PG&E CEO: A ‘culture change’ is underway at the utility

While in Petaluma for the day at a Pacific Gas & Electric Co. employee town hall, CEO Patti Poppe — two years into leading one of the nation’s largest and most controversial utilities — sat down Monday with The Press Democrat for an interview.

In 2020, PG&E emerged from bankruptcy for the second time in its history after causing catastrophic and deadly wildfires many have attributed to years of profit chasing at the expense of infrastructure and maintenance investment.

The consequences continue to play out as fire victims of wildfires caused by the utility between 2015 and 2018 wait to be made whole and PG&E faces trial for sparking the 2020 Zogg Fire, which killed four people. The blaze burned 56,338 acres in southwestern Shasta County and northwestern Tehama County.

At the same time, customers struggle to pay energy bills, which have increased sharply.

Since taking over, Poppe said she is most proud of such efforts as PG&E’s Enhanced Powerline Safety Settings, which use data and technology to deenergize power lines within a tenth of a second if they are touched by something like a branch.

In her conversation with The Press Democrat, Poppe said the company is making strides to correct the program’s byproduct of also causing significant unnecessary unplanned outages that have been disruptive to communities and a major problem locally.

She pointed, too, to the “culture change” underway at PG&E, to go “from being responsive to disasters to one that is preventing them.”

“As the climate continues to change around us, and we here in California, and certainly here in Sonoma County, are feeling some of the most extremes effects of climate change, we know that we can be a force for thwarting the pace of climate change, but also adapting our infrastructure to be resilient to those changes,” Poppe said.

She called PG&E’s program to underground 10,000 miles of power lines in high fire risk areas within a decade, the “bedrock of what will be this climate resilient grid of the future.”

The company undergrounded 180 miles in 2022 and plans to underground 350 miles systemwide and a current goal of 2100 miles by 2026.

Here are more highlights of In Your Corner’s conversation with Poppe, edited and condensed for clarity.

In Your Corner: What is happening with undergrounding in Sonoma County?

Poppe: In 2023 for Sonoma County, we're forecasting about 6 miles. That sounds small — it's 6 miles in Sonoma, 85 miles in Lake County, four miles forecast in Mendocino all in 2023 — but as we build our map, and we'll be filing a plan later this year to the Office of Infrastructure and Energy Safety to show our exact plans for the next 10 years, those miles will go up.

In Your Corner: PG&E has said it’s scaling back some of its undergrounding projections.

Poppe: We had been asked to file our proposed first four years of undergrounding to the (California Public Utilities Commission), which we did. We had a lot of our key stakeholders provide feedback about that, and they felt it was too aggressive, and they wanted to make sure that any plan we made was a plan we could execute. So, we just slowed down the initial ramp, but the total mileage commitment is still the same, and we're still planning those 10,000 highest risk miles to be underground.

In Your Corner: What would you say is at the root of some of the historic mistakes and systemic problems with the company?

Poppe: It’s hard for me to assess what people were thinking then. What I do know (is) successful organizations, like the ones where I've worked and led before, have a mindset about continuously improving their performance every day, and that includes investing in our infrastructure so that it is safer, making sure that we have a workforce who is trained, able and supported. I hear from my co-workers that there have been times where in the past they have spoken up and haven't been heard. So, each day, every team has a morning huddle, and then their team of leaders has a huddle, et cetera, et cetera, and at 10:20 in the morning, every day of the week, I get a briefing about what happened in the field today. The best companies in the world have executives whose dials are turned to hear the voices of our co-workers closest to the front and closest to our customers, and that's where the most important information lives.

In Your Corner: A major issue I hear is that energy costs are becoming unsustainable. Are you concerned about bills becoming unmanageable for many people, especially with more rate increases on the table?

Poppe: We know how important it is to provide this vital resource in the form of electricity, natural gas at the lowest cost possible. The best operators in the world find wasteful processes that they can streamline. For example, originally underground lines had to be buried at 36 inches. We went back and challenged that in our own engineering assessment and identified that if we start burying the lines at 30 inches, which is still deeper than we bury our gas lines, we could save $25 million this year. Last year, we set a target to reduce our cost by 2% after inflation, and we, in fact, reduced it by 3%, so I know the organization has the capacity to find ways to eliminate waste, not do less work, in fact, do more work for less. So, we're working actively on that every single day.

In Your Corner: PG&E’s bill relief programs for vulnerable customers often have household income thresholds that leave many who are struggling ineligible given the high cost of living in much of PG&E’s service region. (For instance, the California Alternate Rates for Energy Program (CARE) and the Family Electric Rate Assistance Program (FERA), that offer monthly discounts, require an income of $36,620 or less for one to two people or less than $69,375 for a household of four, respectively, to qualify for relief.) Is that something the company is looking at?

Poppe: The income limits are set, not by us, but through the state rules. We're always working with the state to look at are those thresholds proper? We'll continue to look at that.

In Your Corner: What do you think about capping bills at the rate of inflation?

Poppe: I don't think it's good to have a blind cap because we need to do the work that's necessary. One of the things I hear from customers is the feeling that PG&E chose profits over safety, and so we didn't invest in the infrastructure to make it safe. I would never want a cap to cause us to not invest in the infrastructure that we need to, but I do think that we are looking hard at how can we make sure that we minimize the cost increases to customers in order to achieve that.

In Your Corner: What would you say about the criticism that customers shouldn’t shoulder the burden for infrastructure work that was neglected over the years?

Poppe: I think that's a kind of spiraling argument that doesn't lead to any improvement. I'm not here to explain away why it is how it is. I'm just here to make it right going forward. Any great infrastructure takes a decision to build it, and we are building it. And in time customers will also receive not just the cost of it but the benefits of that infrastructure being resilient to climate change.

Note: Poppe said costs of litigation, as well as fines or penalties issued against PG&E by the California Public Utilities Commission (CPUC), come out of profits and not customer rates. PG&E can seek cost recovery for wildfire damages not covered by insurance in cases where the CPUC determines the company acted prudently in managing its system.

In Your Corner: PG&E’s stock has been up. What are your reflections and expectations on that?

Poppe: I'm grateful that investors are having more confidence that they can invest in PG&E because there was a period of time where they couldn't and wouldn't and didn't want to. The investors in the utility are often pension funds, teachers’ funds, mom-and-pop kind of investors. I'm grateful that those long-holding investors are coming back.

The hedge funds are less than 10% of our stock holdings now. When I got here, they were 40%, so we've made a big improvement of turnover in the ownership.

We are still very much at a discount to other utilities nationwide, and even in California, so we have a lot more room to grow to catch up with peers so that we can attract the lowest cost capital, so that we can make the system safer faster.

In Your Corner: How does PG&E compare to some of the other California energy utilities?

I would say because of the nature of our service area, and certainly the conditions, but just the size of our service area, particularly these high fire threat areas, we have a much higher footprint of risk. I will say we've learned a lot from our peers in the state. In fact, a nod to San Diego (Gas & Electric) — they have undergrounded a higher percentage of their lines than we have. We went there to see how they were doing it. They were the ones who taught us about this reduced depth of the lines.

In Your Corner: How do you contend with the size of the service area and thoughts about whether it needs to be reduced?

Poppe: That was an early thought I had coming here, and so we, early on in my time, created what we call a regional service model. We’ve taken our service area across the state and divided it into five regions, so that we could have a closer point of contact to those regions. North Coast is where Sonoma is, and we have a regional vice president, Ron Richardson. He is my conduit to this region. And so when Ron calls, and we talk every day, but when he calls and says we've got an issue in the North Coast, he has my direct attention. So in that way, we have shrunk the company. We have to act like a local business. We have to be present.

In Your Corner: Are you supportive of increasing use of microgrids, localized self-sufficient energy systems?

Poppe: I’m very supportive of microgrids. I'm very supportive of new and innovative ways of delivering energy with less wires.

In Your Corner: There's been some criticism that California utilities have a history of undermining solar adoption, for instance, pushing for heavy solar fees or cutting the amount paid to customers for excess power. What are your thoughts?

Poppe: It's an interesting debate. And first of all, we are big believers that rooftop solar, and bulk solar, play a very important role in the energy of the future. I'm definitely pro-solar. What I do want to make sure is that it's priced fairly. It's important that we think about implementing these clean energy technologies, rooftop solar being one of a suite of solutions, that decarbonize our economy, at the lowest societal cost. And so we want to make sure that the costs are borne and shared appropriately. And that's what we care about in that debate. We certainly don't want to thwart the use of solar, we just want to price it right.

“In Your Corner” is a column that puts watchdog reporting to work for the community. If you have a concern, a tip, or a hunch, you can reach “In Your Corner” Columnist Marisa Endicott at 707-521-5470 or marisa.endicott@pressdemocrat.com. On Twitter @InYourCornerTPD and Facebook @InYourCornerTPD.