Scott Shafer: I know. I was I was afraid of mispronouncing that, but I think I got it right.
Marisa Lagos: But before we bring Patti Poppe in, Scott, we do have to talk about some news this week, which is that Bakersfield Republican Congressman Kevin McCarthy is stepping down. He announced this in a bit of a surreal Wall Street Journal editorial today saying he will not finish his term. He’s going to leave at the end of the year. This comes two months, of course, after he was ousted as speaker by the far right faction in the House. And he says he did what, as I said, surreal. He says he did what he set out to accomplish. No matter the odds or personal cost. We did the right thing.
Scott Shafer: Yeah, of course. You know, there are a lot of things that, you know, history will judge. Like January 6th, for example, where, of course, there was the Trump inspired mob stormed the Capitol. And it’s interesting because, you know, McCarthy was never really trusted by the far right part of his party. Right.
Marisa Lagos: Even though he really aligned himself with them more than the moderates, honestly.
Scott Shafer: Well, in many ways, certainly increasingly, as time went by, and, you know, that changed from the time he was in Sacramento. But, you know, he was too willing to talk to Democrats, to willing to keep the government open, not willing to sort of force a crisis when it came to government spending or government funding as well. So, you know, I think we all remember when he came to the House floor on January 6th and really went after Trump blaming him for what happened. And then like a few weeks later was down at Mar a Lago.
Marisa Lagos: Kissing the ring, basically. I mean, it really was a remarkable especially when we heard later on some of the things he was saying behind the scenes. But, you know, I do think to your point, you know, McCarthy came up in Sacramento as a lawmaker here in California and was very well-liked across the aisle, was seen as a pretty centrist Republican, kind of a back slapper, always been fundraising. And yeah, but not somebody with like huge policy chops. And I think, you know, in some ways that kind of came back to bite him because there was so little trust of him among these wings of the party because he hadn’t ever been, you know, you may disagree with him or agree with him, but like someone like Mike Johnson, the current speaker, is clearly coming from a very specific point of view.
Scott Shafer: He is although, you know, he did some of the same things that McCarthy did and was deposed over like, you know, a government funding bill. And so I think, you know, it’s one thing to be a Matt Gaetz from Florida where you’re throwing bombs all the time. It’s another thing — and Nancy Pelosi talked with us about this many times — to be in charge of the caucus. You know, you have to get things done. You have to round up the votes. You have to count the votes.
Marisa Lagos: And you have to make people believe that they can trust you even if they you don’t do what they ultimately want. And I think that that is lacking in general in this Republican caucus. But certainly he he had challenges.
Scott Shafer: He did, and I think even Democrats didn’t trust him. You know, at the end when the vote came to…
Marisa Lagos: Especially Democrats.
Scott Shafer. Well but I think there were some people, you know, Hakeem Jeffries, I think they considered maybe cutting some kind of a deal on a power sharing arrangement with him. But in the end, the caucus just didn’t trust him. They felt, you know, whether it was the going after the impeachment inquiry of Biden or Hunter Biden, all those things, you know, and just were backtracking on promises that they just didn’t want to keep him there.
Marisa Lagos: Right. I mean, it is interesting. You know, the thing that he was very good at was fundraising. He raised hundreds of millions of dollars for Republicans. I mean, just his ousting, I think, sounded some alarms within, you know, the campaign wings of the Republican caucus. And it’s going to be fascinating to see A, what he does next. He says he is he still wants to be involved, whatever that means. So we’ll see if he’s still involved in Republican politics. But what it’ll do to some of these competitive House races here in California, you know, he really has help folks like David Valadao in the Central Valley.
Scott Shafer: Protected him from Trump…
Marisa Lagos: Yeah Young Kim down in Orange County keep their seats at times.
Scott Shafer: Yeah and you know very different in so many ways from Nancy Pelosi both you know, the role they played as speaker. But Nancy Pelosi, also a prolific fundraiser for her party, she stepped away. Now she’s the speaker emerita and is continuing. She’s running for reelection. That’s not make everybody happy in that. But she’s yeah, but she is continuing to raise money for the party. Something that it’ll be I don’t think McCarthy is going to necessarily want to do I mean his leaving, you know, before the end of the term and you know, with the eviction of George Santos, get throwing him out of the house, I mean, there are majorities down to like 2 or 3 votes right now.
Marisa Lagos: Right. And I think that’s something that’s going to be fascinating also as we see a potential special election happen in his district, which is a safe red seat, we should say. This is not going to change the makeup of the California delegation per se. It does open up a rare opportunity to run for Congress on the safe seat.
Scott Shafer: But it’s a huge loss of power for all of you and part of a trend as well with Feinstein’s death and Pelosi stepping.
Marisa Lagos: Yeah, and we’re seeing long time, you know, veterans like Anna Eshoo in the South Bay decided to step down. So it is definitely a moment of transition here. But I mean, in some of those cases, these are people have served for decades, are in their seventies or beyond. He is not. And so this really, I think, is indicative of this moment, you know, in American politics. Quickly, before we break, any thoughts on who might run for that seat?
Scott Shafer: Well, you know, you have to look, first of all, at which Senate and assembly seats are nested within that district. Shannon Grove, state senator, she’s been down there for quite a while. Vince Fong is in the assembly. He may run as well. I’m sure they’re all looking at it, doing polling, checking their fundraising. And there is also, we should say already even before he stepped down, there is a kind of a MAGA Republican running who is getting some help from Roger Stone, who is kind of conciliatory to Donald Trump so that he will probably stay in the race and then we’ll see if, you know, some better known Republicans jump in as well. And probably a Democrat or two. But it won’t really matter.
Marisa Lagos: Well, we’ll keep an eye on it. And that means more elections for folks in that district because there will probably be two next year. Okay. We are going to take a short break. When we come back, we will be joined by PG&E CEO Patti Poppe. You’re listening to Political Breakdown from KQED Public Radio.
Marisa Lagos: Welcome back to Political Breakdown. I’m Marisa Lagos here with Scott Shafer. And we are thrilled to welcome PG&E CEO Patty Poppe. She took over the largest investor owned utility in California as it was emerging from bankruptcy and the second time in 20 years. Must have been quite a job interview. Patti Poppe, welcome to the breakdown.
Patti Poppe: Thank you for having me. Great to be with you.
Marisa Lagos: Well, before we talk about your current role, I do want to go back. You grew up in Michigan. I think your mom was a school principal and teacher. Your dad was a nuclear engineer. And I mean, this is a very big job in an area that hadn’t does not has not historically always had women leaders. I’m curious, like, how your parents jobs and your upbringing informed your career path?
Patti Poppe: Oh, well, that’s a great question. You know, I always would I always say my dad taught me how to be an engineer and my mom taught me how to be a leader. She was a great school principal. We all know that schools are such important places in the lives of so many people. And she was a great principal and a great leader for her teachers. So I got to see her do that. And that was always inspiring to me.
Scott Shafer: Well, and as Marisa said, you were, probably found yourself being the only woman or one of the few women in rooms, whether it was in the corporate suites or even in some of the undergrad and business school and post-grad classes you took. You took some really male, male-oriented kinds of.
Marisa Lagos: Industrial engineering? Is that your…
Scott Shafer: Industrial engineering, I mean, GM. What was that like? What did you learn from that? What difference did it make to have you in the room at those times?
Patti Poppe: Well, since I had six sisters at home, I probably had plenty of women in my life telling me what to do. I was the baby, so I got lots of instruction, let’s just say. But I think growing up in automotive as an operator, as an engineer, you know, my dad really wanted me to be an engineer. He inspired and encouraged me to do so. None of my other sisters had been engineers, so I was sort of his last, last ditch effort to get one out of the bunch. And so I’m in this great pride and joy that way. But, you know, growing up in automotive, it was an interesting era at General Motors, there actually were more women than you might expect. Mary Barra’s the CEO at General Motors. She and I were contemporaries. She was a little bit ahead of me, but we had a lot of other really amazing women in operations. And so I grew up not actually thinking it was that strange. In fact, I felt like it was very well-received. And and maybe in some ways it was an advantage because people wanted to have more diverse leadership. And so maybe I got tested a little more early and pushed further and faster and, you know, was able to deliver when called. And so I feel good about what General Motors prepared me for professionally.
Marisa Lagos: How did you make the leap into energy? You went to DTE Energy and then CMS. I think they’re both also investor in utilities in Michigan?
Patti Poppe: That’s right. That’s right. My well, my dad actually worked for Consumers Energy, CMS Energy. So he retired from CMS Energy. Had done built nuclear power plants around the country. And so I was familiar with energy, but I had been in automotive and really at General Motors, we had to move around a lot. And I have young children and that’s one of the advantages of working for an energy company or a utility. We don’t have to move. And so my husband and I made a, you know, a family decision to settle in Michigan with our family and and raise our daughters. And so we we really made a personal decision that ended up being a really exciting professional move in the long run. Had I known, I had no idea at the time.
Scott Shafer: So you ended up transitioning to PG&E. You were hired roughly 2020. And, you know, that was a time when the company was still, you know, in bankruptcy, emerging from bankruptcy, dealing with the aftermath of some devastating fires. What made you think that’s the job I want?
Marisa Lagos: Right. Super easy.
Patti Poppe: Yeah. Well, you know, I think I was compelled watching from afar, having been CEO at CMS Energy for at that time, five years. That was in my hometown. It was a very well-run company. We’d had our own transformation. And so I was able to observe and learn through that transformation at CMS and then to lead it myself. I did feel like I could help. I watched from afar what was happening here in California and specifically for PG&E, such an iconic company. After everything the company had been through and the the customers and our communities had been through. I felt like PG&E really needed an operating oriented leader. And I got a lot of calls. A lot of people called and asked me to consider taking the job. And the first several calls, I was like, No, no, no. You know, I’m I’m in a great place in my hometown. I lived next door to my sister and next door to my dad. There was no reason for me to move. But then, as I really considered the seriousness of what was happening here, I truly felt compelled to come and make a difference.
Marisa Lagos: So it sounds like you wanted the challenge, because one of the things like prepping for this, I’m counting them up. I mean, before you arrive, the company had pled guilty or been found guilty of 90 felony counts and faced more. Like that feels like a bit of a red flag. I mean, what what was your thought in terms of like what you could bring to the table that might be different?
Patti Poppe: Yeah. Well, I knew what it meant to run a very strong ethical and safe company, and I knew it was possible for PG&E too. And what I know is that the people who work for PG&E are not criminals. These are not bad people who set out to do harm. The people, the kind of people who are attracted to a utility and the kind of people who are attracted to PG&E are your neighbors, your friends, your family that set out to have a career at a company where they know they can make a difference in their hometown. And I wanted those people to feel valued and respected again.
Marisa Lagos: Can I push back though? I mean, yes, the line folks, I think, are all members of our community. But I mean, this is a company we were both there on the scene when San Bruno blew up. Right. This natural gas explosion. And that was just the first of many investigations that found shoddy record keeping, lying to regulators, covering up things in order to maximize profits. Like can you say that everybody really had the community’s best interest in line historically?
Patti Poppe: Yeah. So maybe I’m I’m talking generally there’s always the risk of bad apples for sure. And I guess maybe what I’m saying is that I knew that a company like this could be run well and that could be trustworthy. And that with the right kind of leadership and the right kind of focus on what is happening on the ground every day, not distracted by, you know, what’s new and interesting in the globe, but really focused on what’s happening here today. This company could be really important for the clean energy transition, for the ambitions of the state and the ambitions of the globe to thwart the effects of climate change. This company is essential to California’s ambition and the world’s forecast.
Marisa Lagos: I mean we have no choice. We have to pay you guys no matter what as people who live in this region.
Scott Shafer: You said a moment ago that you thought that PG&E could be an ethical ethically run company, suggests that there were things that happened before you got there that weren’t so ethical. What what were you thinking?
Patti Poppe: Well, you know, I don’t I wasn’t here. And so it’s very hard for me to.
Scott Shafer: Well you must have looked at that pattern, right, before you took the job.
Patti Poppe: I mean, I saw the results of a lot of things that contributed to the outcomes that were so devastating to so many. And I knew that that did not have to be our future and that did not have to be the reality for the citizens of California who are served by PG&E, and that we could be a force for good. And so that that is really what I have been relentlessly focused on since the day I got here. My focus is on making sure that we are trustworthy, that we are honest and ethical and safe, and that we are doing what is necessary every single day to make it safer.
Marisa Lagos: Can I ask about the very structure of investor owned utilities? As somebody who did not come from a business or energy world? As I have covered and I’ve covered PG&E and a lot of these tragedies for the last 20 years. Why should a public utility be publicly traded? Like, why should something that we all rely on be subject to the whims of Wall Street, the desire to, you know, make shareholders…
Scott Shafer: Quarterly earnings reports?
Marisa Lagos: Yeah. And isn’t that in itself a conflict?
Patti Poppe: Yeah, that is a great question. And I will tell you, when I left automotive and went to the energy industry and I was I was running power plants, I had the same thought. I thought, wowwee why is it where we need to make a profit here? Shouldn’t we be doing, like, our public good? And then the more I learned and the more I understood, particularly the business model, where we have to attract huge sums of capital to invest in the infrastructure because customers don’t pay for that every they don’t pay for it real time. Customers make a mortgage payment, if you will, on all of the assets. But we have to get the money from the capital markets. And so what I learned is that investor owned utilities actually do have to compete. We have to compete for capital. And when we compete for capital, we are benchmarked like crazy. Wall Street actually is a very important leg of the stool to make sure that we do good work. And when we don’t do good work, Wall Street exits. And so the fact that we have to attract capital actually helps create some real tension around our performance relative to our peers. And I can tell you, they rack and stack us and PG&E was at the bottom of the list.
Marisa Lagos: When you say performance though, does that mean financial performance or…
Patti Poppe: I think you might be surprised. Our investors recognize that there’s a virtuous cycle. It starts with serving customers. When you serve customers well and you keep the system safe, then regulators are more apt to be able to approve the things that you need to invest in that that’s when the investor gives their return. But they know if you lose trust with your regulator, you lose trust with your customers. You’re not going to get easy yeses and follow through and support for your ambitions.
Scott Shafer: You know, the company, of course, went into bankruptcy, which is a way of restructuring debt. And, you know, a lot of people see that as a way of escaping responsibility with rate payers. In fact, many in Wall Street on Wall Street made kind of a killing. Some of the hedge funds and others, you know, how do you respond to that criticism? You know, that the only real winner of all that was was the company and the shareholders?
Marisa Lagos: And the company did come out very similar. Right? I mean, it’s structured the same at least.
Patti Poppe: Yeah, it is structured the same. And the state did have an option. I mean, the state had a choice to split up PG&E or, or municipalize PG&E at that moment. But I think when they looked at all the calculus, the idea of breaking up the company actually was not in the best interest of the people that we serve. And I will say that the company was not absolved of the of the debts in many ways. We’re still at a sub-investment grade. We still have to work very hard to attract capital from the capital markets. So there’s no doubt. And a lot of investors lost it all. And I want to just clarify one thing. When we talk about shareholders, it’s kind of interesting to me because a shareholder at a utility, I want to tell you who we’re talking about. We are not talking about the hedge funds. We’re not talking about the big fat cats on Wall Street.
Marisa Lagos: Well we were for a small period.
Patti Poppe: When we were in bankruptcy because they know how to come in and make their move. But a good utility, a utility like PG&E, our shareholders are moms and pops. Heck, you guys, probably our shareholders, you might not know it, Right. But in your retirement funds, in your 401Ks, in the firefighters funds, in the police funds, in the teachers, they’re invested in utilities and they are invested in PG&E. And so shareholders at PG&E, are moms and pops and I want to keep my promise to them too. They’ve entrusted their life savings to a mutual fund or something and asking for a little return to come back. That’s what PG&E delivers. When we deliver profits, we deliver profits for those moms and pops who are funding the infrastructure that keeps people safe in California.
Marisa Lagos: If you’re just joining us, you’re listening to a Political Breakdown from KQED Public Radio. I’m Marisa Lagos. Here is Scott Shafer. Our guest today, PG&E CEO Patti Poppe.
Marisa Lagos: I want to ask about corporate culture. We’ve been told that your motto is “leading with love.” And. We mentioned earlier, you know, these decimating fires and natural gas explosion in San Bruno, felony charges, bankruptcy. Like what was the morale like when you got there and how do you change that and potentially the culture of a company if that’s needed?
Patti Poppe: Well, culture change at PG&E is the number one priority because it’s through our people that we deliver what we do. And there is no doubt that people had were shaken about their role in the past, their role in the future. How do they make it right? It’s a big entity. What is PG&E? And “leading with love” is a fundamental tenet that I felt needed to interrupt business status quo. To come in and say, Hello, I’m your new CEO and I lead with love. I got a lot of, like, reaction…
Marisa Lagos: Like oh yeah, she’s from the Midwest.
Patti Poppe: Yeah, she’s from Michigan. Yeah no, the Midwest for sure. And they they, you know, in fact, I had people say, you know what? You can’t say that you’re losing credibility. I said, Oh my friends get used to it because I think love is essential ingredient. You know, you look at professional athletes, for example, I’m a huge Golden State Warriors fan and have been for a long time, long before I moved here. Maybe that’s why I migrated.
Scott Shafer: Draymond is from Michigan. Michigan State.
Patti Poppe: Yeah, that’s true. But you know, the athletes very the and the winning teams, of course, they always talk about how they love their teammates. They love their coach, they love the players. Why is that full expression of joy of the game constrained to only professional athletes?
Marisa Lagos: I don’t know, we love each other. We like to talk about that at KQED.
Patti Poppe: That’s nice!
Scott Shafer: You know, but in addition to the joy or maybe, you know, it adds to the joy, are the salaries and the bonuses that a lot of the executives get. It’s a lot of money. I think you’re you make 51 million, I think, per year.
Patti Poppe: No, no, no, no. That was that was a one time make hole. I had already earned that money at my previous company. And the only way I wasn’t going to leave that on the table to take the job, so they paid me what I had made.
Marisa Lagos: In 2021, yeah.
Scott Shafer: But there was also on the table, I think, $188 million in raises and bonuses for executives at a time when, you know, so many terrible things were happening. And I think a lot of people on the outside look and say, where is the accountability? Why do people working for companies that are either, you know, financially not doing well or doing bad things, you know, in out in the world as with the wildfires and so on? Why are why are people getting rewarded?
Patti Poppe: Well, I will say this. To attract talent, there are market rates for leadership. And people can work a lot of places. When I joined PG&E, the entire executive team was vacant, so there was no one there making money off what had happened. They had all been fired or had quit. I had to hire an entirely new team. I searched the entire world and the country for the best and brightest leaders, and I have to pay them to come. And they left good jobs. They did not need to come and they did. And so there’s there’s a market rate for talent, just like there’s a market rate for athletes, just like there’s a market rate for great radio broadcasters.
Scott Shafer: It’s not the same as athletes, let me tell you that.
Patti Poppe: Nor is mine. But, you know, I think that that this idea that that to invest in leadership is essential to turning the company around. And so to invest in leadership, there darn better be a return on investment for customers and for our coworkers to have the right leaders in place.
Marisa Lagos: Well, I want to talk about customers. We just saw approval of PG&E rates to go up for everyone in January. The average is going to be about $30 a month, which adds up over the course of a year to hundreds of dollars. Why is this happening? And especially given everything we’ve talked about, you know, you haven’t been CEO forever, but the customers have been paying for, you know, for a long time. And there’s been a lot in the past of evidence of not necessarily investing that money wisely or doing all the things that were promised under previous rates. So what’s the case to to to and you already made it to the regulators, but to the rate payers that this is justified?
Patti Poppe: Yeah. Well, first of all, I when I first got here, I heard a lot of people say to me, oh my gosh, PG&E chose profits over safety. You didn’t invest in the infrastructure. Well, I will tell you, the leadership team at the helm of PG&E is very focused on delivering the safe infrastructure that will stand the test of time. That does cost something. The the good news is that rate increase that we requested and it’s a four year rate increase. We hadn’t had one in a couple of years. We did put in for this rate increase. There is some catch up for investments we’ve made in hardening the system and making the system safe to wildfire. We’ve had significant improvement in that area, which I’ll talk about. But the idea that over that four years, 2023, 2024, 2025 and 2026, the average the compound average rate increase for each of those four years is going to be around 3%. It just so happens the first year is the biggest bump and then actually it will come down next year and come down again the next year. There’s some catch up between 23 and 2024 that is embedded in that increase that will get spread back out over time.
Scott Shafer: And that is largely to underground a lot of the wires?
Patti Poppe: That the undergrounding is a small piece. It’s a lot 85% of it is safety and infrastructure, though, investments all over the system. And the undergrounding was a small piece of that increase that the regulators really wanted to see us do more, could we do more and didn’t want to write a blank check and yes, tell us to go collect those dollars before we proved we could do it. I’m happy to report that this year we will have underground 350 miles of line that we have never done that before, almost double what we’ve ever done before.
Marisa Lagos: And for years we heard that was way too expensive. And so is that is the technology changed? Is it just we’re at a point where that just needs to happen?
Patti Poppe: Two things. One, the comparison to building overhead conductor, which has been the standard to what we’re doing today, takes into account all of the vegetation management that we’re doing today that we were not doing before. PG&E spends 1.5 to 1.8 billion dollars a year taking down trees. That’s a problem. California, we need to save the trees and we need to instead of investing over a billion dollars a year, invest that same amount in a capital investment, you actually can invest in that undergrounding for less. It is lower cost than what we are doing today or before.
Marisa Lagos: So were they just wrong before?
Patti Poppe: Before we weren’t doing as much vegetation management, so it wasn’t as much of a trade. But today we have to or we’re
Scott Shafer: And then the executives say they were doing it and a lot of it wasn’t getting done.
Patti Poppe: I, I can’t actually I don’t know that. I don’t know that to be true.
Scott Shafer: Another question, though, how much of this the problem with wildfires and you know lines trees falling lines getting you know sparking and so on, how much of that can be resolved, do you think, from undergrounding versus new technology or hardening the system, adding resiliency?
Patti Poppe: It is all of the above. And I will say on undergrounding and we talk about our 10,000 mile plan and I sometimes wish I had called it the 9,442 mile plan because they’re very specific miles. These aren’t it isn’t an arbitrary 10,000. These are very specific high risk miles in the places where the trees are coming in contact with the lines and trees that look healthy on the outside that have some issue in the in the routes. We can now protect customers with those specific miles being underground.
Marisa Lagos: That is PG&E CEO Patti Poppe. Thank you for coming in.
Scott Shafer: Thanks a lot.
Marisa Lagos: Wish we had more time.
Patti Poppe: Oh, I do, too. I’ll come back any time.
Marisa Lagos: That is going to do it for this edition of Political Breakdown. We’re a production of KQED Public Radio.
Scott Shafer: Our engineer today is Christopher Beale. Our producer is Izzy Bloom. I’m Scott Shafer.
