Good evening. Good evening and welcome. Thank you for joining us for tonight's program. My name is Jenny Park and I am Climate One's executive director. We're in the San Francisco Bay Area and I like to acknowledge that we are on the unceded ancestral homelands of the Ohlone people. They are the original inhabitants of the San Francisco Peninsula and they and other indigenous people are very much still here today doing important work to overcome historic trauma and restore their lands. I'm committed to keep honoring their existence by telling their stories and tread on their land with deep respect and a light step.
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Towards the end of tonight's program, we're going to set some time aside to take some questions from the audience. Please write your name and a concise question and do it all very legibly, please. We have a hard time reading in the dark here. And find the question cards on your seats. We'll then collect your questions toward the end of throughout the program and Greg will then call out folks by name and welcome you to ask the question come up to the microphone that's going to be on this side of the stage in the order that it's called.
Now I understand that a lot of you have a lot of questions and a lot of comments. So I'm going to ask for everybody to hold off on comments on those questions until we actually reach the Q&A portion of the program so that people can actually come and listen to the conversation that they came to hear. Are we okay with that? All right. Thank you. All right.
One more note before I welcome our speakers on stage. I know that some of you may have noticed that Senator Scott Wiener is not on tonight's program. He was unable to join us tonight because of a scheduling conflict. I do apologize and I thank you for your patience and forbearance as we reschedule this program a couple of times and I'm very glad you're here. And with that, let's get to it. Please join me in welcoming Climate One host, co-host and founder Greg Dalton to the stage along with our guest of the night Patti Poppe, CEO of PG&E.
Great to see you here. Thank you everyone. All right. Patti, welcome back.
Hey Greg, great to be here.
Been a little bit since the last time we did this.
Yeah, thank you for having me.
So people are angry about energy prices, you may have heard.
PG&E customers across Northern California saw their costs increase more than 60% from January of 20 to 25. That was double the national average. Since then, PG&E has lowered rates I think five times. So bill you say bills are down $25 or so per month. Prices are still, according to one report, 40% above 2020 levels. So, they went up, then maybe they've come down. What do you say about people cranking about prices?
We're not done yet. Look, we hear the cries. We know those are legitimate concerns from people on the affordability of all things and our bills being one of them. We had a lot of catch-up that we had to do coming out of our bankruptcy. It was a very difficult time for the company and therefore our customers. And I'm happy to report that as you mentioned, we reduced our rates five times in the last 2 years. Our most vulnerable customers' bills are down 23%, but to your point, they went up higher than that. And so, we're continuing to work it. The team is extremely focused. We have an initiative internally that we're working to absolutely continue making our energy more affordable for our customers.
Cuz I have seen that there the company has put in for potential rate increases in the future. Are you planning rate increases in the future?
Yeah, in fact, we filed a rate case last year that would go into effect in maybe in 20 what year we're in 26, we filed it maybe in 25. It goes into effect in January of 27 and it holds rates flat. So, it was the first filing of a rate proceeding like that that would hold bills flat if we got everything that we requested. And so, we did that on purpose. We managed very much our forward-looking costs to make sure that we could keep our energy affordable for customers.
It might surprise you, Greg, actually. For California customers and for our customers specifically, the US average of household spend on electricity and natural gas is about 3%. That's the US average. For our customers, it's 1.7 is the average of household spend. Now, that's not true for There's a range of customers, and we have customers, for example, in the Central Valley who have a high air-conditioning load.
That's not true for them. They're above the US average, and we're working hard to make sure that we have programs for them. But, we use less energy. I do feel like California should take a victory lap on energy efficiency, and of course, our weather is more moderated. And so, even though rates are higher, our energy bills are closer and closer to the US average. So, our goal is to get those bills back to the US average where they used to be.
Right. And that's been what it has been one of California's great stories, the Rosenfeld curve for people who are energy geeks. So, grew the economy, but energy do you know, demand stayed flat. And but a lot of that has changed, and we'll get into data centers and other things shortly. But, you know the critiques that that basically people are questioning the investor-owned utility model that say that, you know, you don't have to compete for customers. You have to compete for capital from Wall Street who can invest in other companies, right? And that you work more for for Wall Street than Main Street because they drive the stock price or your access to capital and other things.
Well, first and foremost, I can assure you our first priority is customers. And in fact, that's what Wall Street wants to. They care very much that we have an ability to serve our customers well. And they track all utilities for that. So, one of the key investment thesis that they'll look at, do you serve your customers well? So, that I find the investor-owned utility model actually aligns customer and investor interests. There aren't winners and losers in that model. And especially now when we are growing demand, that's when the model works best because you can reduce the denominator, the number of kilowatts used, and if you can manage that cost, which we're developing and implementing our lean operating system to manage that cost, if we can grow the denominator, everybody's rates can go down.
And so, the investor-owned model actually is required to grow demand because you have to build infrastructure to serve that demand. And so, if you're going to grow that denominator, you need access to capital, and that's why the IOU model actually can work when a utility like ours is at investment-grade, has low cost of borrowing. We have a challenge because of wildfire liability, which we can talk about, that's costing more for our customers, and we're working hard to fix that.
I mean, it's a little hard to say there's no losers when the company went bankrupt twice, and there's been a lot of I mean, some bondholders, you know, the the bankruptcy, you know, hurts people, the fires hurt people.
Well, that's that's the IOU model not working. And there were absolutely externalities that caused the IOU model not to work in those scenarios.
And you know, as electricity bills have risen, so have the as executive compensation. Nationally, CEOs of top utilities have seen an average of 16% rise in compensation since 2004, outpacing inflation and wage growth, and that that is not just confined to utilities. That's true with other executives. Before your time at the company, PG&E diverted more than a hundred million in dollars in money collected from customers for gas safety in operations, and diverted it to other purposes, including profits and executive bonuses. And the judge, you know, that came out of the San Bruno. So, how do you respond to critics who say investor-owned utilities are more interested in profits than safety?
Well, it's hard for people to assess my values, but I can share with you my values, and safety is number one. And we make decisions every day to make sure that we are operating safely and I can assure you my investors want that, too. They were also obviously affected by the bankruptcy. So, they want to make sure we're operating a safe system and I can assure you that our both our safety culture, the safety of our communities, safety of our customers, our wildfire safety has dramatically improved over the last 6 years. I'm so proud of the progress our team has made on both their own safety knowing that they're worth stopping the job when something isn't right, that they're valued enough that they can make sure that they do it right and do it safe every time, and that our communities are safe. Our layers of wildfire protection have dramatically reduced the risk of Californians all over our service area.
Last time we talked, you talked about undergrounding a lot of mileage of power lines underground to protect them so they don't that that hasn't the your projection for you a couple of years ago hasn't happened. You've undergrounded less. Why is that? And does that mean that you know, we're less safe because you're not putting those grounds the wires underground?
Well, I definitely would have buried more if I could get permission. One of the things that's interesting is in a regulated investor-owned utility model, we are not free to do whatever we want with our customers' money. We have to get approval. We have a very transparent process where our regulator and interested parties weigh in and decide whether they agree with our plan. And if they don't agree with our plan, we have to change our plan. And so, we definitely had a plan to bury more lines faster. I'm proud to say we've buried almost by the end of next year, we'll have 2,000 mi of line buried. We've just filed a request for 5,000 miles more.
We have an ambition to get to somewhere between 8 and 10,000, but actually some of the things we're learning, there are some in some geographies lower cost ways to achieve the similar safety and using technology. If we can do it for cheaper, we would definitely want to do that. And so we're making those trade-offs, but we filed a plan that we think is robust that balances the needs to be safe and is more affordable. Net benefit of our undergrounding plan is billions of dollars of savings for customers because the cost of vegetation management and inspections year after year after year after year far exceeds the cost of burying those lines and spreading out the cost of that infrastructure investment over the life of the assets.
I've seen that around Cali and San Francisco that all the crews cutting down all the foliage and it's going to grow back and land owners cranky cuz you cut down that tree and you know, I see the the visible of that.
Save the trees, bury the lines.
You know, another hot topic is, you know, there's a growing rage where the left and the right have come together around data centers. I've rarely seen something so strong, so quick, so visceral in this country. You know, that they're blamed for increasing consumer electric bills. You also hear that, you know, you say that that actually will spread costs around a broader base. So explain that for us. How that's that you know, this these big energy hogs aren't going to drive up the price for everybody.
Amen. So let's make sure that it's the very simple answer. It's called pricing. You have to charge the right price from the large data center owner operator. And when you charge the right price, they carry more of their fair share and everybody's rates go down.
Can you ensure that they Some people say that that growing load growth we've had basically flat electricity demand in this country for decades. Now it's ticking up or surging because of data centers. Can that be a boost for renewables, or does that mean cuz they want to go so fast, they can't wait for grid interconnection, bring on the fossil fuel gas?
Oh no, we are adding renewables here in California. I'm so proud of the California grid and what the direction between the CEC, the California Energy Commission, the California Independent System Operator, and the CPUC. They forecast the load. They direct what we need to add, and they direct what types of fuel resources to add. And as a result, California has added 33 GW of solar and storage in the last 5 years. And let me give you frame of reference. What's 33 GW? Well, our entire system peak is 50. We've added 33 GW of solar and storage, and in the next 4 years we're going to add 22 GW more of solar and storage. And when you combine that with our amazing hydro system, and our nuclear power resources, and our limited gas here in California, we have one of the most resilient grids in the world. We've already exceeded the limit where people said, 'Oh, you can't have that many renewables.' And yet we just had a little hot spell, didn't we? Does anybody remember a Flex Alert?
Which just means like turn down your air conditioner.
Yes. I don't remember that. It didn't happen. We used to have those, but we've added all of this capacity of clean energy resources. It's fast to build, affordable, and easy to interconnect. And so we're gladly supporting the additional supply to power now this growing load, which is when the model works the best. So, when you have this added supply and we'll be adding transmission infrastructure investments to serve large load and that large load pays its proper price and by the way manages their environmental exposure, uses closed loop either water-free or closed cycle water system, so they're not tapping the important water resources. That should all be very transparent and heavily regulated to make sure that we're not burdening or overusing our natural resources, but it can be the thing that actually rebuilds our grid.
Our grid is old. And in the absence of a new customer coming on, the existing customers have to pay to rebuild all that infrastructure, which is what has been happening. We've been paying to invest and rebuild the infrastructure in our case here in the especially in our high fire risk areas, paying to harden the system for fire risk with a shrinking usage, that's the exact recipe for rates going up like they've gone up.
We need to stop that trend by growing the denominator, powering our tech industry and the amazing jobs and the entire ecosystem that exists here in the Bay Area, power that, power it well, price it right, lower rates for everyone and make sure the environment is cared for as we do it.
So, batteries are beautiful. We didn't quite see the scale that they would adopt of several years ago. They've done a lot, so you don't have to build these peaker plants, which are dirty and expensive. And you seem to be saying that we can manage this big surge and load growth, energy demand because of data centers and they if done right, they won't push costs, Google and Meta, etc. won't make our bills higher.
definitely saying that. And the cool thing about California, first of all, we have 300 plus data centers in California. And those exist and have exist for a long time because what a data center is is a warehouse with racks of computer servers. We have lots of tech companies in California, as we all know, and they need a lot of compute. And so they've had those for years. We're adding more and we can add them well in what I call Goldilocks load. It's not so much that it's a problem, but it's enough to do the good work that we need it to do.
But the scale seems to be that just like something like half a trillion dollars they wanted to the hyperscalers want to deploy this year. So I think the scale that we're seeing and anticipating is different than what we've seen the last few years, right?
Well, and I think when you hear the national headlines, I think we need to compare and contrast. I'm, you know, talking about California. I know you have a national audience, but the national data center infrastructure investments look different than the California infrastructure investments. Ours are smaller projects. We have about 12 gigawatts of applications, which is a lot. Not all of that will get built, but there's 12 gigawatts of applications coming through our system. That's over 50 projects. In some parts of the country, 12 gigawatts might be one project. One enormous project. Or it might be six enormous projects. We're building right-sized compute for our local companies to deliver world-class solutions to the biggest problems, biotech solutions, humanity needed answers that tech can enable. We're going to do that here in the Bay Area. And we can do that in a way that's absolutely beneficial to all customers.
So we realize you run a company based in California, but some of these data centers outside the state, you know, in Utah, the Shark Tank guy wants to build one that's what, 50,000 acres or something like that. That's just mind-blowing. It's hard to put that on the grid without someone paying part
I think that's a different very specific type of infrastructure project and we don't have really any of that large large large demand projects in our pipeline.
So you spent 15 years working for General Motors and you're in the automotive Hall of Fame, pretty cool. Demands of for EVs are expected to double by 2040. Even those, you know, sales have softened recently because of the tax credits, but I'm seeing advertisements for Toyota, which is a real laggard in the EV space. When Toyota's advertising EVs, you know, something strange is going on. So that's going to you know, that's going to add to demand. Is the grid ready to handle data centers and electric stoves, electric cars, electric heaters?
It's the best thing that could happen to the grid. Growing demand will be what funds rebuilding of our aging infrastructure and EVs are the best kind of load because they can act as a battery on the grid. Many of the auto makers now have bidirectional charging vehicles. It's in its very earliest stages, but they can provide your vehicle is the equivalent of depending on the size of vehicle. If you have a GMC pickup truck, we're talking about 10 Tesla power walls. If you have a Chevy Bolt, maybe it's five. But that's five Tesla power walls in your car that you were going to buy anyways. I call it anyways economics. You get a value stack. You're going to buy the car to get around. Oh by the way, it saves you on your fuel cost cuz electricity's cheaper than gasoline. And you have a resilience solution in the occasion that you would need a backup at your home for any number of reasons.
But I can't drive the car away and run the refrigerator at the same time.
True. True. That I mean, obviously you have to count on the resilience of the grid. I don't think anybody's going grid free. But it can absolutely serve as an important resilience. And you can run down to the store and come back and your ice cream will still be okay.
So so you're bullish on EVs, the grid can handle it, and they people should think about bidirectional using their their car as a battery as an energy source as well as a thing to get around. So let's talk about fire safety. You know, obviously rates are a thing, a national issue. But before we go to fire safety, we have politicians running for office right now saying that they're going to solve the affordability problem. They're going to make prices lower for milk and electricity and whatever else. What tools do politicians really have to lower our bills?
Well, one tool they have is to pass wildfire reform and enable PG&E to finally become investment grade. It's our policy that is forcing us to be sub-investment grade. And that for the debt that we've issued since 2017 to today, the life of those bonds, the money we borrowed to build the infrastructure, will cost $4 billion more for my customers than if I were investment grade. And they can in a single day pass a law that would change that.
So that law, you know, died in the legislature this year. California lawmakers rejected a bill that would have shielded PG&E and others from liability if your equipment sparks another fire, which is
It doesn't shield us from liability. It holds us accountable.
It has a disallowance cap in the event that we do not operate the grid well.
So that news that California did not move with that liability cap knocked $20 billion off the market value of your company and Con Edison and Southern California. So, that's shareholders saying, 'Uh-oh, we're on the hook.'
Yeah, I think it's investors who by the way are pension funds and retirement funds and people who are part
hard-earned life savings said, 'That's too risky. California's too risky.' And here's the challenge for California. If capital safe, reliable capital, the best kind of retiree capital will not flow to fund our infrastructure investment, that's a way bigger problem than data centers, I can tell you right now.
So, against that are the cities and counties saying, 'Whoop, we don't want to get stuck with, you know, another Palisades, another Eden fire, you know, campfire, you name the fire.' Can't remember all the fires California's had in the last since Tubbs in 2017. Obviously, the insurance industry. There's a lot of people who don't on the other side of that saying, 'We don't want to basically, when your line sparks a fire, they don't want to foot the bill.'
Yeah, I think the strict liability construct here in California creates a too great of a risk for investor capital and it's too expensive for customers. So, it's they go together. Investors and customers go together, they win together, and they lose together. And today, our customers are losing because it's too expensive to borrow the money to build the infrastructure to keep them safe. It's you know, it's in some ways leading toward that death spiral that you and I talked about years ago that our ability to attract capital is necessary. No matter what kind of utility you are, you have to attract capital from the capital markets to invest in infrastructure. We need infrastructure now more than ever and the infrastructure we can build will lower rates. It's the model working just like it's supposed to, but the model's in neutral right now waiting on legislative action.
See, this is where I can get really get dark because we have homeowners saying they can't afford fire insurance. We have a CEO of a big company saying we can't afford the risk in the system. We have flood insurers have basically left the market. We have all this risk sloshing around that we don't know where to put cuz we can't afford it. And it's And it's like makes me wonder like I mean you're love and hope over here, but like help me, you know, like we have so much unpriced risk in our markets, right? We can't afford all these things that we did What are we going to do? Shove it all to Sacramento and put it on the public balance sheet?
I don't think we need to do that and the proposal that it was being considered for this wildfire liability, I think did a nice job. There was a case that could be made that would strike a good balance and make sure that we are absolutely still held accountable and I am 100% for it and we're in our fourth year without a major wildfire. We are continuing to make our system safer every day at a lower cost. All those things can be true and we can have a system that can attract lower cost capital so everyone's bills can go down even further. So, I see that there's a win there and still remain actually keeping our insurance market open and available for more and more access to homeowner insurance. Now, what I will say and what the report that was published as part of the legislative session in April really showed is that our community and home hardening must improve. So, lots of things can cause a spark.
companies are already having people 5 ft set back and all that.
We need more and more building codes like that, just like earthquake. You have to have mandatory earthquake permitting and necessary strengthening of your buildings. Wildfire is exactly the same. Our communities are not ready for the environmental catastrophes in the environment in which we live, and
We need to actually send a proper price signal to a homeowner and a property owner so they can see, 'Oh, my risk is higher here. If I invest X, my insurance rate can go down Y.' We need the ability for that insurance market to work. In the hurricane states, they had obviously the same problem with high-cost insurance due to hurricanes. Now, there's no one to blame in a hurricane, and so there's not a lot of all this friction about who's going to sue who and what lawyers are going to make what and who's going to try and get the most.
Fair enough. Fair enough. That's okay. Okay, well, we'll set that aside. In Florida, and I agree with you on that point, just to be clear. But on the hurricane point, with the insurability of homes along the coast, temporarily they had to raise the cost of insurance so that homeowners would have the signal of this is what I need to do to invest to make this home hardened to hurricanes. Now, many of those homes are hardened and they get much less damage during an event. They buried all the power lines. The entire distribution system in the hurricane zones in Florida are underground. They did not meet the resistance that I'm meeting about being able to do that infrastructure work. Those systems are safer, they're more reliable, and now insurance costs are going down because when they do have a hurricane, significantly less damage occurs. We need that in California. We must harden our communities to these catastrophes. Fires start with lightning. They start with a chain being dragged accidentally behind a truck. They start with all sorts of accidents and yes, power equipment that sparks by design can cause, even when we're operating it perfectly, can cause a fire. We need to invest in the spread resistance and make our communities safer even when there is a spark. That is an important choice that the state can make collectively with good building codes, and this legislative package included some things about hardening and incentives to do so.
And a lot of resistance from wooded, wealthy, often affluent communities nestled in oaks in Mill Valley or Woodside. A lot of people don't want to hear that or do that. So if a PG&E line causes another major fire, what happens? Who pays?
Well, we have two funds that have been established to pay claims in the event of a wildfire. And so those funds were funded 50% by shareholders and 50% our customers. And as the law, the law actually would have customers pay 100% of them, but we've invested, our shareholders have funded those two funds 50/50. The concern from our investors is they don't want to keep doing that, and they do have choices of where to put their capital. And they, as you mentioned, they left California when the law didn't pass this year, and that's a problem for California. And I'll ring the bell in every corner that I can to say there's a way to fix it. We need to fix it, and we need to take action to do so.
Widespread outages last winter outraged customers here in San Francisco who are paying high prices for unreliable service. And just two weeks ago we had a power outage in this building. In fact, this was before your time. I was right in this room interviewing Robert Gibbs, who was President Obama's White House press secretary, and the power went out. And so, pretty soon I'm in the closet back there with the guy who I used to see in the White House press briefing, and we're knee to knee doing an interview because the power went out. So, you know, that's added to calls to break up PG&E. You know, there was a bill going through the legislature. It seems like it's been stuck in committee. So, you know, what about the divorce with San Francisco?
Let me just say we love San Francisco. My coworkers and I love serving San Francisco. San Francisco's expectations are high, and we...
You moved your headquarters out of San Francisco to Oakland.
Somebody before me did that. But I have... I love looking out here. I'd be very happy to move in. I'll move in next door to your office here. But look, we love serving this city. I have a thousand of my coworkers live in the city. 600 of them work and serve San Francisco every single day. We want to measure up to the expectations of the city. Some of the outages that you're experiencing right now are us fixing the system. And we're making it better every day. We have an incredible team and we've beefed up that team here in town. I have a great new head of energy delivery, Jason Regan, who is a superstar born here in the city, loves the city, has spent his life and his career at PG&E, and he is leading our team here in San Francisco. We intend to measure up. We're investing in hardening the system. The way the system is designed in San Francisco today, we believe when there is an incident that causes an outage, too many people are affected by that outage, and there's technology and things that we can do to make that system, when there is an outage, affect much fewer people. We've got 23 projects we've completed already year-to-date. We've got more we're doing here between now and year-end to shrink the effect. And I know people aren't going to believe what I'm about to say, but it is a fact. Our customers' experienced outage minutes here in the city are 23% less than they were a year ago, and we're just getting started and we've turned a corner. We are going to continue to make it more reliable. We've got an entire team dedicated to making sure that this system is resilient and reliable to the expectations. Look, the December 20th event was a devastation to us. We let you down.
Christmas time and people, yeah.
