PG&E Safety Culture Investigation
In this investigation (I.15-08-019), the California Public Utilities Commission (CPUC) is examining whether Pacific Gas and Electric Company (PG&E) has corporate governance, clearly documented organizational goals and objectives, and work procedures that prioritize and improve safety.
The CPUC hosted a series of forums to explore whether changes to PG&E's corporate governance, management, structure, and ownership were needed to ensure the safe provision of electric and gas service to Northern Californians. The first two forums were on April 15 and April 26, 2019, in the CPUC's Auditorium in San Francisco (505 Van Ness Ave.) and was available remotely.
On March 29, 2019, NorthStar Consulting submitted their first update to their assessment of PG&E's safety culture. The report provides an initial review of PG&E's implementation of NorthStar's recommendations following a lengthy examination of PG&E's safety culture. The report can be found here.
On May 8, 2017, NorthStar Consulting issued their "Assessment of Pacific Gas and Electric Corporation and Pacific Gas and Electric Company's Safety Culture." The report investigated whether Pacific Gas and Electric Company's (PG&E) and PG&E Corporation's (PG&E Corp.) organizational culture and governance prioritize safety and adequately direct resources to promote accountability and achieve safety goals and standards. The report can be found here.
On Dec. 21, 2018, the CPUC initiated the next phase of its investigation into PG&E's and PG&E Corp.'s safety culture by examining the companies' current corporate governance, management, and structure to determine the best path forward for Northern Californians to receive safe energy service. Read our Press Release
On Nov. 29, 2018, the CPUC ordered PG&E to implement the safety recommendations of CPUC staff as outlined in a report by an independent third-party that originated through the Safety Culture proceeding. Read our Press Release
Questions Asked of PG&E and other Stakeholders in the December 21, 2018 Scoping Ruling
Corporate Governance - Board of Directors
- Should PG&E and PG&E Corp. be subject to a utility-specific business judgment rule (BJR) to require the Board of Directors to account for safety beyond the current fiduciary duties? If so, should such a utility-specific business judgment rule apply to corporate officers as well?
- Should the PG&E Board of Directors regularly file with the Commission a report of how the Board met its duties under the BJR to account for safety? Should this include a summary of the oversight exercised by the Board including information reviewed, when deliberations occurred, and the depth of the review?
- Should the report include the Board review of the corporate officers' leadership as it pertains to safety? Should compensation to the Board Members be dependent on a Commission finding that the Board members discharged their safety duties appropriately?
- Should PG&E form an independent nominating committee to identify and select candidates for the Board of Directors?
- Should PG&E identify specific criteria for potential Board of Directors members? For example, should PG&E have one or more Board of Directors members be experts in organizational safety, gas safety, and/or electrical safety? If so, should the appointment of safety experts be made subject to Commission or Governor approval?
- Should PG&E form an audit committee constituted of independent directors possessing financial and safety competence, as defined by the Commission, to evaluate the Board of Directors' discharge of their duties and recommendations for qualifications of future members of PG&E's Board of Directors?
- The Securities and Exchange Commission requires publicly traded companies to file an 8-K Form when a material event occurs. Generally, an event is material if there is a substantial likelihood that a reasonable investor would consider the information important in making an investment decision. Should PG&E file an analogous safety report with the Commission when PG&E makes a significant decision regarding capital expenditures pertaining to safety, a change in management as it pertains to safety, or any other decision that may impact safety?
- Should PG&E file a public annual report of all Directors and Officers insurance policies obtained by PG&E and identify the risk PG&E identified to obtain the insurance? If PG&E amends its Directors and Officers insurance, should it notify the Commission of the risk identified and the terms of the amended policy?
- Should part or all of the existing Board of Directors resign and be replaced by directors with a stronger background and focus on safety?
Corporate Management - Officers and Senior Leadership
- Should PG&E retain new corporate management in all or in part?
- Should the questions posed above for Corporate Governance be similarly considered for corporate management?
- Should compensation for non-officer executives be modified? Does the current incentive structure properly incent PG&E decision-makers?
- Should PG&E's gas and electric distribution and transmission divisions be separated into separate companies? If so, should the separate companies be controlled by a holding company? Should the holding company be a regulated utility?
- Should PG&E's corporate structure be reorganized with regional subsidiaries based on regional distinctions? For example, PG&E could be divided into multiple smaller utilities operating under a single parent company. If so, should such a reorganization apply to both gas and electric services? Do the physical characteristics of the gas and electric systems lend themselves to the same regional structure, or do the physical characteristics of the respective systems lend themselves to different regional structures?
- Should the Commission revoke holding company authorization, so PG&E is exclusively a regulated utility?
- Should all affiliates and subsidiaries be spun off or incorporated into the regulated utility?
- Should the Commission form a standing working group with the union leadership of PG&E to identify the safety concerns of PG&E staff?
Publicly Owned Utility, Cooperative, Community Choice Aggregation or other Models
- Should some or all of PG&E be reconstituted as a publicly owned utility or utilities?
- Should PG&E be a "wires-only company" that only provides electric distribution and transmission services with other entities providing generation services? If so, what entities should provide generation services?
Return on Equity
- Should the Commission condition PG&E's return on equity on safety performance?
- What are the safety considerations for the utility if its financial status is downgraded by the investment community?
- What other measures should be taken to ensure PG&E satisfies its obligation to provide safe service?