At the beginning of a 28 May 2020 court hearing, U.S. District Court Judge William Alsup made the following opening statement, “If there ever was a corporation that deserved to go to prison, it is PG&E for the number of people it has killed in California.” Pacific Gas and Electric’s (PG&E) survival for the last decade has been described in some detail in Parts 1 and 2 of this three-part article. The vox populi of the courts, regulators, fellow utilities, businesses, and customers has most of the time fallen on deaf ears with the leadership of PG&E. The facts that create this type of environment are extremely complicated.
The settlement of PG&E’s tumultuous past is, as always, the beginning of the next adventure. How PG&E’s corporate face may look in ten years or whether it will even exist depends on the legal settlements resolved and their ability to change the corporation’s culture. Part 3 begins with an explanation of the various settlements required.
The settlements involved in emerging from bankruptcy and setting the course for the future involve multiple segments of PG&E’s legal, financial, corporate, and customer environments. The settlements also control the starting point for PG&E’s new future and the hoped-for aftermath of success. The key elements are highlighted below:
- PG&E’s emergence from bankruptcy with a $58 billion restructuring plan – the plan is approved by both the California Public Utility Commission (CPUC) and the Federal District Bankruptcy Court.
- The payment of $13.5 billion to the victims of multiple fires during the 2017 and 2018 fire season for property damage, physical injuries, and emotional distress.
- The payment of $5.4 billion into the newly created Wildfire Trust Fund for future victims of wildfires.
- The payment of $3.5 billion in state fines for deadly wildfires, $500,000 to cover investigative costs, and $15 million for a water delivery system in the Town of Paradise, California.
- Agreement with California Governor Gavin Newsome and the CPUC on a reorganization plan covering vegetation management, regional focus of service, replacement of most of the board of directors, and appointment of a new chief executive officer. A noteworthy item about the board is that Craig Fugate, former Federal Emergency Management Agency (FEMA) administrator, has been appointed to the PG&E Board.
The public is unlikely to forgive or forget PG&E’s criminal negligence related to flawed policies for vegetation management or infrastructure replacement.
PG&E supplies electricity and natural gas to 16 million customers, which is about 1 in 20 Americans. It also tends to support the claim that PG&E is too large to handle its customer service needs efficiently. There is no indication that the public is going to forgive or forget the criminal negligence that has caused death and destruction in San Bruno or Paradise, or any other of the communities affected by the company’s flawed policies involving vegetation management or infrastructure replacement. This predicament tends to indicate a Sisyphean task about re-organization that may never change the company’s public image. However, in all fairness, here are the key highlights of the plan:
- Rebuild the boards of directors of PG&E Corporation and the Pacific Gas and Electric Company.
- Regionalize the company’s operations to focus on local customers.
- Appoint an independent safety advisor after the term of the court-appointed federal monitor expires.
- Establish a new chief safety officer and a new expanded role of chief risk officer, who reports directly to the chief executive officer.
- Form an independent safety oversight committee (ISOC) with non-PG&E employees to provide review of the company’s operations.
- Commit to enhanced safety metrics and stricter oversight.
- Reform executive compensation focused on safety performance.
- Pay value in excess of $25 billion to wildfire victims through settlements.
The political atmosphere in California appears close to overload status. Beginning with Governor Newsome’s efforts to solve the service delivery problem and backed by the outcry of the public, it could be assumed that PG&E is getting one last chance to deliver on its promise of safe electric and natural gas service. Both the governor’s and CPUC’s demands were met after the threat of a government takeover subsided. Consultants and politicians spoke openly about different types of organizational structure for trimming PG&E down in size. PG&E’s response was regionalization of service. At the same time, the state created a fund to help utilities deal with wildfire costs throughout the state. The governor’s insistence that PG&E’s board be replaced and that six appointees to the board would be named by the governor is another example. The governor even insisted that a new chief executive officer be appointed at PG&E.
PG&E faces a backlash of citizen anger over their vegetation management program designed to help decrease the fire load problem. However, every day citizens complain that “You can’t cut my trees”!
CPUC approved the Public Safety Power Shutoff program for the state several years ago. Now, CPUC records show that broken poles, clamps, and connectors caused more than half of the equipment fires in the state from 2014 to 2016. Pressure increases daily for more maintenance and safety funding. But even the CPUC has to weigh conflicting imperatives – boost spending for safety or hold the electricity rates as low as possible.
In addition, PG&E counters most complaints with promises that data analytics will allow it to improve maintenance concerns. Customers are not buying this logic either because PG&E has a past history of providing high dividends to company investors, while transferring or not spending allotted maintenance and vegetation management funds.
At this time, it is too early to really tell if PG&E leadership has seen the light and will change into a highly respected corporate citizen in the future or if they are just shuffling the chairs on the deck, as it is commonly referred too. The truth of the matter is that PG&E’s future is clouded by its unshakeable image. Its image could be called “antipathy,” but it certainly is highly negative. The good news is that PG&E readily recognizes that perception. The company has had many opportunities in the past, but this could be its last. Here are some PG&E programs aimed directly at the reimaging effort:
- PG&E is moving its headquarters and all operations from San Francisco to Oakland in 2022. This is a welcomed addition to Oakland and gives PG&E that new start and new enthusiasm. The move will add significant property, payroll, and other tax revenue for the City of Oakland. PG&E is already called an A+ addition to Oakland.
- PG&E has increased customer outreach for planning and preparing for the Public Safety Power Shutoff (PSPS) program.
- The company has committed to increased vegetation management and infrastructure replacement and maintenance.
- Safety is more than just a slogan at PG&E. It is now enforced more vigorously and practically every employee’s job is now safety oriented.
- The PSPS program has been used and leaders have a better understanding of reaction time requirements and warning notifications. Usage should increase effectiveness within a reasonable time forecast.
- PG&E continues to increase its knowledge on the warming impact of climate change. This knowledge is playing a more prominent role in response and recovery operations by the company.
It has been said when speaking about PG&E that the more things change, the more they stay the same. So, it was no surprise to any Californian that William Johnson, the CEO of PG&E was terminated on 30 June 2020. It was just four days after the Federal Bankruptcy Court approved the plan to emerge from bankruptcy. Johnson received a $3 million bonus when he was hired just last year and he will also receive a pro-rated portion of his $2.5 million annual salary.
Back to Paradise
This story may be closing down for now, but the amorphous nature of PG&E’s future leads one to believe that it is not over yet. Here are three learning points:
- The culture of any organization is difficult to change.
- Seeing the danger in any situation often escapes the most highly trained preparedness official.
- Citizens live their lives subconsciously accepting a certain degree of danger.
The same spirit of freedom that challenges citizens every day is still here. It is what causes someone to rebuild a beach house every time a hurricane washes it away or to live in a flood zone and refuse to evacuate. It is what causes citizens – who could not wait to leave – to return to Paradise, California, where 85 citizens died and 14,000 buildings burned down. In about 20 years, Paradise will likely be back to normal. History is known to repeat itself and especially so if there is no hazard analysis, emergency plan, or preparedness. History is no one’s fault, some would call it life – besides, everyone wants to live in Paradise.
This article is Part 3 of a three-part series on the failure of Pacific Gas and Electric’s (PG&E) emergency preparedness and response efforts: