On Tuesday, August 31, I was in the audience at the Haas School of Business at UC Berkeley as Peter Darbee, CEO of Pacific Gas & Electric Co., responded to moderator questions about the energy industry and the company’s stance on climate change.

The post below consists of Part 3, the final part, of my record of the conversation – all portions are included in chronological order. Read the previous posts on the conversation – Part 1 and Part 2.

An ellipsis (…) indicates that I was not able to capture the words or thoughts skipped. Moderator questions are paraphrased. Responses are included as accurately as possible – punctuation choices are mine. The moderators were Bev Alexander (BA) and Joey, a student.

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Joey

SmartMeters – I saw your talk at the CPUC  – there were protesters saying Dumb Meters. Talk about the backlash.

Peter Darbee

In California, there has been a tier system of rates… Tiers depend on how much power you use. Originally the tiers were not so steep…all of the rate changes have been amplified in tiers 3-5. In Bakersfield last year…had 17 days over 100 degrees. The previous year had 6… And I’m talking about in July. So folks get rocketed into the higher tiers. There were some folks who didn’t have SmartMeters… Some had SmartMeters for a year and hadn’t had issues until that July… Then they held hearings… And this whole outcome is an inadvertant result of government, freezing the first 2 tiers.

… … ….

… But PG&E could have done better at communications… We kind of assumed they were infrastructure… We assumed that people didn’t give a lot of thought about the meters on the side of the house… We were wrong.

Bev Alexander

In California, it’s a very activist state – you came out in support of AB 32, PG&E advocated decoupling, used to support shareholder incentives for energy efficiency, has a very aggressive RPS at 33% – combined with the federal level, there’s potential for overlapping and conflicting mandates – what works? Why these positions?

Peter Darbee

I’ve done a lot of thinking about climate change…and where is the public on climate change…and they have concerns it may happen…but they don’t want to pay a lot…have to be very attentive to the cost concerns of our customers. What this says is energy efficiency is a no brainer.

…AB 32 envisions a cap and trade system…time to transition to cleaner technologies…for utilities benefits pass through to customers.

… … …

Climate change is a planetary issue, and if a state rigs the system to help themselves, it gets expensive… If we do it in a very expensive way, the people of Ca will revolt, and it will set us back tremendously.

Joey

How did you teach your kids about energy efficiency? What advice do you have for future leaders on climate change?

Peter Darbee

The kids would leave the lights on, the stereo on…in every single room… I instituted a policy that if you leave the lights on, and you’re not in the room, it’s 25 cents…went up as they got older… We now have kids that are tremendously concerned about the environment…

The challenge of climate change will fall more greatly on you and your children…

Write your obituary… The way you create transformational change is you put a stake in the ground for the future…an attractive future…then plan from future back to present. You have a choice.

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This exchange was followed by a question and answer session with the audience.

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On Tuesday, August 31, I was in the audience at the Haas School of Business at UC Berkeley as Peter Darbee, CEO of Pacific Gas & Electric Co., responded to moderator questions about the energy industry and the company’s stance on climate change.

The post below consists of Part 2 of my record of the conversation – all portions are included in chronological order. Read Part 1 here.

An ellipsis (…) indicates that I was not able to capture the words or thoughts skipped. Moderator questions are paraphrased. Responses are included as accurately as possible – punctuation choices are mine. The moderators were Bev Alexander (BA) and Joey, a student.

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Joey

I want to go back to a shareholder value article in the Wall Street Journal – a professor from Michigan says we should focus exclusively on profit. Why worry about corporate responsibility?

Peter Darbee

I used to have that view – I lived and breathed Milton Friedman… It’s tragic that more people haven’t continued the journey of being realistic… What [the professor] is saying is that if you maximize profit each quarter…line up the quarters…then that will maximize profit forever… But you cut back on expenditures that are needed… There’s such a time between when policies are set and it comes home to roost…

I want to make sure PG&E is here 100 years from now and I’m setting up good people and good culture…

I couldn’t disagree with that teacher more…it’s rubbish.

Bev Alexander

The direction the industry is headed will call for a lot of innovation. How are you shifting the culture? How will the utilities integrate new technology?

Peter Darbee

Utilities have been very conservatively run and prone to not changing…but the environment is of new technology and changing regulation… You could say the risk is that utilities won’t change quickly enough… … Utilities react to their commissions…can be punished for change… … Our commission has been open to change and promoted change…

How do we create innovation? An organization is the shadow of its leader…and of the leaders that have come before… The people who have the best ideas are the people closest to the work…want to create an environment for trial and looking into things.

We had an opportunity to invest in solar in space…structure the risk…so that we only pay for the power if it’s delivered…ensure that they are abiding  by the rules of government. The two principle objections went away.

Bev Alexander

Other technology you’re working with – robust energy efficiency, electric cars, renewables – what are the most important? What are choke points on the grid that need to be addressed?

Peter Darbee

… If we’re going to deal with the carbon problem, we’re going to need all the tools in the arsenal…nuclear, renewables, the first fuel should always be energy efficiency, demand management, carbon capture and sequestration… We’re going to need chips on all the squares… What’s scary is we need a lot from each…from energy efficiency to renewables.

… We’re going to need nuclear… I know a lot of people aren’t keen on nuclear… The storage issue is far less than the challenge of climate change.

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Part 1 was posted yesterday. Part 3 will be posted on Monday.

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On Tuesday, August 31, I was in the audience at the Haas School of Business at UC Berkeley as Peter Darbee, CEO of Pacific Gas & Electric Co., responded to moderator questions about the energy industry and the company’s stance on climate change.

The post below consists of Part 1 of my record of the conversation – all portions are included in chronological order.

An ellipsis (…) indicates that I was not able to capture the words or thoughts skipped. Moderator questions are paraphrased. Responses are included as accurately as possible – punctuation choices are mine. The moderators were Bev Alexander (BA) and Joey, a student.

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Bev Alexander

Over the last decade, you’ve led the industry through major turmoil…

Peter Darbee

I go different places, around the world and country, and I hear that a utility gets a guaranteed return, so anyone can run that place. Then why were we in financial distress ten years ago?

What’s happening in the industry is very dynamic…deregulation, reregulation…customer choice provides opportunity for others to take over…When government dramatically changes rules, there’s a mad scramble. And there’s the introduction of new technology all the time…these are disruptive technologies. This demands the most of management…

Bev Alexander

You’ve distinguished yourself on the issue of climate change…but you’re a business leader. Why is this a top priority?

Peter Darbee

You have to talk to your conscience. On January 1, 2005, I thought about the awesome responsibility of running a huge company… The question of climate change came up…

How would you feel if you were running this huge company and it had a dramatically negative impact on the planet?… How could you live with yourself if…you did not do everything you could to mitigate your impact?

Also, I owe a fiduciary responsibility to shareholders…so need to reconcile the two. So if we emit as much carbon as we can, and someone sues…the questions could be a problem… I have to do everything I can within the context of my role to reduce carbon emissions… We learned as much as we could about the issue and tried to change the industry… So what we did is called together some of the greatest scientists…put together top people in the country…tried to get to the bottom of the issue…came up with the statement “The earth is warming, mankind is responsible, and the time for action is now.”

Joey

I read your paper on climate change, but other folks in the audience might be concerned – why aren’t other companies on board?

Peter Darbee

… … … Why other companies don’t feel the same way… They love to moan, and say it’ll be horrible if we have to make that change… Folks at PG&E complained 30 years ago about decoupling… Everyone overreacts and creates a boogeyman… But this issue has become so political that we can’t have a conversation about it…and this is true in my own family.

… … I’ve never known anything good to happen when people are screaming at each other…and have lost the ability to listen.

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Part 2 will be posted tomorrow. Part 3 will be posted on Monday.

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