PG&E takes a systematic approach to managing risk throughout our business, using an annual integrated planning cycle to identify and analyze risks and develop a coordinated strategy to manage them effectively. We work continuously to improve our ability to address risks of all kinds—from seismic activity and wildfires to “dig-in” incidents where third-party workers damage underground natural gas pipelines.
Risk at PG&E is managed on three levels:
PG&E focuses on monitoring and managing three broad categories of risk across the business:
- Enterprise and Operational Risk. This encompasses risks that could have a potentially catastrophic impact on public and employee safety, reliability, the environment, customer trust or PG&E’s financial condition, as well as other risks that arise from our operations.
- Compliance Risk. This includes all programs that enable PG&E to comply with both the spirit and the letter of the applicable legal and regulatory requirements.
- Market and Credit Risk. This includes PG&E’s exposure to risks associated with PG&E’s energy portfolio, including trading in energy commodities, financial hedging and counterparty risk.
Among our senior executives, PG&E’s Vice President of Internal Audit is responsible for overseeing enterprise and operational risk management, internal audit and insurance functions, reporting to the Audit Committees of the PG&E Corporation and Utility Boards. The Vice President and Treasurer is responsible for market and credit risk management and facilitates and is a voting member of the PG&E Corporation Risk Policy Committee and the Utility Risk Management Committee, which include a subset of senior officers of PG&E Corporation and the Utility.
Enterprise-wide Risk and Compliance teams are responsible for guiding PG&E’s risk management process. On an annual basis, PG&E’s senior executives from every line of business hold a two-day discussion to review and assess our plans to manage risk, including the identification and assessment of the top risks for each line of business. Broadly, this process enables PG&E to assess risks, set a strategy to address them and then allocate resources to successfully implement our strategy.
Further, the PG&E Internal Audit department provides independent verification regarding the adequacy of processes and controls to manage business risk, and provides advisory services to strengthen controls.
Boards of Directors
The PG&E Corporation and Pacific Gas and Electric Company Boards and their committees have specific oversight responsibility for risk management in their respective areas:
|Entity||Risk Oversight Responsibilities|
|Nuclear, Operations and Safety Committee1||
- 1. Refers to committees of the PG&E Corporation Board of Directors only.
For a full description of Board committee oversight responsibilities, please see the webpages of the Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company, as well as our 2016 Joint Proxy Statement (PDF).
Lines of Business
Each of PG&E’s lines of business follows a rigorous process to assess the likelihood and impact of various enterprise and operational risks. The results of these assessments are calibrated across the enterprise, objectively applying the same criteria to all areas of operational focus.
Final plans for each line of business include metrics that evaluate risk management performance and assess, manage and monitor top risks. These plans inform how we deploy resources—leading to our practice of using risk-informed budget allocation.
We continued to review and refine our approach to risk management, examining all enterprise and operational risks. Our risk management governance structures allow risks to be investigated both under a Board of Directors-directed review process and also from a “bottoms-up” approach that allows operational experts to apply their knowledge and identify emerging issues for PG&E.
PG&E responds to help reduce risk of wildfires
With California in the middle of a multi-year drought, PG&E focused on key areas to reduce wildfire risk:
- Enhanced vegetation inspection and mitigation: Re-inspected nearly 44,000 miles of electric lines in areas of higher fire risk and removed hazardous trees that could contact power lines, potentially causing power outages or wildfires.
- Fuel reduction and emergency response access: Partnered with local Fire Safe Councils to provide $2 million in funding for fuel reduction, emergency access and defensible space projects in local communities.
- Early detection and response to wildfires: Operated daily air patrols in four regions, with pilots spotting 96 fires during 2015, 20 of which were first reports.
- Public education and awareness: Partnered with CAL FIRE and local telecom companies to place remote fire detection cameras on fire lookout towers, and collaborated with California State University, Humboldt on a study on forest health.
PG&E is committed to achieving a best-in-class risk management program, and continuing to employ risk-based decision-making in our integrated planning process and regulatory approach. Areas of focus include:
- A strengthened governance process to oversee risk management activities and progress
- Improved enterprise-wide monitoring and analytics
- An optimized risk portion of the integrated planning process