View the full episode transcript.
Patti Poppe started a new job as CEO of PG&E in 2021, after the company emerged from bankruptcy for the second time in two decades. She sat down with KQED’s Marisa Lagos and Scott Shafer of the Political Breakdown podcast to discuss the future of the utility.
Episode Transcript
This is a computer-generated transcript. While our team has reviewed it, there may be errors.
Ericka Cruz Guevarra: I’m Ericka Cruz Guevarra and welcome to the bay. Local news to keep you rooted. Patti Poppe started a new job as CEO of Pacific Gas and Electric in 2021 after the company emerged from bankruptcy for the second time in two decades. And Poppe’s got her work cut out for her.
Ericka Cruz Guevarra: She leads a company that’s lost a lot of trust from customers who are now footing the bill for PG&E’s efforts to adapt to the threat of more wildfires. So today on the Bay, Poppe sits down with my colleagues Scott Shafer and Marisa Lagos of the Political Breakdown podcast to answer some tough questions. As the leader of California’s largest public utility. Stay with us.
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 does not have that 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 Schafer: 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 style engineering, industrial engineering, I mean, GM. What was that like? What did you learn from that? What difference would it make to have you in the room with those guys?
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.
Patti Poppe: There actually were more women than you might expect. Mary Barra, 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 DC 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 had been in automotive and really at General Motors. We had to move around a lot. And I had 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 Schafer: 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 emergency, emerging from bankruptcy, dealing with the aftermath of some devastating fires. What made you think that’s the job I want?
Marisa Lagos: That’s super easy.
Patti Poppe: Yeah, well, I did feel like I could help. I watched from afar what was happening here in California and specifically for Pigeon is such an iconic company. After everything the company had been through and the the customers and our communities had been through. I felt like PGE 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.
Patti Poppe: And the first several calls, I was like, No, no, no. You know, I’m I’m in a great place in my hometown. 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. 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 arrived, 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 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 PGD to. And what I know is that the people who work for Jini 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 PGE 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 that? 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 lines 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 I mean, we have no choice cast.
Marisa Lagos: We have no choice. We have to pay you guys, no matter what, as people who live in this region.
Scott Schafer: You said a moment ago that you thought that you could be an ethical ethically run company, which 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.
Scott Schafer: But 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 PGE 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 PGE 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 Schafer: Quarterly earnings reports?
Marisa Lagos: Yeah. And 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, wow, we 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.
Patti Poppe: 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 PGE 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 and follow through and support for your ambitions.
Scott Schafer: 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 municipalizePG&E at that moment. But I think when they looked at all the calculus, the idea of. A 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 subinvestment grade.
Patti Poppe: 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.
Marisa Lagos: Well, we were for a small period.
Patti Poppe: We were, when we were in bankruptcy because those things, you know. Yes. They know how to come in and make their move. But a good utility, a utility like PGE, our shareholders, our moms and pop’s, heck, you guys, probably our shareholders, you might not know it, Right. But in your retirement funds, in your 401. KS, in the firefighters funds, in the police funds and the teachers, they’re invested in utilities and they are invested in PG And so shareholders at PG and E, our 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 you need 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: 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 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 and 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, reactions from them.
Patti Poppe: Yeah. Oh, yeah, she’s from Michigan, but, you know. Yeah. No, 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, All my friends get used to it because I think love is essential. Ingredient. 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 took the job.
Scott Schafer: Draymond Green is from Michigan.
Patti Poppe: Yeah, that’s true. Michigan State. But you know, the athletes very 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? Why we have you up here. There you go to talk about that. Hey, that’s.
Scott Schafer: Nice. 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 Michael. 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. 21 Yeah.
Scott Schafer: Okay. 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 and people can work a lot of places. When I joined Jeanie, 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. 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 Schafer: Not the same as athletes.
Patti Poppe: You know, 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? Two, two, two. 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, Jeannie chose profits over safety. You didn’t invest in the infrastructure. Well, I will tell you, the leadership team at the helm of Jeannie 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 put in for this rate increase.
Patti Poppe: 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 Schafer: 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 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 as the technology changes, it’s 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 the vegetation management that we’re doing today that we were not doing before. PGE spends 1.52 $1.8 billion a year taking down trees, that’s a problem. Yeah. California, we need to save the trees and we need to instead of investing over $1 billion a year, invest that same amount in a capital investment, You actually can invest in that undergrounding for less. It is lower cost so than what we are doing today or before we weren’t doing as much vegetation management, so it wasn’t as much of a trade. But today we have to do it.
Scott Schafer: But didn’t 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 Schafer: 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 an underground and we talk about our 10,000 mile plan and I sometimes wish I had called it the 9442 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.
Marisa Lagos: So in general, how would you explain to ratepayers sort of where we’re at? Because I think we’ve seen a pretty big increase over the past decade in all of the utilities in California, but we do have some of the highest rates in the country. And I think PJ&E is, you know, at 92% compared to like so Cal is like 89. I mean, it’s not a huge. But like, how do you explain that? What are we talking about here?
Patti Poppe: Well, I do think California’s ambition to lead the clean energy transition has led us to take make decisions in the past to invest in the future, invest in renewable projects, invest in in solar, when it wasn’t necessarily the lowest cost choice, but it was the right. Environmental choice. And here’s what I think is a very exciting postcard from the Future Peoples Household Energy wallet. Let me just call this your one wallet. What you pay for gasoline in your car, electricity and natural gas will get smaller as we decarbonize the economy.
Patti Poppe: And the more you transition to electric vehicles, the less you will spend on energy in total, because electricity is more efficient than gasoline and it is cheaper than gasoline by a lot. And so transitioning to electric vehicles, how much money a household spends on energy will go down as we decarbonize the economy.
Marisa Lagos: Thank you so much.
Patti Poppe: Yeah, Thank you.
Ericka Cruz Guevarra: That was Patti Poppe, the CEO of PG&E, speaking with KQED’s Scott Shafer. And Marisa Lagos on the Political Breakdown podcast, which you can find wherever you found the Bay. This episode was engineered by Christopher Beal and produced by Izzy Bloom. The Bay is a production of member supported KQED in San Francisco. I’m Ericka Cruz Guevarra. Peace.