One of the biggest stories of the last 5+ years has been the power outages, blackouts, wildfires, and the San Bruno gas explosion that have plagued Northern California and PG&E. Here in B'game, we have had outage issues over the years that lead to the founding of Burlingamers Unwilling to Live with Blackouts (BULB) that appeared to get PG&E to do some equipment upgrades that improved uptime. We have been lucky in not having any wildfires, but anything can happen--there is plenty of fuel in Mills Canyon and throughout our City of Trees and in our up-the-hill neighbor H'borough. Keep your fingers crossed.
The Wall Street Journal published a three and a half full page investigative piece on PG&E on December 28th. If you have access and missed it, go back and read it. Otherwise I will be taking a few excerpts from it to illustrate not only the PG&E failings, but those of the CPUC and Gov. Brown and Newsom. There is plenty of blame to go around. This first installment starts with the revolving door at the top. It's never easy to turnaround a huge operation like PG&E and heavily regulated utilities are even harder than a regular large company. It takes strong leadership, methodological and patient strategy and execution and good relations with the regulator and investors. Stability helps too and we have not had that in the CEO's office.
The Journal article starts with Peter Darbee taking over from 35-year veteran Gordon Smith in 2005. Known as the "Green CEO" who arrived with a plan for "business transformation" using Accenture as a major consultant and a mission to move towards more green power, Darbee fell far short on the earnings front and resigned in the wake of the San Bruno explosion. There was an interim CEO, Lee Cox, until Tony Earley was hired from DTE Energy in Detoit on a "back to basics" theme. Infrastructure investment went up
PG&E traditionally had spent $5 to maintain its far bigger electrical transmission and distribution system for every dollar it spent maintaining its gas network each year. The furor over the San Bruno explosion skewed spending toward gas.
In 2011, the company spent $237.8 million to maintain its gas network, more than twice the amount in 2010, according to federal filings. That spending kept rising, hitting $658.3 million in 2016, when it topped the spending on electric upkeep by $60 million.
Then came the power failure at Candlestick during Monday Night Football. Earnings suffered for a number of reasons and Early was gone in 2011 and
In his final year, PG&E’s average cost of electricity for residential customers had risen an inflation-adjusted 10% to 20 cents per kilowatt hour, among the most expensive of any large utility in the country. Mr. Earley, who had touted his practical-minded, back-to-basics approach, returned to Detroit, never having tamed PG&E.
“We are coming back to Michigan when this adventure is over,” he had promised the Detroit Economic Club two years earlier. “One of the reasons is someone once summed up San Francisco absolutely perfectly. They described the city as 49 square miles surrounded by reality.”
The next CEO, Geisha Williams, had been the PR face of PG&E during the San Bruno aftermath and was elevated to CEO with an emphasis on "affordability" of rates. Then the major fires started and continued
While its service area burned, PG&E’s residential electricity rates averaged 21 cents a kilowatt hour in 2017, rising to 22 cents the next year. Only New York’s Consolidated Edison and San Diego Gas & Electric charged more among the nation’s largest utilities.
She lasted 14 months, followed by another interim CEO, John Simon, until another industry vet, Bill Johnson, was brought in from Tennessee Valley Authority (TVA) in April of last year. In addition to all of the operational issues, Johnson has competing bankruptcy plans to shepherd, an ever climbing green energy mandate to satisfy and hundreds of wildfire and blackout-related claims to work through. That is a lot of change - people and strategy - at the top for any organization to digest while keeping the lights on.
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