FOR the Valley Business Breakfast | PG&E CEO: Patti Poppe

All right, thank you.

Well, this is going to be fun. Thank you, Tyler. It's so nice to be with everyone. It's so great to call this area home, and what a treat to be with all of you. You know, if I go back in time, to be a CEO? No, I never thought that was in my future. I'm the youngest of seven girls. There's seven of us. My dad was an engineer and desperately wanted one of us to be an engineer, so I was his last ditch, final effort to get an engineer out of the bunch, and succeeded. But he took a stand for me and my career and my life. So I went into operations. I started my career at General Motors. I was at GM for 15 years, all building cars in factories. My dream job after working for a guy named Herb Stone. He came to our plant. I worked in this plant in Detroit, Detroit Hamtramck Assembly Plant. It was a very hard place to work. I was growing up, a young engineer, and the plant was not doing well. It was a bit of a disaster. This leader came in and within maybe a year and a half, two years, he transformed the performance of that plant through us, with us. I realized what a difference it made in the people's lives at that factory to have a great leader. So in my mind at that time, I was whatever, 20 years old, I said I want to be that kind of leader who can transform organizations and make people's lives better by winning, by doing well and succeeding through people and with people. So I set out on my career path to do that. I spent 15 years at GM in operations, moving around, working in different factories, crazy places. I got lots of stories that I'll spare us for another day. I learned a lot about people and learned how to transform. I became sort of a turnaround person. They'd send me to the worst performing place to try and get it back on track. I learned a lot of tricks about how to do that. That's really how I got started in the journey to leadership through people.

I think I had COVID. No. In all seriousness, I was after I left GM, I went to another utility. It was actually our hometown utility. I lived in my hometown of Jackson, Michigan. We lived there because my father had retired from the utility in Jackson, Michigan. I lived two doors down from him and was CEO of our hometown utility. I thought I had achieved all of my career ambitions. I live next door to my sister, next door to my dad in my hometown. It was like a delightful, I couldn't pinch me kind of life that we had achieved and were experiencing. Then the things started happening out here in California. We watched from afar. The whole electric utility industry is a pretty tight-knit group, and we were all watching what was happening. My husband and I many times said, oh my gosh, no one is going to take that job. It is so hard. Then I got the call. I got a few calls. I'm like, no thank you, no thank you, no thank you. Then finally I got a call from our board chair. He had turned around a different utility. He's like, listen Patty, you have too much to offer. He said I was too young, which was not true, but he said you're too young to sit there for the rest of your career. You got one more in you. Come do your professional final exam. My husband and I prayed about it and just said... I used to wonder how do CEOs know what to do. All of a sudden in this moment, I knew what to do. So I said, well honey, what do you think? Eric Poppe, God bless him, said, you know what Patty, I guess we're moving to California. So we came on out. It was December of 2020, so COVID was obviously still a major issue. We found a house here in the area, and I started January 4th. Here we go. We're not done yet, I promise everybody. We got lots more to improve. We've made some progress though, and I'd love for people to hear about that.

Well, what I observed from afar, first I've long subscribed to that idea that at work, there's so much more human element to it than people sometimes respect. It's not just about numbers, it's not just about the outcome, but it's the outcome through people and helping people live a full experience in their work is a gift of love. I stand for joy at work, which is born out of having a real human experience. One of the things that was true here at PG&E when I arrived was our safety performance was not good. I heard from a lot of people that we had to focus on safety. For me, one of the most important acts of love in a workplace is speaking up when something isn't safe, and it's sometimes the hardest thing to do. I've had the unfortunate responsibility to attend funerals of co-workers who died on the job. The expression of love is so intense. People are like, they love the family and they're so sorry and everything, and so sad. My reflection is it's too late. That's not the moment to tell someone you love them. You need to tell them on the job when they're about to do something that will hurt them and forever change their family. Leading with love just becomes a respect for the human element of us in our work. Helping people find their true purpose, helping people discover why they are here and what kind of impact they can have, is a very human kind of thing. I have a funny little story. Back in my car days, I worked for this guy. He was a real car guy. I was working in this factory in Lansing, Michigan. He found out that I didn't know how to drive a stick shift. I just didn't have to learn how to drive a stick shift. He says, well Patty, you're a car executive, you have to be able to drive a stick shift. I'm adding it to your performance review. I'm like, what? Some poor intern had to teach me in the back of the plant how to drive a stick shift. I did it, but I did not like it. Anyhow, he said to me, you're a car person. He said, don't you want to go on this car rally with me this weekend? I'm like, no I don't. I don't care about any of that. He's like, well you make cars for a living. I said, no, no, no, no. I make people for a living. Cars are just our medium. We're changing lives through the work that we do. When we change the life of a person at work, we change the life of their family. When we change the life of their family, we change the life of the community. That's what I have always felt I was up to. I happen to do it in cars, and now I do it in energy. I feel like it's well placed.

Yeah, safety is a culture, it's a mindset. When I arrived here at PG&E, we were having a coworker fatality every 90 days. That is not normal. We have transformed our safety culture. When you think about your professional accomplishments, if I just have that one, I am happy to report today we have gone 719 days without a fatality at PG&E. That snuck up on me. We've changed how we act. This whole point of leading with love, I actually believe it or not, we gather our co-workers. It is our purpose. We say the words. We gather them and we ask them, who do you love? To show the love for your coworker, we use the word love at work. To get a stereotypical line worker, the hero in the darkest night, to express their love for one another and then have the courage to express that love on the job by saying, whoa, wait a minute, let's stop. We've implemented tools and techniques that we had actually at Diablo Canyon Nuclear Power Plant, which is our nuclear power plant in San Luis Obispo. It is one of the highest performing nuclear power plants in the world. They haven't had a fatality in decades. That team is inside PG&E. We actually took the safety guy from Diablo Canyon and put him in charge of the whole thing. We're transforming this culture of how safety shows up every single day. Convert that then to the community safety and all of the challenges that PG&E has a sordid history, going all the way back to the San Bruno gas pipeline incident, through the fires, the Napa fires, the Concade fire, the Z fire, and the campfires. We were having a major catastrophic wildfire as a result of our equipment every year for five years in a row. That had to stop. We have implemented drastic improvements in safety around wildfire and have reduced the risk of wildfire as a result of our equipment by over 90%.

Well, watching those guys be safe. That brings me joy, no doubt. I think just leading people through to do things that they thought were never possible. To help people believe that what seems unachievable is achievable. In fact, we have something we call our Performance Playbook. These are the things that I knew what we needed to do. We've implemented a lean operating system so that we can do our right work right the first time, on time, at a lower cost. Number one, we're doing that. I promise the lower cost part is coming. Number two, helping people believe that our past was not a predictor of our future. I know I've got some PG&E-ers in the house, so thank you to my team for being here today. Imagine being a PG&E-er for a minute and thinking, is this all we are? Are we just destined for disaster? Getting into a position of prevention instead of reaction. I will say if you're in trouble, you want the PG&E team on the job. They can handle it. This team of mine is amazing. We handle a lot of major catastrophes very well, but I want to get out of the catastrophe business and get into prevention, not reaction. Building out this Performance Playbook and teaching people something we call breakthrough thinking. For the business leaders in the house, I think you'll find this a little interesting. It's a real mindset where you say your ordinary thinking, or your current thinking, delivers current actions, delivers current outcomes. But so many people want to shift from their current actions and outcomes to extraordinary outcomes without changing how they think. That actually doesn't work. You just get there slower, more consistently. You're going to get to the same place if you think the same way. So interrupting how people think. Extraordinary thinking delivers extraordinary actions, delivers extraordinary outcomes. As a transition from status quo, instead of going through the crisis, often when you're in a crisis you have to think extraordinary thoughts because you have no choice. But let's skip the crisis part. Everybody just have some extraordinary thoughts without having a crisis. So we really focus on having extraordinary outcomes. One of the classic stories that I'm sure people want to hear about: I had done this breakthrough leadership course for my top leaders. They had gone through a four-day experience. This was in the first year I was on the job. We came out and one of my lawyers came to me and he said, Patty, I have a breakthrough outcome I want to stand for. I said okay. He said, we need to bury the power lines. I'm like, okay, what? Let's have another idea. That one's too hard. He said, no Patty, I'm telling you. I've been representing this company. I'm a lawyer. I've been representing this company through all these disasters. There's only one answer that will actually keep people safe. We need to bury not all of the power lines, but the high risk lines. He called the workshop, the lawyer guy, it was so wonderful. Then he called the engineers and the finance people, of course they had to come, and the regulatory people. We got everyone in this big room. After a day of these people, my engineers had all these great ideas about how we could do it for less. It didn't have to be the most expensive way. There were more affordable ways. In Germany, they had buried this huge transmission line to get wind to the population centers. There were all these facts that we were not seeing. At the end of the day, we came up with we're going to bury the lines. We came up with 10,000 miles to bury. It was born out of this breakthrough thinking. Fast forward, maybe it was two or three months later, the Dixie Fire started a mile from the origin of the Camp Fire. I had to go to Chico, California and tell them that we would try harder was not going to work. I said everybody, we got to tell them we're burying the lines. They're like, Patty, that's insane. We're not ready to tell them that. We know that we're going to do it. I said no, because I know we are going to do it. They need to know that we have changed, that we're not the same old PG&E, that we're going to find a way to do it and we will do it affordably. But we're going to take a stand together as a company. We went to Chico against all of my advisers' best advice. We called a press conference and we told the world we're going to bury the power lines. I know you've heard a lot about this, but I want to demystify two things. Number one, everyone thinks your bill is up because we did that. That is not true. A dollar a month of your bill is for burying power lines. You actually get to build the right infrastructure and spread out the cost over the life of the asset. What is in your bill? $20 a month for vegetation management. $1 a month for undergrounding. $20 a month for vegetation management. It's a bad equation. We cannot take out every tree in California. We have to build infrastructure that's actually designed for the conditions in which we operate. We're going to bury the right amount of lines. The team is working hard. We've cut the cost of it in half. We're not done yet. We're going to keep reducing the cost. We're going to do more of it. We're going to keep you safe and we're going to keep your power on. I know here in Danville, those of you in the area have had a lot of power outages. A lot of them are based on our enhanced powerline safety settings to keep you safe. If something makes contact with the line that's in the air, we de-energize within a tenth of a second if there's fire conditions in the area. That's a massive technology implementation we've done, but it causes outages. In 2023, there were 40 outages in Danville. I'm sorry about that. It's not good enough, and you should not be satisfied. You're not satisfied with it. You've let me know about that. But neither am I. I am also not satisfied with that. We will build infrastructure that is resilient to the climate conditions in which we operate. The beautiful conditions in which we operate, these beautiful trees can stay, but we got to get those lines out of the air in the high-risk areas. That was all born out of this breakthrough thinking. We've got a bunch more stories like that. We're transforming how we do our work.

Yeah, the good news is one of the things that the board of PG&E knew they were looking for was an operator. I think PG&E being operated by an operator and led by an operator is really essential to what gives me confidence that we can in fact solve this whole suite of problems. Because if it was one problem, it would be fine. If it were just wildfire, we've made dramatic progress there, 90% reduction in risk, and yet we're not done. We even see what happened in Southern California just breaks our hearts. But then you combine that with the need for reliability and the need for safety of co-workers and the need for affordability. Solving the suite of them is actually the part that I love the most. It's the complexity of figuring out how to do all of those things simultaneously. In a utility company like ours, those things all do go together. We put into place our Performance Playbook. I talked about the breakthrough thinking. We have a safety management system which is essential to the safety culture I talked about. The lean Playbook is part of that system. We're adopting and implementing the techniques that Toyota developed decades ago, the lean operating systems, to deliver predictable performance, on-time work at the right price, at a lower cost every single day. All of that coming together requires that we capture the hearts and minds of my co-workers because they have to believe that they can do it differently. I've got 28,000 co-workers and 14,000 contractors who work with us every single day. So it's about 40,000 people getting their hearts and minds aligned. We talk about head and heart. We've got the lead with love and loving one another, speaking truth to one another, speaking up when something changes. But there's also having the techniques and the methods and the tools to actually do it differently and teach people how to do that. Last year, the team set out a target. These numbers are going to sound crazy, but to save $850 million in the way we do our work, we actually achieved a billion dollars of savings in the way that we do our work. So we did the same or more work for a billion dollars less than we had forecast in one year. We're going to do it again this year. We're going to do it again next year. One of the things that surprised me when I got to PG&E is if there was any kind of financial crisis, tightness, like we had something went over, so something else has to come in under. Our only choice at the time was to not do something. I talked to some of the builders who are here today. One of our choices, I think in 2022, was to just not connect new customers because we were out of money. That's what we did. It was a terrible situation, terrible idea, terrible decision. But we had no cash. We had just gone bankrupt. We had no cash, and the team had no tools in their kit, which was a big problem. We've transformed that. We're not finished yet, but we have dramatically changed. Last year in the fourth quarter of 2024, we had worked hard to get legislation passed that helped us get the necessary funding flowing. It wasn't that it needed to cost more, but we needed to have cash flow. We got the necessary cash flow, and we were able to pull in our plan for 2024 was to do 9,000 new customer connections. We pulled in an incremental 4,000 connections in the fourth quarter from 2025 into 2024 and did them for half the unit cost because we transformed how we did the work. That wasn't just throw money and people at it. We actually had to change the way we did the work, and we could do it for half as much and achieve a 30% increase in output in one quarter of one year. That's carrying on into this year. All that to say, there are ways to teach people. When you capture their hearts, when you've got their attention and their minds and they trust and they feel safe, then you teach them how to run a great business. Then it's going to be a great business for our customers. You are at the heart of every improvement that we strive to do. We're always talking about how do we serve our friends, our families, our neighbors better every day.

I say I did a 180 about halfway through. Growing up in the auto industry, it was a tough business. I don't know if anybody ever worked automotive, but it's not for the faint of heart. I got Mafia stories, all sorts of things. It's crazy. UAW, oh my goodness. You want to turn the camera off and tell one of them? Yeah, after we'll have a cup of coffee, I'll tell you the rest of the story. About halfway through my career is when I switched from automotive to utilities. I got a call from the head of HR. I was maybe at the utility a month, and I thought in my impression I was in my best behavior. The head of HR calls and says, whoa Patty. He had come from the steel business, from Bethlehem Steel, and he knew what I was up to. He's like, you, that's not going to work around here. You got to be nicer than that. I was like, what? I'm on my best behavior.

Anything yet? She like, trust me, that's not going to fly. So they sent me some version of charm school, if you will, and it worked. It worked. And I actually transformed my leadership. I went from like nothing is ever good enough, and in automotive it felt like it wasn't, and we got to hurry up to get stuff done because nothing's good enough. That's one way to operate, that's not very fun honestly, and my team I think delivered results by working harder. And so I transformed that to anything is possible through God and others, and that became my leadership mantra: anything is possible through God and others, and find joy in the journey. So those two: don't just worry about the destination, but enjoy it as we go. Orient people around possibility, around the idea that they can achieve anything. And believe it or not, you can when you put your mind to it. You just have to believe first. Every great innovation, somebody had to say the ridiculous thing out loud first. Like we're going to bury 10,000 miles of line. It wasn't true when we said it, it was crazy, but we're doing it, and we're doing it smarter, better, faster, safer every day. The idea is orienting a team that they can achieve extraordinary things. And so that mantra for me became really came to life at one of the power plants I was operating. I was power plant director. We had like five power plants. The team, we wanted to create a sense of ownership with the team, so we created small cross-functional teams. And I'm telling you, this is a business secret, you should just write this down because it is extraordinary. I have learned it firsthand that if you get the people closest to the work solving the problems and owning the outcomes, you can get out of the way and let it just happen. But bosses so often think they have to be the one who is deciding, solving. You want to add value, so you get there in the mix of it. And what I learned is you have to just have really clear outcomes. And so we had this power plant that literally the team had told themselves, well, and it was true, the plant was 20 years old and every 90 days we had to come off to do a particular cleaning. The team came to me and said, okay, this cross-functional team that we had, just like I gave them the pep talk, you're the owners, you get to do it. They come and they say, okay Patty, we have an idea. We have an outage scheduled to do one of the cleanings, and it's supposed to be five days. We think it should be 10 days. I'm like, okay, this is going in the wrong direction. We think it should be 10 days, but we're telling you if you give us 10 days, we'll skip the next one. I'm like, well, it's 50, you know, it's not actually, we're not ahead in that scenario. And they're like, okay, will skip two. I'm like, they're making it up, like there's no way. But I had made this commitment to them. I was like, oh gee. So I went to my vice president and I said, okay, here's the deal: we're going to double the length of the outage, but we're going to skip the next two. He's like, you're out of your mind. I said, look, I really think we can do it. I didn't know. I wasn't a power plant operator. Sometimes ignorance is bliss actually running a team. You don't know what they do is a benefit. So I stood for them. They did it, and it turned out not only did they skip the next two, they ran for a year continuous. And you want to know why? It wasn't necessarily because the work they did on the outage, though that was a piece of it. It was because they owned it. When they did their operator rounds, their reputations were on the line. They were at stake. They were the ones who had set their professional reputations out there to say yes we can. We got a big award, longest running plant in history, blah blah blah. And all I had to do was say yes. I just had to say yes to the people who were closest to the work, who knew what to do. And what a leadership lesson for me. I've done that a million times since and it pans out.