2008 Corporate Responsibility Report

How we are creating a smarter foundation for a sustainable future

Our Environmental Compliance Performance

The bedrock of PG&E’s commitment to environmental leadership is our policy to comply with applicable environmental requirements. Our environmental policies, management systems, review processes and programs are designed to promote compliance with environmental requirements, as well as to provide a platform from which we can take our performance beyond the legal and regulatory baselines.

Environmental Management System

During 2008, we continued to evaluate our Environmental Management System (EMS) and identify opportunities for continued performance improvement. As illustrated below, the EMS is consistent with international standards (ISO 14001) and employs the widely adopted “Plan, Do, Check, Act” model for continuous improvement, which includes the elements of policy development/planning, implementation and operation, checking and corrective action and management review to evaluate performance.

PG&E’s Environmental Management System
General Requirements, Structure and Responsibility

Planning

During 2008, we continued to identify compliance improvements and prioritize our compliance efforts. To more fully integrate environmental responsibilities into work department practices, PG&E issued a utility standard practice describing the company’s EMS and defining environmental compliance roles and responsibilities. Recognizing the need to manage resources efficiently and effectively, we continued to use risk assessment tools, such as Lean Six Sigma’s Failure Modes and Effects Analysis, to ensure that we are addressing our activities that may have an environmental impact.

Implementation and Operation

To ensure compliance obligations are met in a timely and effective fashion, during 2008, we further documented environmental compliance roles and responsibilities at our facilities and within various business functions through procedures, guidelines and service-level agreements.

Training is a key element of a successful compliance program. During 2008, PG&E trained more than 14,000 employees on various environmental compliance responsibilities, including air quality, habitat and species protection, oil spill prevention and cleanup and hazardous materials/waste management. Additionally, we developed a training program outlining our environmental policy to reinforce every employee’s obligation to improve PG&E’s commitment to environmental leadership. This new training is being rolled out in 2009.

To measure progress toward PG&E's goal of environmental leadership, we developed an “environmental leadership index” comprising enterprise-wide factors that cover both compliance and “beyond compliance,” including sustainable buildings and operations, risk management and the company's reputation. PG&E's senior management reviews the index results on a quarterly basis, allowing for timely and meaningful management of our environmental performance.

Checking and Corrective Actions

PG&E measures its environmental compliance performance through indicators such as an Environmental Scorecard; internal assessments, reviews and audits; environmental agency findings; and individual program metrics. During 2008, we continued to improve our corrective action process by performing root-cause analyses on non-compliance issues identified through environmental agency inspections, and tracking detailed corrective action plans to resolution. A greater emphasis on the system-wide implications of non-compliance will lead to a reduction of non-compliance items over time.

Management Review and 2009 Priorities

The environmental team meets quarterly with our executive team to review progress and an annual environmental compliance summary is presented to the Public Policy Committee of PG&E Corporation’s Board of Directors. These governance processes ensure that we remain focused on high priority work.

Our priority in 2009 is focused implementation of our environmental management program to drive towards compliance. Our key focus areas include partnering with operations and integrating operational controls, continuing to improve our risk assessment process, strengthening our environmental management plans and streamlining our permitting processes in support of PG&E’s reliability and renewable energy projects.

Auditing Our Performance

One of the pillars of PG&E’s environmental policy is that we develop and implement a risk-based audit plan to ensure periodic independent review of our environmental performance. In 2008, we realigned our auditing function to increase focus on systemic or programmatic issues, developed a new, updated risk-based protocol for our individual facility assessments and began to more effectively assess compliance at our project construction sites.

Environmental auditing performed by the Internal Auditing Department uses controls-based audits to analyze the effectiveness of the Utility’s environmental compliance management systems. More formal facility-level audits are either comprehensive or focused on a single media area and are performed by the Compliance Risk Management department. Assessments are performed by our site personnel and typically focus on a small media area or are used to assess system-wide compliance in an area of non-compliance concern. During 2008, we performed a total of two management system audits, 11 formal facility level audits and 459 assessments. We continue to evaluate the environmental audit realignment and look for ways to further improve our auditing function.

Operational Performance

As part of PG&E’s environmental policy and EMS, we track and report annual environmental performance across a broad spectrum of areas. This section details our performance results for 2008.

Reported Releases and Permit Exceedances

The Utility reported to various government agencies a total of 280 releases and 6 permit exceedances in 2008. A release is defined as an unintentional discharge of a regulated substance that meets a reporting threshold and an exceedance is defined as a discharge in excess of what is allowed by permit. PG&E reports releases that not only meet the regulatory thresholds but also fall below those thresholds.

Two air quality permit exceedances were reported to local air districts for opacity exceedances. Four water quality permit exceedances were reported to regional water quality control boards, including two of an oil and grease limit, one of a residual chlorine limit and one of a total suspended solids limit.

The number of releases and exceedances in 2008 was a 26 percent increase from 2007, due primarily to an increase in weather-related releases caused by significant winter storms in early 2008. We have detailed emergency response procedures for both our facilities and our distribution equipment and our crews and outside contractors respond to spills and releases no matter how small. We remediate such incidents in accordance with applicable laws and regulations. Ninety-two percent of the releases in 2008 involved small amounts of mineral oil used in transformers or other petroleum-based substances and approximately 45 percent were either weather-related equipment damage or caused by third parties.

Agency Inspections

Government agencies conducted 590 routine inspections of PG&E’s facilities in 2008, up from 530 inspections in 2007. Local jurisdictional fire and environmental health departments performed the majority of inspections with most inspections related to hazardous material, hazardous waste and water quality requirements at our facilities.

Enforcement Actions—Notices of Violation

The Utility received a total of 12 notices of violation (NOVs) from government agencies during 2008, a decrease from 14 in 2007. The rate of NOVs per 100 agency inspections in 2008 decreased, as well. There were 2.03 NOVs per 100 agency inspections in 2008, compared with a three-year average of 1.98. Of the NOVs received in 2008, six involved air quality regulations. Three of the six involved requirements for vehicle-fueling facilities and the others involved a failure of a source test for a thermal oxidizer at a natural gas transmission facility, inadequate emissions controls on an emergency generator and a public nuisance caused by a seal failure of a natural gas odorant pump.

Three NOVs involved water quality regulations. Two of these involved compliance with drinking water requirements including late submittal of a sampling schedule and a nitrate exceedance during a sampling event at a facility while in the process of obtaining a permit. The third water quality NOV was issued for previously reported permit exceedances at our Shell Pond remediation site. Two NOVs were issued for hazardous material/waste regulation—one for lack of an audible alarm on an aboveground storage tank and one for failure to obtain a local hazardous material permit. The one remaining NOV was issued for vegetation removal without prior authorization from the California Department of Fish and Game, a violation of habitat/species regulations.

As discussed earlier, we are using our root-cause analysis of these NOVs to improve our overall compliance performance by implementing corrective actions to prevent reoccurrence.

2008 Enforcement Penalties and Settlements

In 2008, the Utility received five NOVs resulting in monetary penalties, and we paid penalties or settlements on two 2007 enforcement actions. The total penalty and settlement payments made in 2008 were $119,625. Specifically, we paid $75,320 to resolve a 2007 enforcement action initiated by Solano County regarding various underground tank monitoring and recordkeeping requirements. We also paid $600 for an air quality NOV received in 2007. For 2008, we paid $36,000 for previously reported discharge permit exceedances at our Shell Pond remediation site, $5,280 for a failed source test, $1,800 for improperly vented engine, $525 for a crack in a fuel island hose and $100 for a fueling dispensing system violation.

Compliance Data
 
2006
2007
2008

Notices of Violation (NOVs)
8
14
12

Rate of NOVs (per 100 inspections)
1.55
2.64
2.03

Releases/Exceedances
324
227
286

Penalties Paid
$6,800
$222,450
$119,625

Agency Inspections
517
530
590

Formal Audits Performed
59
62
11

Compliance Assessments Performed
1,868
1,034
459