PG&E leader in­her­its tur­moil

Pan­demic adds to new CEO’S many chal­lenges

San Francisco Chronicle - - FRONT PAGE - By J.D. Mor­ris

Crimes pre­vi­ously com­mit­ted by Pa­cific Gas and Elec­tric Co. hung over Bill John­son for the en­tire time he was chief ex­ec­u­tive of the par­ent com­pany PG&E Corp.

Ef­fec­tive Tues­day, John­son will re­tire, hand­ing con­trol of Cal­i­for­nia’s largest util­ity to a suc­ces­sor who also faces a new set of prob­lems. The task of the next top ex­ec­u­tive, Bill Smith, is to keep the com­pany sta­ble while be­gin­ning to steer it away from its cat­a­strophic past.

It won’t be easy. Not only does PG&E owe bil­lions of dol­lars to the vic­tims of pre­vi­ous wild­fires sparked by its power lines, but the com­pany also faces a pro­found chal­lenge in what may be an acutely dan­ger­ous fire sea­son this year. PG&E is un­der pres­sure from all sides to avoid caus­ing more calami­ties while also re­duc­ing the use of its most ex­treme fire­preven­tion mea­sure: power shut­offs like those that left mil­lions of Cal­i­for­ni­ans with­out elec­tric­ity last year.

The coro­n­avirus pan­demic adds an­other com­pli­ca­tion, both for PG&E’S more than 20,000­mem­ber work­force and the 16 mil­lion Cal­i­for­ni­ans it

serves.

Shep­herd­ing the com­pany through those head­winds in the near term will be Smith, a for­mer AT&T ex­ec­u­tive who has been on PG&E’S board since Oc­to­ber. As the in­terim CEO while the com­pany searches for a long­term leader, Smith will be the fifth top ex­ec­u­tive of PG&E Corp. — in­clud­ing an­other in­terim chief — in just five years.

He as­sumes con­trol of PG&E shortly after John­son trav­eled to Butte County to ap­pear in a court­room to ac­cept the com­pany’s guilt over the 2018 Camp Fire, the dead­li­est and most de­struc­tive wild­fire in Cal­i­for­nia his­tory. Smith also at­tended part of the Butte County pro­ceed­ings, and both ex­ec­u­tives ex­pressed re­gret over the fires.

The turnover at the top also comes just as the com­pany re­solves its bank­ruptcy that be­gan last Jan­uary be­cause of Pg&e­caused wild­fires that killed more than 100 peo­ple and in­cin­er­ated more than 20,000 build­ings across North­ern Cal­i­for­nia in 2015, 2017 and 2018.

PG&E de­clined to make Smith or John­son avail­able for an in­ter­view. Com­pany spokes­woman Lynsey Paulo said in an email that “Mr. Smith’s top pri­or­ity is to con­tinue ef­forts to re­duce wild­fire risk through sys­tem in­spec­tions, sys­tem up­grades, en­hanced veg­e­ta­tion man­age­ment and other op­er­a­tional im­prove­ments.

“He cred­its re­tir­ing CEO Bill John­son for man­ag­ing the com­pany’s wild­fire­re­lated chal­lenges un­der very dif­fi­cult cir­cum­stances,” she said. “Smith plans to keep that work on track.”

Smith, who re­cently moved from Texas to San Francisco as he pre­pared to start his new role at PG&E, has no prior ex­pe­ri­ence work­ing for an elec­tric and gas util­ity. But he spent nearly 40 years with AT&T and its pre­de­ces­sor com­pa­nies, where he held a va­ri­ety of op­er­a­tional roles, Paulo said.

“Through­out his ca­reer, he man­aged or­ga­ni­za­tions with more than 100,000 em­ploy­ees and con­trac­tors and led net­work and cus­tomer care ef­forts across a broad global foot­print,” she said in the email. Smith’s com­pen­sa­tion pack­age won’t be ap­proved un­til PG&E seats its new board when it of­fi­cially emerges from bank­ruptcy, which the com­pany cur­rently ex­pects to hap­pen by Wed­nes­day.

Through­out John­son’s 13month ten­ure, PG&E was work­ing fever­ishly to get its bank­ruptcy plan ap­proved in court and by state reg­u­la­tors. The process be­came even more ur­gent last sum­mer, after Gov. Gavin New­som signed a new law that re­quired PG&E’S plan to be ap­proved by Tues­day in or­der for the com­pany to qual­ify for a new form of util­ity wild­fire in­sur­ance.

PG&E ul­ti­mately met that dead­line with time to spare. U.S. Bank­ruptcy Judge Den­nis Mon­tali con­firmed the com­pany’s plan June 20, a few days after he said he would do so be­cause leav­ing fire sur­vivors and other cred­i­tors “with no other op­tions on the hori­zon is not an ac­cept­able al­ter­na­tive.”

Bank­ruptcy was not the only ma­jor item on PG&E’S agenda while John­son was in charge. Last fall, the com­pany un­der­took a his­toric ef­fort to pre­vent more fires by re­peat­edly turn­ing off its power lines when fast, dry winds blew through North­ern Cal­i­for­nia’s parched land­scape.

PG&E drew wide­spread crit­i­cism be­cause mil­lions of peo­ple were af­fected by the out­ages, some for days on end. The PG&E web­site also crashed amid high traf­fic, and lo­cal gov­ern­ment lead­ers ac­cused the com­pany of poorly com­mu­ni­cat­ing its plans to them.

And de­spite its ag­gres­sive ef­forts, PG&E may be re­spon­si­ble for the Oc­to­ber 2019 Kin­cade Fire. The com­pany left one of its high­volt­age Sonoma County power lines turned on even as it shut down other parts of the grid in the same area. A piece of that power line broke right around the ori­gin point of the fire, the cause of which is still un­der in­ves­ti­ga­tion.

Crit­ics be­lieve the black­outs will de­fine John­son’s legacy at the com­pany.

“A cus­tomer liv­ing their daily life isn’t fol­low­ing the ins and outs of the bank­ruptcy,” said Mark Toney, ex­ec­u­tive di­rec­tor of The Util­ity Re­form Net­work con­sumer group. “Peo­ple ex­pect that if they pay their monthly bills, the bar­gain that they get ... is that they have re­li­able, safe en­ergy. Clean en­ergy. And he did not de­liver that, par­tic­u­larly dur­ing the fall.”

But Tom Dalzell, the busi­ness man­ager of PG&E’S largest union, IBEW Lo­cal 1245, said John­son was lim­ited be­cause “he in­her­ited a sys­tem that was built 100 years ago.” Re­flect­ing back on John­son’s time at PG&E, Dalzell said the out­go­ing CEO was likely un­able to spend as much time on “big op­er­a­tional changes” as he had planned.

“He got some, but I think he came here think­ing that was mostly what he was go­ing to work on and it wasn’t,” Dalzell said. “He got them out of bank­ruptcy. He got them through a fire sea­son. He got through a leg­isla­tive sea­son and he en­tered the (Camp Fire) plea.”

Dalzell re­cently spent about an hour and a half with Smith, who he said has “some good in­stincts” de­spite his lack of ex­pe­ri­ence in the en­ergy sec­tor. Still, Smith clearly faces big chal­lenges.

“He has to avoid fires, im­prove the (shut­offs) ... and he’s got to deal with the move away from nat­u­ral gas,” Dalzell said. “He’s got tough fi­nances com­ing out of bank­ruptcy. There are a lot of chal­lenges.”

State of­fi­cials have so far not em­braced the most dra­matic pos­si­ble ways of re­form­ing PG&E — such as trans­form­ing it from an in­vestor­owned com­pany into a gov­ern­men­trun util­ity, an idea en­dorsed by State Sen. Scott Wiener, D­san Francisco, and some pro­gres­sives. But they have laid plans to take more ag­gres­sive steps if Pg&e­caused fires con­tinue harm­ing com­mu­ni­ties after its bank­ruptcy.

The Cal­i­for­nia Pub­lic Util­i­ties Com­mis­sion has es­tab­lished an es­ca­lat­ing en­force­ment process through which it can re­voke PG&E’S op­er­at­ing li­cense if the com­pany fur­ther harms the peo­ple it serves. Also, state Sen. Jerry Hill, D­san Ma­teo, has au­thored leg­is­la­tion that would have the state trans­form PG&E into a new non­profit called Golden State En­ergy if the com­pany loses its li­cense. The bill, SB350, was ap­proved by the Assem­bly and was re­ferred to a Se­nate com­mit­tee.

A group of lo­cal gov­ern­ment of­fi­cials led by San Jose Mayor Sam Lic­cardo had pro­posed turn­ing PG&E into a cus­tomer­owned co­op­er­a­tive sim­i­lar to a credit union. While the idea is not com­ing to fruition any­time soon, Lic­cardo said it could “still be in play” should PG&E cause even more disas­ters.

Lic­cardo re­mains con­cerned about the state of PG&E’S elec­tric grid and its debt bur­den after bank­ruptcy, among other mat­ters.

“If there was ever a com­pany well suited to stum­ble, it’s PG&E,” he said.

Ul­ti­mately, the im­me­di­ate re­spon­si­bil­ity for keep­ing PG&E on track will fall to Smith, the in­com­ing in­terim CEO. And he must do so while fac­ing a deep level of dis­trust from cus­tomers weary of all the death, de­struc­tion and dis­rup­tion that the com­pany has caused over the past decade.

“There’s no trust,” said Toney, the util­ity re­form net­work leader. “Trust has to be earned. They’ve got a long way to go.”

Rich Pedroncell­i / As­so­ci­ated Press

In­terim CEO Bill Smith will as­sume con­trol of PG&E on Tues­day. The for­mer AT&T pres­i­dent is the fifth top ex­ec­u­tive of PG&E Corp. — in­clud­ing an­other in­terim chief — in just five years.

Jana Asen­bren­nerova / Spe­cial to The Chron­i­cle 2019

Re­tir­ing CEO Bill John­son ne­go­ti­ated a bank­ruptcy plan re­sult­ing from PG&E’S role in wild­fires in 2015, 2017 and 2018.

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