By Tuck Communications
Published Jun 21, 2010
PG&E Corporation has its surfboard ready. A technological tide is rising that may cause a few wipeouts among utilities or leave others stranded in flat water. But PG&E is preparing for an awesome ride. "Distributed generation," says chairman, president, and CEO Peter Darbee, "could be as disruptive to utilities as the move from wired to wireless was in telecom." Darbee's company is parent of the California utility Pacific Gas and Electric.
PG&E recently invested $60 million in California's top owner of rooftop solar panels, angled for solar power beamed down by satellite, and is pursuing, yes, megawatts generated by tidal currents and ocean waves. "Rather than fighting change, we are totally embracing change," says Darbee with relish.
It's an unusual tack to take in utilities, but the forthright Darbee, a high-school wrestling champ who came to regulated utilities via the telecom industry and Goldman Sachs, is one to break the mold. A political conservative who advocates forceful action to combat global warming, he nudged the change-averse industry into the ranks of cap-and-trade supporters by arguing that, "it's better to be at the table than on the menu." Recently he took PG&E Corp. out of the U.S. Chamber of Commerce, chastising its "obstructionist tactics" on climate issues. "After everything our company has been through, that decision wasn't even visible on the courage meter," he grins.
But he does recall a time the needle jumped: a shouting match he had early on with his then-boss, CEO Robert Glynn, when Darbee urged him to open up to the media. "After that, I was literally shaking, thinking He's going to fire me. I walked up to him in the hall and said, 'Thank you.' He said, 'For what?' I said, 'For giving me the freedom to tell you what I really think.' He pointed a finger right in my face and said, 'Never, never stop doing that.'"
It's advice that squares with Darbee's character. As CFO, he made unpopular judgment calls during the Enron-induced fiscal crisis. The corporate restructuring he led allowed PG&E to achieve investment-grade credit ratings immediately upon its exit from Chapter 11. When he became chief of PG&E Corp. in 2005, its public image was so sour that employees felt uncomfortable wearing shirts with the company logo. He replaced the word ratepayer ("prisoner of a monopoly") with customer ("someone you must win every day"), and he rallied 20,000 employees around high performance benchmarks. Within two years, customer satisfaction ratings soared, and today PG&E is fiscally sound, user-friendly, and the country's number one green utility, by Newsweek's reckoning.
The issue of climate change—utilities emit 40 percent of U.S. carbon—grabbed his attention early on, for reasons of "individual conscience and our fiduciary responsibility to shareholders." To methodically explore the issue, top PG&E executives grilled the most respected scientists from both sides, no holds barred, during months of videoconferencing. Their conclusion: "The Earth is warming, mankind is likely responsible, and the time to act is now," says Darbee.
PG&E backed a 2006 California law requiring utilities to supply 20 percent of power from renewables by 2010 then upped the ante through an executive order mandating 33 percent by 2020. PG&E is meeting the challenge with solar panels, wind farms, hydroelectric dams, geothermal power from geysers, even biogas from cattle. It is pumping equity funding into wind, photovoltaic, and solar thermal projects and pioneering digital "smart grids" to lower usage.
A Tuck overseer, Darbee's advice to future leaders: "Put an audacious stake in the ground that you don't know how to get to then plan back from that future to the present."