As California takes the lead in setting a mandatory cap on emissions, Pacific Gas & Electric Corp., one of the nations largest utilities, is reaching out to customers to help diminish their carbon footprint. How can other utilities look to PG&E as an example? Can a program like the one created in California exist throughout the United States? During today's episode of OnPoint, Peter Darbee, chairman and CEO of PG&E Corp. discusses why he believes a California-like standard could work throughout the country. He discusses specific emissions legislation that has been introduced in the Senate and endorses Sen. Dianne Feinstein's (D-Calif.) emissions bill. Darbee also discusses how he believes energy independence can be achieved.
Please note: This episode was filmed on Jan. 17, 2007, prior to the announcement of the U.S. Climate Action Partnership.
Monica Trauzzi: Welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Peter Darbee, chairman and CEO of Pacific Gas and Electric Corporation. Peter, thanks for joining me.
Peter Darbee: Happy to be here, Monica.
Monica Trauzzi: We'll get to emissions legislation in a moment. I wanted to first start off by talking about the recent below freezing temperatures in California. Citrus crops were ruined. There was also icing on power lines. Assess for us how PG&E responded and was there adequate support for an increased demand?
Peter Darbee: We really dealt with that situation very well, had no major problems. There was plenty of capacity for us to meet those demands. So the recent cold snap has not been as bad as the storms that we had in late December.
Monica Trauzzi: On to emissions. Does PG&E expect to meet the state-mandated goal of 20 percent of power from renewable sources by 2010? And what steps is your company taking to meet that goal?
Peter Darbee: We certainly do expect that we'll meet that goal Monica. In fact, we're ramping up and accelerating the rate at which we're signing contracts. So at the end of the year, for 2006, I think on a contracted basis we were up 14, 15 percent compared to the 20 percent requirement. And we had started the year at 12. So I think we're working towards meeting that objective. Many of the people that we're dealing with are new developmental technologies. And so there may be question as to whether they get across the goal line in delivering that energy by 2010. But part of our reason for over contracting is that we'll, in fact, meet that that minimum threshold.
Monica Trauzzi: And how are you doing this? Are you amping up when power? How specifically?
Peter Darbee: We're actually using a multiplicity of alternatives. We have geyser power. We have wind power. We have photovoltaic. We're very interested in some new solar thermal technologies. And one of the ones that's gotten a lot of comic relief has been the biomass. In particular, taking the methane gas from cattle waste and using that and putting it back in the system.
Monica Trauzzi: How has California's legislation that sets emission caps for companies like yours changed the way you do business from day to day?
Peter Darbee: I'm not sure that, if you're referring to Assembly Bill 32.
Monica Trauzzi: Thirty-two, yes.
Peter Darbee: Assembly Bill 32 really hasn't changed yet how we do business. It's intended, as we go forward, that it will change. We're currently in a process, about a two-year process, that we see focused on the implementation of that legislation. And so, for example, I'm working with our senior team in thinking about the support we can provide the California Air Resources Board. And what the CARB, as it's called, has done is determined that they're going to give a fair amount of the responsibility for the utilities to the California Public Utilities Commission.
Monica Trauzzi: California is leading the way in capping emissions and pushing for low carbon fuel standards. We saw Senator Barbara Boxer saying early on that she wanted to implement California-like standards throughout the country. And she quickly backed away from that. Can a California like standard be implemented throughout the country, in all states?
Peter Darbee: I think it most certainly can. And, in fact, my understanding is that was Governor Schwarzenegger's intention as well as the legislature in California to provide a model for the rest of the United States. I think many people in the United States have a feeling that they don't want California experience to be exported per se and exactly like it's implemented in California to the rest of the United States. And so I myself lived in New York for 40 years and understand that each part of the country has pride and wants to bring its own ideas to the table. And so I think that's why the senator might be moving back from that position and thinking about how to build a broad basis of support for any legislation done here in Washington.
Monica Trauzzi: But you think she'll go for something that is similar in standard?
Peter Darbee: I haven't actually spoken with Senator Boxer on that, but her staff has expressed interest in talking with us and our staff likewise in talking with Senator Boxer. We were critical and instrumental in the development of Assembly Bill 32. We did come out and support that. And, therefore, I think it's logical that we would have a dialogue and see how can the lessons from AB 32 be applied to the United States?
Monica Trauzzi: We're seeing many proposals already the Democrats relating to emissions. Which legislation do you think will be most successful and would be best received by utility companies around the country?
Peter Darbee: Well, we had been working with Senator Feinstein who introduced a bill recently and we think that there's a lot of merit in what she's put together. We believe that any legislation should make progress against this very serious problem of global warming, but at the same time be practical and pragmatic, and we believe hers is.
Monica Trauzzi: Hers focuses specifically on power plants though. Is it fair for legislation just to focus on utilities when there's so many other intruding factors to global warming?
Peter Darbee: Well, utilities are the largest single source of greenhouse gases in the United States. And it's my understanding that her intent is to start with the power sector, but actually that she has a compendium of five bills that she'd like to introduce and the other four will deal with other segments of the economy as well as other issues along the way. So I think she's starting with power, which is the logical place to start. The next logical place is to go to transportation because that's the next single largest provider of greenhouse gases in the economy.
Monica Trauzzi: Do you think emissions legislation could be handled region to region? Different regions would have different systems for cap and trade. Or is a broad-based, nationwide attempt the only way to go?
Peter Darbee: Well, the answer to your question is different regions could proceed on that basis. Historically, our company, PG&E, has taken a point of view that optimally we would do it on a nationwide basis. If we can't get it done there, we do it on a regional basis. If we can't get it done there, we do it on a state basis. But there's no question when one talks about a cap and trade system, for example, it's best that that be done on a broad scale and across the entire United States.
Monica Trauzzi: There's a lot of talk in Washington about increasing our nation's energy security. How do we do this without damaging the environment or nullifying the steps that we're taking through emissions legislation?
Peter Darbee: Well, I think there's a very clear path and I articulated that in a speech recently, and I think Senator Feinstein is on the right path. Specifically, the way to do that is to follow something similar to the preferred loading order in California. Start with energy efficiency, then have programs focused on demand management that is delivering power on a more even basis to the course of days, a portfolio of renewables, and then improving on coal generation through clean coal technologies and storage of CO2; and then also revisiting the question of nuclear power.
Monica Trauzzi: I wanted to focus specifically on a program that's being offered to PG&E customers. It's called the Climate Smart Program and by paying five dollars a month customers can see basically what their carbon footprint is. In return, PG&E will offset the customer's emissions by helping to preserve California's carbon storing forests. Do you think this program gives customers a false sense of security though? That by paying these five dollars they're doing all that they need to do to help the environment and to clear their carbon footprint.
Peter Darbee: We've seen no evidence that this program would lead to complacency on their part. What we find is the customers who are interested in the program want to do their part, but they also have a keen interest in seeing others do more. And so we haven't seen that as a problem with that program.
Monica Trauzzi: And how is the program being received by customers?
Peter Darbee: Very positively. We've done a lot of surveys that were the harbinger of that program. And specifically what it showed is that our customers want us to plan for their energy futures and they want us to do it in an environmentally responsible fashion. And so that's a pretty strong message. And I think the direction we've taken with Climate Smart is entirely consistent with the customer desires.
Monica Trauzzi: How does a company like yours remain environmentally conscious but still maintain the bottom line and not hurt itself economically and financially?
Peter Darbee: Well, that's a great question. And the answer is that 30 years ago some very smart people at the Natural Resources Defense Council, NRDC, together with the Public Utilities Commission and our company got together and they broke the relationship between selling more kilowatt hours and earning more profits. It's called de-coupling. And what they did was in sure that we earn a return on the investment that we put in the ground and elsewhere to supply and support our customers as opposed to how many kilowatt hours we sell. So we are indifferent to the volume of energy that we provide each year. So that had the effect of neutralizing our incentive to sell more power. And then what the California Public Utilities Commission did was put in place hundreds of millions of dollars of incentives for us to encourage customers to use less power. So all of that leads to a situation where we make more money by encouraging our customers to consume less power.
Monica Trauzzi: All right. We will in it on that note. Thanks for joining me.
Peter Darbee: Great, thank you very much Monica.
Monica Trauzzi: This is OnPoint. I'm Monica Trauzzi. Thanks for watching.
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