Earnings Per Share

6 Months Ended

Jun. 30, 2011

Earnings Per Share

NOTE 6: EARNINGS PER SHARE

For the three and six months ended June 30, 2011, PG&E Corporation's basic earnings per common share ("EPS") was calculated by dividing the income available for common shareholders by the weighted average number of common shares outstanding. For the three and six months ended June 30, 2010, PG&E Corporation calculated EPS using the "two-class" method because PG&E Corporation's convertible subordinated notes that were outstanding prior to June 29, 2010 were considered to be participating securities under applicable accounting standards. Under the two-class method, the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders is divided by the weighted average number of common shares outstanding during the period. In applying the two-class method, undistributed earnings were allocated to both common shares and participating securities. Since all of PG&E Corporation's convertible subordinated notes have been converted into common stock there were no participating securities outstanding as of June 30, 2011.

The following is a reconciliation of PG&E Corporation's income available for common shareholders and weighted average shares of common stock outstanding for calculating basic EPS for the three and six months ended June 30, 2011:

	Three Months Ended June  30,					Six Months Ended June  30,
(in millions, except per share amounts)	2011			2010		2011			2010
Basic
Income available for common shareholders		$   362			$ 333		$  561			$ 591
Less: distributed earnings to common shareholders		-			178		-			347
Undistributed earnings		$     -	(2)		$ 155		$     -	(2)		$ 244
Allocation of undistributed earnings to common shareholders
Distributed earnings to common shareholders		$       -			$ 178		$       -			$ 347
Undistributed earnings allocated to common shareholders		-			149		-			234
Total common shareholders earnings		$     -	(2)		$ 327		$   -	(2)		$ 581
Weighted average common shares outstanding, basic		399			373		397			372
Convertible subordinated notes		-			15		-			16
Weighted average common shares outstanding and participating securities		399			388		397			388
Net earnings per common share, basic
Distributed earnings, basic (1)		-	(2)		$ 0.48		-	(2)		$ 0.93
Undistributed earnings, basic		-	(2)		0.40		-	(2)		0.63
Total		$  0.91			$ 0.88		$ 1.41			$ 1.56

⁽¹⁾ Distributed earnings, basic may differ from actual per share amounts paid as dividends, as the EPS computation under GAAP requires the use of the weighted average, rather than the actual, number of shares outstanding.

⁽²⁾ EPS for 2011 was calculated by dividing the income available for common shareholders by the weighted average number of common shares outstanding.

In calculating diluted EPS, PG&E Corporation applies the treasury stock method of reflecting the dilutive effect of outstanding stock-based compensation. During 2010, when PG&E Corporation's convertible subordinated notes were outstanding, the "if-converted" method was also applied in calculating diluted EPS to reflect the dilutive effect of the convertible subordinated notes to the extent that the impact was dilutive when compared to basic EPS. As noted above, these convertible subordinated notes were fully converted into shares of common stock in 2010 and were not outstanding during 2011.

The following is a reconciliation of PG&E Corporation's income available for common shareholders and weighted average shares of common stock outstanding for calculating diluted EPS for the three and six months ended June 30, 2011:

(in millions, except per share amounts)	Three Months Ended   June 30, 2011		Six Months Ended   June 30, 2011
Diluted
Income available for common shareholders		$  362		$  561
Weighted average common shares outstanding, basic		399		397
Add incremental shares from assumed conversions:
Employee share-based compensation		1		2
Weighted average common shares outstanding, diluted		400		399
Total earnings per common share, diluted		$  0.91		$  1.41

The following is a reconciliation of PG&E Corporation's income available for common shareholders and weighted average shares of common stock outstanding for calculating diluted EPS for the three and six months ended June 30, 2010:

(in millions, except per share amounts)	Three Months Ended   June 30, 2010		Six Months Ended   June 30, 2010
Diluted
Income available for common shareholders		$  333		$  591
Add earnings impact of assumed conversion of participating securities:
Interest expense on convertible subordinated notes, net of tax		4		8
Income available for common shareholders and assumed conversion		$  337		$  599
Weighted average common shares outstanding, basic		373		372
Add incremental shares from assumed conversions:
Convertible subordinated notes		15		16
Employee share-based compensation		2		1
Weighted average common shares outstanding, diluted		390		389
Total earnings per common share, diluted		$  0.86		$  1.54

For each of the periods presented above, the calculation of outstanding shares on a diluted basis excluded an insignificant amount of options and securities that were antidilutive.

Pacific Gas and Electric Company [Member]

Earnings Per Share

NOTE 6: EARNINGS PER SHARE

For the three and six months ended June 30, 2011, PG&E Corporation's basic earnings per common share ("EPS") was calculated by dividing the income available for common shareholders by the weighted average number of common shares outstanding. For the three and six months ended June 30, 2010, PG&E Corporation calculated EPS using the "two-class" method because PG&E Corporation's convertible subordinated notes that were outstanding prior to June 29, 2010 were considered to be participating securities under applicable accounting standards. Under the two-class method, the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders is divided by the weighted average number of common shares outstanding during the period. In applying the two-class method, undistributed earnings were allocated to both common shares and participating securities. Since all of PG&E Corporation's convertible subordinated notes have been converted into common stock there were no participating securities outstanding as of June 30, 2011.

The following is a reconciliation of PG&E Corporation's income available for common shareholders and weighted average shares of common stock outstanding for calculating basic EPS for the three and six months ended June 30, 2011:

	Three Months Ended June  30,				Six Months Ended June  30,
(in millions, except per share amounts)	2011		2010		2011		2010
Basic
Income available for common shareholders		$   362		$ 333		$  561		$ 591
Less: distributed earnings to common shareholders		-		178		-		347
Undistributed earnings		$     -(2)		$ 155		$     -(2)		$ 244
Allocation of undistributed earnings to common shareholders
Distributed earnings to common shareholders		$       -		$ 178		$       -		$ 347
Undistributed earnings allocated to common shareholders		-		149		-		234
Total common shareholders earnings		$     -(2)		$ 327		$   -(2)		$ 581
Weighted average common shares outstanding, basic		399		373		397		372
Convertible subordinated notes		-		15		-		16
Weighted average common shares outstanding and participating securities		399		388		397		388
Net earnings per common share, basic
Distributed earnings, basic (1)		-(2)		$ 0.48		-(2)		$ 0.93
Undistributed earnings, basic		-(2)		0.40		-(2)		0.63
Total		$  0.91		$ 0.88		$ 1.41		$ 1.56

⁽¹⁾ Distributed earnings, basic may differ from actual per share amounts paid as dividends, as the EPS computation under GAAP requires the use of the weighted average, rather than the actual, number of shares outstanding.

⁽²⁾ EPS for 2011 was calculated by dividing the income available for common shareholders by the weighted average number of common shares outstanding.

In calculating diluted EPS, PG&E Corporation applies the treasury stock method of reflecting the dilutive effect of outstanding stock-based compensation. During 2010, when PG&E Corporation's convertible subordinated notes were outstanding, the "if-converted" method was also applied in calculating diluted EPS to reflect the dilutive effect of the convertible subordinated notes to the extent that the impact was dilutive when compared to basic EPS. As noted above, these convertible subordinated notes were fully converted into shares of common stock in 2010 and were not outstanding during 2011.

The following is a reconciliation of PG&E Corporation's income available for common shareholders and weighted average shares of common stock outstanding for calculating diluted EPS for the three and six months ended June 30, 2011:

(in millions, except per share amounts)	Three Months Ended   June 30, 2011		Six Months Ended   June 30, 2011
Diluted
Income available for common shareholders		$  362		$  561
Weighted average common shares outstanding, basic		399		397
Add incremental shares from assumed conversions:
Employee share-based compensation		1		2
Weighted average common shares outstanding, diluted		400		399
Total earnings per common share, diluted		$  0.91		$  1.41

The following is a reconciliation of PG&E Corporation's income available for common shareholders and weighted average shares of common stock outstanding for calculating diluted EPS for the three and six months ended June 30, 2010:

(in millions, except per share amounts)	Three Months Ended   June 30, 2010		Six Months Ended   June 30, 2010
Diluted
Income available for common shareholders		$  333		$  591
Add earnings impact of assumed conversion of participating securities:
Interest expense on convertible subordinated notes, net of tax		4		8
Income available for common shareholders and assumed conversion		$  337		$  599
Weighted average common shares outstanding, basic		373		372
Add incremental shares from assumed conversions:
Convertible subordinated notes		15		16
Employee share-based compensation		2		1
Weighted average common shares outstanding, diluted		390		389
Total earnings per common share, diluted		$  0.86		$  1.54

For each of the periods presented above, the calculation of outstanding shares on a diluted basis excluded an insignificant amount of options and securities that were antidilutive.