2008 Corporate Responsibility Report

How we are creating a smarter foundation for a sustainable future

Working Collaboratively to Address Climate Change

PG&E recognizes that the link between greenhouse gas emissions and the Earth’s warming climate is convincing, the potential consequences are serious and the need for action is urgent.

We are working in partnership with a wide network of stakeholders to identify the policies, technologies and practices to successfully meet the climate challenge in a way that is environmentally effective, economically sustainable and fair.

PG&E’s Climate Change Journey

Understanding and Planning for Potential Impacts to Our Business

As concentrations of greenhouse gases in the atmosphere grow, the scientific community is increasingly focused on the future impacts of climate change to ecosystems and humankind. Often referred to as “adaptation,” planning for—and managing around—the impacts of climate change is a major challenge.

For the California electricity sector, two adaptation challenges, in particular, are emerging as paramount: increased electricity demand due to more extreme and frequent hot weather events, and reduced hydroelectric generation due to reductions in snowpack in the Sierra Nevada. PG&E’s adaptation strategies for reducing greenhouse gas emissions—such as energy efficiency and demand response—are also effective strategies for addressing the increased demand for electricity in extreme hot weather events. Simply put, some of PG&E’s climate change mitigation strategies are also climate change adaptation strategies.

On the electric supply side, if PG&E’s future hydroelectric generation is reduced due to drought conditions or climate change, PG&E might have to replace some of this carbon-free generation with fossil-fueled generation, typically natural gas-fired turbines. The ongoing drought in California illustrates the possible negative consequences of climate change to our greenhouse gas mitigation efforts: During the 2007 drought, PG&E’s hydroelectric generation dropped from 22 to 13 percent of our delivery mix, resulting in a 39 percent increase in our verified greenhouse gas emissions rate.

In 2008, PG&E continued to evaluate the potential impacts of climate change on our hydroelectric system, as we have for several years. Some of the first negative impacts to conventional hydroelectric output will likely take place on the relatively low elevation North Fork Feather River, followed by negative generation impacts on the South Yuba River-Bear system with increasing frequency. We are analyzing and exploring a combination of operating changes that may include, but are not limited to, higher winter carryover reservoir storage levels, reduced conveyance flows in canals and flumes during winter storm periods, reduced discretionary reservoir releases during the late spring and summer period and increased sediment releases from diversion dams.

We continue to engage with thought leaders from the business, government, academic and non-profit sectors to begin the important dialogue on the impact of climate change on various sectors in California. PG&E is also assessing the benefits and challenges associated with various climate change policies, identifying how a comprehensive program can be structured to mitigate overall costs to our customers and the economy as a whole, as well as to ensure that the environmental objectives of the program are met.

The results of these efforts will enable PG&E to develop adaptation and mitigation plans to ensure a high standard of customer service and reliability in both the near and long term, as well as to engage constructively in the broader climate change discussion occurring at the state, regional and national levels.

Reporting Our Impacts

PG&E has been a leader in the effort to quantify and report greenhouse gas emissions, which is an essential first step in the longer-term effort to effectively and efficiently address this challenge. We are a charter member of the California Climate Action Registry and, in 2002, were the first investor-owned utility in California to voluntarily complete a third-party-verified inventory of our CO2 emissions.

Since 2005, we have also participated in the Carbon Disclosure Project, which provides additional detail on our actions as they pertain to climate change and our greenhouse gas emissions profile.

Beginning in 2009, PG&E will begin voluntary reporting to The Climate Registry, a new non-profit organization that is developing consistent reporting and measurement standards across industry sectors in North America. PG&E is a founding member of The Climate Registry, and its Governing Board includes more than 40 states, all six Mexican border states and Canadian provinces and territories. PG&E will also begin mandatory greenhouse gas emissions reporting to the California Air Resources Board under AB 32 in 2009.

Please see the chart below for PG&E’s 2007 greenhouse gas emissions by source category, as reported to the California Climate Action Registry.

Total 2007 Greenhouse Gas Emissions by Source Category
(Total: 28.7 Million Tons CO2-e*)

* PG&E's 2007 greenhouse gas emissions, which equate to 26 million metric tonnes, were calculated and independently verified in accordance with protocols of the California Climate Action Registry. Given that a small percentage of the electricity that PG&E delivered in 2007 came from unspecified generation sources, the total emissions may vary from the registered figure.

We also verified the CO2 emissions rate associated with the power we delivered to our customers in 2007 at 636 lbs CO2/MWh. PG&E’s emissions rate increased significantly in 2007 over 2006 primarily because more fossil fuel-based power was purchased to make up for the decrease in hydroelectricity that occurred due to drought conditions affecting the western U.S. in 2007. Even with the increase, PG&E’s 2007 emissions rate was still approximately 50 percent below the national average.

For comparison, the national average CO2 emissions rate for all power generation was approximately 1,329 lbs/MWh, while the California average CO2 emissions rate was approximately 724 lbs/MWh (based on 2005 data).

Benchmarking Greenhouse Gas Emissions for Delivered Electricity
[Pounds of CO2 per MWh]

* Source: U.S. Environmental Protection Agency eGRID 2007 Version 1.1 (updated December 2008 and based on 2005 data).

** PG&E’s emissions rates for delivered electricity were independently verified and registered with the California Climate Action Registry. Given that a portion of the electricity that PG&E delivers comes from unspecified generation sources, the company’s total emissions, and associated emissions rates, may vary from registered figures. Review emissions data for our owned generation resources.

PG&E recognizes the importance of a common greenhouse gas reporting infrastructure, which ensures comparability and improved transparency across industries. That is why we continued to provide critical expertise in the development of new or revised greenhouse gas emission reporting and reduction project protocols last year. This includes important protocols under development by The Climate Registry, the California Climate Action Registry, the Climate Action Reserve and the World Resources Institute.

Addressing Our Own Footprint and Empowering Our Customers

At PG&E, we are working to minimize our carbon footprint:

  • Since 1998, we have reduced our sulfur hexafluoride (SF6) leak rate by 84 percent and our absolute emissions by 74 percent.
  • We continue to reduce the methane leak rate from our natural gas pipeline operations, avoiding the release of more than 770 tons of methane (CH4), or approximately 16,200 tons of CO2-equivalent, in 2008.
  • And we continued to participate in PG&E’s ClimateSmart™ program, making the energy use in the company’s offices and maintenance buildings “carbon neutral.”

Steven Kline, vice president, Corporate Environmental and Federal Affairs at PG&E Corporation, speaking at the Capitol in support of the Boxer-Lieberman-Warner Climate Security Act of 2008. Also pictured are Senators Barbara Boxer (D-CA) and Charles Schumer (D-NY).

We also provide our customers with a complementary portfolio of options to help reduce their carbon footprint through steps such as improving energy efficiency, taking advantage of solar and self-generation incentives and voluntarily signing up for the ClimateSmart program to balance out the greenhouse gases associated with their energy use.

From Oakland to Arcata, a growing number of cities and counties in northern and central California are conducting inventories of their communities’ greenhouse gas emissions. In 2008, we assisted more than 100 cities and counties with these inventories by providing them with aggregated historic energy consumption data and the associated greenhouse gases for residential, commercial and industrial PG&E customers within their jurisdiction, as well as detailed data for municipal facilities. These efforts are a part of our partnership with the Bay Area Air Quality Management District and ICLEI—Local Governments for Sustainability.

Sulfur Hexafluoride (SF6) Absolute Emissions (Tons CO2-equivalent)

Since 1998, PG&E has reduced its SF6 leak rate by 84 percent and its absolute emissions by 74 percent. SF6 is an extremely potent greenhouse gas, approximately 23,900 times as potent as CO2 on a per ton basis, and is used as an electrical insulating material in high-voltage circuit breakers and gas-insulated substations. PG&E achieved these reductions in partnership with the U.S. EPA by implementing SF6 tracking, early leak detection measures for circuit breakers and an active breaker replacement program. In 2008, PG&E purchased a 72 kV circuit breaker that uses no SF6 which will be installed at a substation for performance evaluation. PG&E also purchased X-ray equipment so we can perform efficient inspections of breakers in-house. X-ray technology allows breakers to be inspected without being opened, decreasing the amount of lost SF6. PG&E is also actively pursuing the use of recycled SF6 system-wide.

Photo: Lewis Stewart

Advancing Responsible Solutions

PG&E was the first investor-owned utility to support the enactment of AB 32, California’s Global Warming Solutions Act of 2006, which sets a goal of reducing the state’s greenhouse gas emissions to 1990 levels by 2020. PG&E is working with the California Air Resources Board (ARB), CPUC, CEC, Cal/EPA and concerned stakeholders to make AB 32 a success and a model for emerging regional and national greenhouse gas reduction programs.

Peter Darbee speaking at the 2008 United Nations Investor Summit on Climate Risk.

To date, specific regulatory goals or targets for individual sectors or entities within sectors have not been set under AB 32. Recognizing that these requirements will be forthcoming, PG&E has not set a greenhouse gas reduction target for our operations.

In 2008, the ARB approved a Scoping Plan that provides a road map for the regulatory implementation process to follow between now and 2012. Importantly, the plan included a cap-and-trade program covering 85 percent of the state’s emissions. This program will be developed in conjunction with the Western Climate Initiative, composed of seven states and four Canadian provinces that have committed to cap their emissions and create a regional carbon market.

During 2008, we actively participated in the regulatory proceedings to develop the AB 32 Scoping Plan. We also supported SB 375, state legislation enacted in 2008 to promote development patterns that will further the goals of AB 32 by aligning housing policy, transportation funding and climate change strategies to optimize the design of California’s communities. We also continued to provide extensive input into the Western Climate Initiative’s efforts to design a regional cap-and-trade market—as well as emerging federal legislative and U.S. EPA rulemaking activities.

And, finally, we filed an amicus curiae brief in support of California’s request for a waiver from the Clean Air Act, which would authorize the state to regulate greenhouse gas emissions from vehicles. PG&E has been a consistent voice of support on this issue, and was one of the only private-sector companies to support the passage of state legislation (AB 1493) in 2002.

Ultimately, California’s greenhouse gas reduction program should be harmonized with a broader federal program and global framework. This will allow California to reduce greenhouse gas emissions at the lowest possible cost and also provide the opportunity to more seamlessly “export” innovative technologies, programs and practices. A national program should recognize and take into account the significant investments already made by the state of California and its energy consumers to reduce greenhouse gas emissions.

At the national level, PG&E actively worked to advance comprehensive climate change legislation by testifying before the U.S. House Select Committee on Energy Independence and Global Warming and supporting the Boxer-Lieberman-Warner Climate Security Act of 2008. Peter Darbee also shared PG&E’s views at the 2008 Investor Summit on Climate Risk, a gathering at the United Nations on global warming with 200 of the world's top investment strategists.

PG&E’s Climate Change Policy Principles

Market-based strategies provide economic incentives and the flexibility to cut emissions in the most innovative and cost-effective ways. This approach is key to driving development of the next generation of clean, highly energy-efficient technologies and practices. PG&E believes a properly designed cap-and-trade system—coupled with our customer energy efficiency, renewables and demand-side management programs—will reduce greenhouse gas emissions, diversify our energy supply mix and help to minimize costs to our customers. We believe that the following principles should guide policy development:

  • Mandatory greenhouse gas reductions are necessary.
  • Long-term greenhouse gas targets provide a basis for action and investment.
  • Standardized emissions reporting is an essential first step and must form the basis of any mandatory program.
  • A cap-and-trade program minimizes costs, maximizes innovation and ensures environmental effectiveness.
  • Broad-based participation leads to better, more cost-effective results.
  • Near-term opportunities for cost-effective, verifiable greenhouse gas reductions, including offsets, should be encouraged and pursued, and early action recognized.
  • Consumers will bear the majority of program costs, so consumers should receive a substantial amount of value associated with allowance distribution.
  • The value associated with emissions allowances under a cap-and-trade program should be used to support the overall objectives of the climate protection program, including smoothing the transition for consumers and businesses, helping to advance technology and train and transition the nation’s workforce and supporting efforts to adapt to a changing climate.
  • Barriers exist to realizing the full potential for energy efficiency, and they must be dismantled.
  • Investment in low- and zero-emission electric generation and other technologies is critical and must be prioritized.

Working with Coalitions

We also continued our efforts as part of coalitions to advance comprehensive climate legislation through both the U.S. Climate Action Partnership (USCAP) and the Clean Energy Group (CEG). We are a founding member of both organizations. USCAP is a coalition of major businesses and leading environmental organizations that have come together to call on the federal government to quickly enact strong national legislation to require significant reductions of greenhouse gas emissions.

Launched in 2007, USCAP developed a set of detailed legislative recommendations for a national, mandatory market-based approach to reduce greenhouse gas emissions that calls for an economy-wide cap on emissions, along with a set of complementary policy measures to advance technology, mitigate costs for consumers and businesses and provide opportunities for the nation’s workforce.

The CEG is a coalition of progressive utilities and power generators that serve millions of customers and have a footprint in every state. The CEG released a framework for legislative action that is focused on policies to help smooth the transition to a low-carbon economy for the electric power sector and its customers.

PG&E was also an active participant in the Energy Future Coalition’s energy efficiency and smart grid task forces, working with a broad coalition of business, labor and environmental groups to identify new directions in energy policy. And, finally, as a member of Combat Climate Change (3C), a coalition of more than 50 leading international companies, PG&E led the organization’s Energy Efficiency Task Force to develop more detail for policymakers on how to accelerate the penetration of vital energy-saving technologies throughout the world economy.