Energy Policy:

PG&E Corp. VP Steve Kline details company plans on climate, solar power

Executives at Pacific Gas and Electric recently announced a new program allowing consumers to pay to reduce their carbon footprint. But will consumers be willing to pay extra to lower their greenhouse gas emissions? Steve Kline, vice president of corporate environmental and federal affairs for PG&E Corp., joins OnPoint to discuss this program, and PG&E's stance on federal climate legislation as well. Plus, Kline addresses how PG&E will comply with a new $2.5 billion solar initiative from the California Public Utilities Commission and the future for renewable energy in the state.

Transcript

Brian Stempeck: Hello and welcome to OnPoint. I'm Brian Stempeck. Joining me today is Steve Kline. He's the vice president of corporate, environmental and federal affairs for Pacific Gas & Electric Corporation. Steve thanks a lot for being here today.

Steve Kline: Thank you Brian it's great to be here.

Brian Stempeck: PG&E just announced a new program that allows consumers the right to try to pay for their greenhouse gas emissions. Explain how this program works.

Steve Kline: The program that we just filed with the California Public Utilities Commission is called the Climate Protection Tariff. It allows customers to in essence become climate neutral. They can take away the carbon that they use in their day-to-day lives from the products they buy from us.

Brian Stempeck: So how does it work? They pay you a tariff on top of their normal utility bill. And where does that money go to?

Steve Kline: It is a small increment. We estimate it will be about $4.50 for our average customer. And that money will go for sequestration, so local California projects that reinforce forestry, that do all kinds of things, that meet the California Climate Action registries stringent requirements and that meet an oversight board's review.

Brian Stempeck: So basically the customer has the ability to pay four dollars or so per month and this will set aside land or protect certain amounts of land in a forest or kind of basically sequester some of the carbon via that way?

Steve Kline: That's correct.

Brian Stempeck: OK. Basically, what's been the reaction from some of your consumer so far? I mean this, a lot of customers would say another $4 per month, I'm not sure I want to go that route.

Steve Kline: From my perspective, the beauty of this is that it's voluntary. Customers can choose to do it or not. And the response has been very positive. You know we are in California and we have a lot of customers who self identify as environmentalists and they really care about these issues. And this allows them to do something immediately to address their own usage.

Brian Stempeck: Why did the company undertake this proposal? I mean somebody cynical might say that this is setting the stage for saying to consumers you have to pay for climate change. Utilities can't do it themselves. Is that the ultimate goal?

Steve Kline: I think for us the genesis of this was an en banc that the California Public Utilities Commission held on climate issues in which the commissioners really challenged the companies to come back to them with some creative ideas that start the ball rolling. And this was something that we thought did that in a creative way.

Brian Stempeck: How does this program play into PG&E's overall strategy when it comes to climate change?

Steve Kline: I would say our overall strategy has been to work to minimize our climate risk in the sense of emissions that are going to need to be reduced over time. And to focus on finding a pragmatic national federal legislation that would limit, in a reasonable way, climate.

Brian Stempeck: California of course has its own plan. Governor Schwarzenegger is moving forward with plans to reduce emissions in the state. How's PG&E, assuming at some point mandatory caps are put in place or some kind of caps are put into place, where the state comes to you and says you have to reduce emissions. How will PG&E meet that? Is the consumer program part of that or will it be separate actions?

Steve Kline: This is in addition to any actions we'll need to do to meet the governor's ambitious goals. I think we see this as just the icing and the cake, recognizing that we are a have a very clean base in terms of our generation. About 45 percent of our power is non-emitting today.

Brian Stempeck: That's because its hydropower, you have a lot of natural gas?

Steve Kline: Its hydro and its nuclear or it's really a renewable.

Brian Stempeck: Right now the governor has a task force basically working on the details of how this program is going to work in terms of reducing the state's total emissions. What kind of structure do you think it should have? Should it be something like what they're doing in the Northeast with the regional greenhouse gas initiative?

Steve Kline: Well we're very interested in seeing that whatever occurs in California is compatible with what's occurring in the Northeast. That ultimately, to the extent that states are acting, that they should be acting in a compatible way so there could be trading across those regions. I think fundamentally we all believe that a national or international solution is going to be required. But to the extent that states are acting, the extent that they work together, we avoid some kind of crazy quilt that will actually produce negative results.

Brian Stempeck: You're one of the companies that of course supports the four pollutant legislation from Senator Carper, which covers carbon dioxide along with other pollutants. What do you see as the chances for Senator Carper's bill actually passing or moving this year?

Steve Kline: You know we think we've sort of reached the tipping point with the state of the Senate resolution. There is a sense, I think, that some moderate pragmatic approach is necessary. That we can't say no to doing something on climate. At the same time no one wants to destroy the economy. So I think the chance for something like Senator Carper's bill improves as people understand the impact of the issue and also the kind of moderate steps that this bill would take.

Brian Stempeck: Why Senator Carper's bill and not one of the other approaches that we see from Senator Bingaman or Senator McCain when it comes to dealing with climate change?

Steve Kline: The thing that we like about Senator Carper's approach is that we think it is so complicated at this point to try to do something that's economy wide. I mean ultimately we'll need to, but to try to do it at this moment, it's just easier to start with our sector, which does nationally produce a lot of carbon emissions. And find a regime that works based on some of the other trading regimes that are already in place and simply extend that. And then we'll make it easier for a national regime that is economy wide.

Brian Stempeck: Senator Inhofe on the EPW committee is opposed, of course, to a lot of doing, making action on climate policy. In the event that only a three pollutant bill can actually move through his committee and through the Senate, is that something you would be willing to accept? Or does it have to be a four pollutant bill like what Senator Carper is working on?

Steve Kline: I think we believe that absent a 4P bill, that addresses all of the potential emissions, we're not going to have regulatory certainty. And ultimately I think the industry won't accept that because it doesn't address the issue of how much are we all going to have to pay to do this? What are the total impacts? And it creates the possibility of serial regulation that I don't think anybody wants.

Brian Stempeck: Switching gears a little bit, the California Public Utilities Commission just announced $2.5 billion to go towards solar power. Your company, PG&E, is going to be responsible for paying quite a bit of that, passing those costs on to your ratepayers. Is it too much of a burden?

Steve Kline: We have helped to shape the program in ways that I think have made us very comfortable with it. I think there's still some fine tuning we want to do, but fundamentally we're very supportive of this concept. And feel that if you think about the California environment, there's a lot of sun. And this is a great way, especially new construction, to build in solar power. It supplements a program that PG&E has already started called the Solar Schools Program, where we're going into schools and retrofitting them or as new schools are being built, building in solar capability. So I think it's very consistent with where we are.

Brian Stempeck: PG&E is going to be responsible for I think about $1.1 billion of the $2.5 billion, about 40%. It's the most of any utility in the state. With all of these other costs that you're talking about, another four dollars for consumers if they want to pay for climate change, if natural gas prices spike again. Do you think this is going to be too much? I mean couldn't we see a lot of consumers in California, your customers, with very high utility bills each month?

Steve Kline: We're all very concerned about managing costs to customers. And we recognize that fortunately California customers, our customers, pay some of the lowest bills in the country because of the climate and because of our energy efficiency programs over the years. So in some cases rates may be higher, but the total bills the customers pay are lower. I think, the reason why we structured the Climate Protection Tariff the way we did was to address the issue you described. We don't want to just layer cost onto customers in ways that makes it a burden.

Brian Stempeck: What do you see as the benefits of the new solar program? Some critics say this is really not going to bring the cost down on solar panels. This could be a waste of funding.

Steve Kline: I think the notion is that it creates a critical mass which then creates the production capability to produce economies of scale and scope and bring the cost down. I think that this will be the critical test. If the California focus on solar doesn't bring the cost down then there may be some fundamental problem, but I think we're pretty optimistic that it will.

Brian Stempeck: Where is this 2.5 billion going to be going? I mean you talk about PG&E's program dealing with schools. I think you've got something like 10,000 different facilities with solar panels, ranging from schools to different businesses. When it comes to this new chunk of funding that's coming from the state through the utilities, where is that money going to go? Are we talking about homeowners installing solar panels? Is that businesses? Where's the money go?

Steve Kline: Basically all of the above and especially addressing new construction where there are huge opportunities. You don't have the retrofit costs and issues.

Brian Stempeck: OK, Steve we're out of time thanks a lot for being here today. We appreciate it.

Steve Kline: Thanks.

Brian Stempeck: I'm Brian Stempeck. This is OnPoint. Thanks for watching.

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