Frisco Utility Needs a Reboot

Critics agree: change is needed at PG&E.

TO GET ITS MOJO BACK in its home state of California, Pacific Gas and Electric executives, led by new Chief Executive Anthony F. Earley Jr., will need to develop a new long-term strategy for the utility, communicate it effectively both internally and externally and deliver a consistent message. The company needs to become a lot less tone deaf in its dealings with state businesses, consumers and politicians, according to a number of energy industry observers.

“During the last few years at PG&E, there has been a massive shift related to leadership,” said California State Assemblyman Jerry Hill, a Democrat who has criticized the utility. “It’s a massive bureaucracy. They need to streamline and be able to react quickly on issues. And they need to be honest. That’s what I want to see in the future.”

Hill said PG&E has lost political stature in the state because it has acted hypocritically and often foolishly. “What I saw in the last year was PG&E saying one thing – `Safety is our primary goal’ – while the fact is, they are not putting their money where their mouth is.” Hill added that the utility has lobbied against enhancing safety and liability standards in the legislature and before the Public Utilities Commission because it fears there would be a detrimental impact on the company’s rate of return.

The utility’s growing number of critics fault it for not being candid or responding effectively throughout the recent crises that have enveloped it. The most serious was a PG&E pipeline explosion last year in San Bruno, Calif., that destroyed a residential neighborhood and killed eight people. The utility denied any wrongdoing, but a yearlong investigation by the National Transportation Safety Board blamed the explosion on the company, concluding in September that PG&E engaged in poor safety practices, lax recordkeeping, inadequate inspections and botched repairs. After the findings, PG&E issued a statement pledging to incorporate the NTSB’s recommendations into its future safety plans. That, however, has hardly placated critics.

“They have a long way to go,” said Jim Ruane, the mayor of San Bruno. “The NTSB cited a number of organizational deficiencies. I feel for the most part, this could have been prevented. They need to be held to a gold standard going forward.”

The San Bruno tragedy surely was the most serious crisis PG&E faced, but critics contend it has made a number of blatant missteps during the past few years. PG&E was roundly denounced in 2010 for spending $46 million on an ill-fated state ballot proposition that would have limited the ability of local governments to enter the energy business. Some 53 percent of California voters voted it down, but 68 percent rejected it in PG&E’s own service area, an indication of the disdain many PG&E customers hold for the utility. Even its efforts to install smart meters in its Northern California service area have triggered much more strident opposition from worried residents than in areas served by the state’s other investor-owned utilities.

“I really feel that PG&E has been very arrogant in its approach,” said Mark Toney, executive director of The Utility Reform Network, a statewide, nonprofit consumer advocacy organization that often has locked horns with the giant utility. “A little bit of humility would have gone a long way with some of the things they have done.”

Toney added that the utility “burned a lot of bridges” on its proposition effort and even failed to gain political support from the state’s other two giant investor-owned utilities, Southern California Edison and San Diego Gas & Electric. Toney believes PG&E “has a serious problem being able to communicate in an authentic way, in a way people can trust. My personal feeling is that PG&E has a serious lack of organizational discipline. It’s just a poorly run utility.”

Even its harshest critics, however, concede that PG&E has a long history, an experienced workforce and a strong brand in the northern part of the state. The real challenge for Earley, the new chief executive, will be to capitalize on these assets and leverage them so that the utility can move past its current series of travails.