent of Total Cost

Total Canadian Supplies 2�7,55�,386 �,343,288,033Total Domestic Supplies ���,936,033 697,948,765Total All Supplies 329,487,4�9 2,04�,236,798

Total Canadian WMDVBE Supplies 639,777 903Total Domestic WMDVBE Supplies 3�,204,�5� �89,547,296Total WMDVBE Supplies 3�,843,928 9.66 �89,548,�99 9.29

By Purchase PointCanada 639,777 0.�9 903 0.00US Southwest 3�,204,�5� 9.47 �89,547,296 9.29Total By Purchase Point 3�,843,928 9.66 �89,548,�99 9.29

By DurationBUy-BL ��,586,796 3.52 72,596,�74 3.56BUy-MM 20,257,�32 6.�5 ��6,952,025 5.73Total By Duration 3�,843,928 9.67 �89,548,�99 9.29

By EthnicityMINORITy-MALE BLACK 4,627,337 �.40 29,�4�,33� �.42

WOMEN-CAUCASIAN 9,4�3,�77 2.85 52,926,883 2.60

NATIVE-AMERICAN 6,680,�77 2.03 39,94�,878 �.96

MINORITy-HISPANIC �,3�0,902 0.40 8,294,866 0.4�

MINORITy-FEMALE 9,8�2,335 2.98 59,243,24� 2.90

Total By Ethnicity 3�,843,928 9.66 �89,548,�99 9.29

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34Pacific Gas and Electric Company

Table IV b – WMDVBE Natural Gas PurchasesUS (Domestic) SourcedJanuary – December 2007

Supply Purchases Only

Volume (Dth)

Percent of Domestic Supplies

Cost (US$)

Percent of Total Cost

Total Domestic Supplies ���,936,033 697,948,765

Total Domestic WMDVBE Supplies 3�,204,�5� 27.88 �89,547,296 27.�6

By Purchase PointUS Southwest 3�,204,�5� 27.88 �89,547,296 27.�6Total By Purchase Point 3�,204,�5� 27.88 �89,547,296 27.�6

By BUy-BL ��,586,796 �0.35 72,596,�74 �0.40BUy-MM �9,6�7,355 �7.53 ��6,95�,�22 �6.76Total By Duration 3�,204,�5� 27.87 �89,547,296 27.�6

By

MINORITy-MALE BLACK 4,627,337 4.�3 29,�4�,33� 4.�7

WOMEN-CAUCASIAN 8,773,400 7.85 52,925,980 7.59

NATIVE-AMERICAN 6,680,�77 5.97 39,94�,878 5.72

MINORITy-HISPANIC �,3�0,902 �.�7 8,294,866 �.�9

MINORITy-FEMALE 9,8�2,335 8.76 59,243,24� 8.49

Total By Ethnicity 3�,204,�5� 27.88 �89,547,296 27.�6

CPUC COMPLAINTS

There were no complaints in 2007.

Year 2008 Fuels Plan (Core Natural Gas)

INTRODUCTION

As discussed previously in this report as well as earlier reports, natural gas industry changes during the last few years have presented new barriers for WMDVBEs. PG&E’s Core Gas Supply will continue its efforts to identify and assist verified WMDVBEs, and will endeavor to increase participation from WMDVBEs during 2008.

Goal: Increase WMDVBE ParticipationPG&E’s long-term fuels procurement goal of 2�.5 percent WMDVBEs participation is based on the total cost of natural gas purchases in accordance with the long-term objective suggested by the CPUC in Decision 95-�2-045. Presently, market conditions pose significant issues for both buyers and sellers. These conditions strain natural gas industry participants and create challenges for each and every transaction. However, in recognition that the WMDVBE procurement goal is a worthwhile objective benefiting all parties, PG&E will optimistically affirm a 2�.5 percent participation rate as our long-term objective, and will strive to increase WMDVBE participation during 2008.

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35 2007 Annual Report G.O. #�56

Table V – WMDVBE Participation Goals, 2008 and Beyond

Period 2008 Beyond 2009

Minority �5% �5%

Non-Minority Women 5% 5%

Disabled Veteran �.5% �.5%

Total 2�.5% 2�.5%

2008 WMDVBE Program Objectives

PG&E has established the following objectives for 2008:

Objective #1: Renewed Focus

The objective is to establish renewed focus, and to foster enthusiasm and creativity among PG&E gas employees in transacting business with WMDVBEs. The Core Gas Supply department must overcome significant challenges and obstacles described in this report in order to increase the level of WMDVBE participation. Progress toward meeting the optimistic goals in Table V may only be achieved through sustained efforts by gas purchasing personnel. To stimulate these efforts, PG&E management will reinforce the importance of WMDVBE objectives in meetings and communications to ensure supplier diversity awareness and to instill employee enthusiasm for significant progress toward fulfillment of the G.O. �56 objectives and goals.

Objective #2: 100% WMDVBE Certification

The objective is to certify �00 percent of the WMDVBEs who do business with PG&E. Throughout the year, Core Gas Supply will work with WMDVBEs that may need assistance with certification, credit applications, special third party payment arrangements, or other concerns, in order to ensure that these firms are fully prepared to conduct business with PG&E.

Objective #3: Outreach Programs

During 2008, Core Gas Supply staff will continue to seek new WMDVBEs, and maintain relationships with existing suppliers through our outreach efforts. This will be accomplished through participation in meetings, industry conferences and workshops if available, as well as through networking with marketers. PG&E will continue to provide producer/supplier contacts to WMDVBEs, and will promote and endorse utilization of WMDVBEs to producers/suppliers and other marketers. PG&E will also maintain its supply page internet site, which includes information on WMDVBE certification.

Core Gas Supply will continue to work with WMDVBEs individually and collectively, if possible, to help them understand our business so that they can develop competitive practices when bidding to sell us their products and services. PG&E will actively encourage participation in various gas purchase activities by communicating with and involving WMDVBEs in our business through personal contact, negotiations and solicitation of new business.

Objective #4: Develop New and Enhance Existing Opportunities

PG&E will encourage WMDVBEs to pursue new opportunities by offering them creative contractual arrangements such as broker service agreements. PG&E will also assist WMDVBEs by seeking innovative solutions to credit issues, third-party contracts and payment options.

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36Pacific Gas and Electric Company

Objective #5: Maintain WMDVBE Awareness

Core Gas Supply will produce a report of monthly WMDVBE activity that is made available to all trading employees in the department. The gas trading managers and the Core Gas Supply analysts will conduct formal and informal supplier diversity training as needed to familiarize PG&E gas traders with available vendors and to emphasize PG&E program goals.

Objective #6: Performance Communications

WMDVBE performance communications will be provided to the Core Gas Supply staff and management. These updates will emphasize the importance of reaching PG&E’s fuel procurement diversity goals and will keep key personnel apprised of the level and nature of WMDVBE purchase activities. Gas trading managers and Core Gas Supply analysts will discuss and formulate strategies to stimulate new and innovative interaction regarding existing and new WMDVBEs.

PHOTOS

Representatives from PG&E at the Northern California Supplier Development Council Dinner after receiving

the Hall of Fame award on March 31, 2007.

William Harper, III, Vice President of Shared Services, CSO & CPO addressing the audience at the

California Black Chamber of Commerce Convention on August 15, 2007.

Portfolio Manager, Rudy Promani and President and CEO Bill Morrow photographed at the Supplier Diversity Day Celebration on October 11, 2007 where Rudy received the President’s Award.

Charles Twamugabo, Senior Director, Supply Chain addressing the audience at the Supplier Conference on December 4, 2007.

Page 39: Supplier Diversity · its Supplier Diversity Program. • PG&E’s overall purchase base in 2007 increased significantly over 2006 – by more than $487 million—a 2 .45 percent

PG&E's new supplierdiversity advertisement.

Senior Supplier Diversity Consultant, Steve Machado at the National Hispanic Chamberof Commerce Conference in front of PG&E's new Supplier Diversity Exhibit booth.

Page 40: Supplier Diversity · its Supplier Diversity Program. • PG&E’s overall purchase base in 2007 increased significantly over 2006 – by more than $487 million—a 2 .45 percent

®“PG&E” refers to Pacific Gas and Electric Company,a subsidiary of PG&E Corporation.

©2007 Pacific Gas and ElectricCompany. All rights reserved.

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