Partnering in the Fight Against Climate Change

It is critical that investors, customers, policymakers and other stakeholders have access to information that allows them to assess and understand a company’s risks and opportunities associated with climate change.

PG&E was among the earliest companies to voluntarily quantify and report its greenhouse gas emissions. Since 2002, as a charter member of the California Climate Action Registry, we have voluntarily registered and publicly reported our third-party verified greenhouse gas inventory every year.

In 2009, PG&E also voluntarily reported greenhouse gas emissions to two other entities: The Climate Registry and the Carbon Disclosure Project (CDP). The Climate Registry is a non-profit organization that sets consistent and transparent reporting standards for North American businesses and governments. PG&E is a founding member of The Climate Registry.

The CDP is an independent not-for-profit organization holding the largest database of primary corporate climate change information in the world. Thousands of companies from across the world measure and disclose their greenhouse gas emissions and climate change strategies through the CDP. PG&E began reporting to the CDP in 2005 and, in 2009, earned a top ten ranking on both the CDP’s S&P 500 and Global 500 Leadership Indexes. PG&E was one of only four U.S. utilities to make the global listing, tying for first place as the CDP’s top-ranked utility globally.

Last year, we also reported our 2008 greenhouse gas emissions to the California Air Resources Board (ARB), as required by California’s Global Warming Solutions Act of 2006 (AB 32).

PG&E’s third-party-verified CO₂ emissions rate associated with the electricity delivered to customers in 2008 was 641 pounds of CO₂ per MWh, which continued an upward trend since 2006. This increase is primarily due to PG&E purchasing more fossil fuel-based electricity from the wholesale market to make up for reduced output from our hydroelectric system due to continued lower-than-normal precipitation levels, as well as reduced generation from our Diablo Canyon Power Plant in 2008 due to required maintenance. In addition, customer demand for electricity increased during this same period. Even with this modest increase, PG&E’s CO₂ 2008 emissions rate was still approximately half the national average.

The charts below show PG&E’s 2008 verified greenhouse gas emissions, as reported to the California Climate Action Registry.

• PG&E’s Scope 1, 2 and 3 Greenhouse Gas Emissions (CO₂-e)¹

  • PG&E's Scope 1 Greenhouse Gas Emissions (Metric Tons CO₂-e)

    PG&E's Scope 2 Greenhouse Gas Emissions (Metric Tons CO₂-e)

    PG&E's Scope 3 Greenhouse Gas Emissions (Metric Tons CO₂ for Purchased Electricity)

• Total 2008 Greenhouse Gas Emissions by Source Category

• PG&E's Sulfur Hexafluoride (SF₆) Emissions

• PG&E's Methane Emissions

• Benchmarking Greenhouse Gas Emissions for Delivered Electricity

¹ Since PG&E purchases a portion of its electricity from the wholesale market, we are not able to track some of our delivered electricity back to a specific generator. Therefore, there is some unavoidable uncertainty in PG&E's total emissions and emissions rate for delivered electricity.

² On average, PG&E procures approximately 60 percent of the electricity it delivers to customers from third-party suppliers. The emissions associated with this electricity are considered Scope 3 per The Climate Registry’s Electric Power Sector Protocol for the Voluntary Reporting Program, Annex I to the General Reporting Protocol, June 2009, Version 1.0.

¹ Since PG&E purchases a portion of its electricity from the wholesale market, we are not able to track some of our delivered electricity back to a specific generator. Therefore, there is some unavoidable uncertainty in PG&E's total emissions and emissions rate for delivered electricity.

² On average, PG&E procures approximately 60 percent of the electricity it delivers to customers from third-party suppliers. The emissions associated with this electricity are considered Scope 3 per The Climate Registry's Electric Power Sector Protocol for the Voluntary Reporting Program, Annex I to the General Reporting Protocol, June 2009, Version 1.0.

¹ PG&E reports no greenhouse gas emissions attributed to electricity purchased from the wholesale electricity market in 2006 because the amount of electricity PG&E resold into the wholesale electricity market was greater than the amount PG&E purchased from it.

¹ PG&E reports no greenhouse gas emissions attributed to electricity purchased from the wholesale electricity market in 2006 because the amount of electricity PG&E resold into the wholesale electricity market was greater than the amount PG&E purchased from it.

¹ PG&E reports no greenhouse gas emissions attributed to electricity purchased from the wholesale electricity market in 2006 because the amount of electricity PG&E resold into the wholesale electricity market was greater than the amount PG&E purchased from it.

¹ Because PG&E purchases a portion of its electricity from the wholesale market, we are not able to track some of our delivered electricity back to a specific generator. Therefore, there is some unavoidable uncertainty in PG&E's total emissions and emissions rate for delivered electricity.

² Includes de minimis emissions from PG&E Corporation.

¹ Data not available at the time of this report's publication.

¹ Source: U.S. Environmental Protection Agency eGRID2007 Version 1.1, which contains year 2005 information configured to reflect the electric power industry's current structure as of December 31, 2007.

² Because PG&E purchases a portion of its electricity from the wholesale market, we are not able to track some of our delivered electricity back to a specific generator. Therefore, there is some unavoidable uncertainty in PG&E's total emissions and emissions rate for delivered electricity.

The following table shows PG&E’s CO₂ emissions from our owned sources of power generation. According to Benchmarking Air Emissions, a report commissioned by the Natural Resources Defense Council, Ceres and three major utilities, PG&E had the lowest rate of CO₂ emissions of any major utility in the country for its owned generation.

PG&E’s CO₂ Emissions from Owned Power Generation¹

¹ PG&E’s utility-retained generation comprised approximately 36 percent of our delivered electricity in 2009.

² PG&E’s Gateway Generating Station began operations in January 2009.

At PG&E, we are working to minimize our carbon footprint. Ongoing efforts include the following:

1. Since 1998, we have reduced our sulfur hexafluoride (SF₆) emissions rate by nearly 86 percent and our total SF₆ emissions by 75 percent.
2. We continue to reduce the methane emissions from our natural gas pipeline operations, avoiding the release of nearly 538 metric tons of methane (CH₄), or approximately 11,290 metric tons of CO₂-equivalent, in 2009.
3. We continued to offset all of the greenhouse gas emissions associated with the energy used in PG&E’s offices and maintenance buildings, by enrolling in our ClimateSmart™ program. In 2009, this amounted to nearly 47,300 metric tons of CO₂ reductions.

As a company that has advocated for federal regulation of greenhouse gas emissions since 2000, PG&E understands the imperative of reducing emissions from our sector. While some companies have set voluntary greenhouse gas reduction goals, PG&E, after careful consideration, has refrained from doing so due to impending state mandates.

Specifically, in California under AB 32, PG&E and other "significant emitters" will be required to meet a cap on greenhouse gas emissions starting in January 2012. AB 32 became law in January 2007 and since that time ARB has been developing the regulations to implement this law. At this juncture, regulators have not yet determined how the cap will be applied to PG&E or what other rules will accompany implementation.

In addition to this state mandate, PG&E’s facilities in the nine-county San Francisco Bay Area became subject to a greenhouse gas emissions fee imposed by the Bay Area Air Quality Management District in 2009.

We provide customers with a portfolio of options to help reduce their carbon footprint, including rebates and incentives for customers to use energy more efficiently, incentives to make customer-owned rooftop solar more affordable and the opportunity for customers to offset the greenhouse gas emissions from their energy use by voluntarily signing up for the ClimateSmart program.

Additionally, a growing number of cities and counties in northern and central California are engaged in climate planning activity. In 2009, we assisted more than 75 cities and counties in managing their greenhouse gas emissions and associated energy use by providing them with aggregated historic energy consumption and emissions data for residential, commercial and industrial PG&E customers within their jurisdiction, as well as detailed data for municipal facilities.

These efforts will continue as part of PG&E’s new Green Communities Program, which will provide free training, data and tools to help city and county governments achieve their greenhouse gas reduction goals related to energy usage.

In 2009, PG&E continued to play a leadership role at the state and federal levels in advocating for government policies to address climate change. We believe that a well designed, multi-sector market-based program, combined with cost-effective renewable resources and energy efficiency, can put the nation on a path to a low-carbon economy. Such an approach can achieve reductions in a way that is economically sustainable and environmentally effective, while also spurring innovation and job creation.

A well-designed program includes elements to help mitigate costs for utility customers, including provisions for the use of high quality offsets, a price collar and other flexibility measures. It also sets long-term reduction targets that challenge our sector while recognizing the time it takes to bring new technologies and resources on-line.

We are engaging proactively in many forums at the international, national and state levels to advance these objectives. For example, senior executives from PG&E testified numerous times before key Congressional committees and participated in numerous Congressional briefings on the topic last year. (Review testimony by Peter Darbee, Chairman, CEO, and President of PG&E Corporation on January 15, 2009, Steven Kline, Chief Sustainability Officer and Vice President for Corporate Environmental and Federal Affairs on March 12, 2009 and Van Ton-Quinlivan, Director, Workforce Development and Strategic Programs on November 10, 2009.

PG&E also supported the passage of the American Clean Energy and Security Act in the U.S. House of Representatives and continues to play a constructive role as legislation advances in Congress.

We are also engaging with the U.S. EPA in its rulemaking process regarding greenhouse gas emissions from stationary sources. A representative from PG&E was appointed to the U.S. EPA’s Greenhouse Gas Best Available Control Technology Workgroup.

In addition, PG&E, along with Sempra, filed an amicus curiae brief opposing the U.S. Chamber of Commerce’s efforts to overturn the U.S. EPA’s move allowing California to regulate greenhouse gas emissions from passenger 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 state’s vehicle emissions law (AB 1493) passed in 2002.

PG&E was also the first investor-owned utility to support California’s enactment of AB 32, which sets a goal of reducing the state’s greenhouse gas emissions to 1990 levels by 2020. On November 2, 2010, Californians will vote on Proposition 23, a ballot initiative that seeks to suspend AB 32. PG&E opposes this ballot initiative and will continue working closely with the state legislature, ARB, CPUC, CEC and other concerned stakeholders to ensure the responsible implementation of AB 32.

Last year, we participated in ARB’s implementation of the AB 32 scoping plan, which contains the main strategies California will use to reduce greenhouse gases. This included regulatory proceedings regarding development of the state’s cap-and-trade program. We approach AB 32 implementation guided by three over-arching objectives: achieve AB 32’s greenhouse gas reduction goals, manage costs for customers and create a program that can be integrated effectively with emerging regional, national and international programs.

Finally, as part of a California delegation assembled by the Climate Action Reserve, PG&E also attended the 2009 United Nations Climate Change Conference of the Parties in Copenhagen—helping to highlight the state’s leadership, sharing best practices and promoting the importance of high quality offsets.

Much of our climate change advocacy work is done through coalitions, including the U.S. Climate Action Partnership (USCAP), which consists of major businesses and leading environmental organizations. In 2009, USCAP issued a set of detailed policy recommendations for a national, market-based approach to reduce greenhouse gas emissions with a cap-and-trade program as its cornerstone. As a founding member of USCAP, PG&E played a leadership role in developing these recommendations.

PG&E is a founding member of the Clean Energy Group, a coalition of utilities advocating for a national, mandatory, market-based approach to curbing greenhouse gas emissions in the power sector. PG&E is also a member of the multi-sector Coalition for Emission Reduction Projects, whose mission is to educate policy-makers and the general public about the benefits of using carbon offsets from domestic and international greenhouse gas emission reduction projects. In 2009, the group played an active role in the development of the offset provisions of federal climate legislation, including the American Clean Energy and Security Act of 2009.

Also, in 2009, PG&E Chairman and CEO Peter Darbee accepted an invitation to serve as the United States co-chair of the Global Leadership and Technology Exchange, an international business consortium that facilitates sharing of technology and innovative practices to enhance the environmental and business performance of its members.

In the last several years, California scientists and policy-makers have increased their focus on the potential impacts of climate change to the physical environment. In fact, since 2006, the CEC has published a biannual summary of the most recent developments in climate change science relevant to California.

These experts have identified three primary climate change-related business risks for our sector: potential increased electricity demand from more extreme and frequent hot weather events; potential impacts to facilities due to sea level rise and increased storm surges; and potential reductions in hydroelectric generation due to reductions in snowpack in the Sierra Nevada.

PG&E maintains a cross-functional team to evaluate the risks posed by climate change and to develop necessary mitigation and adaptation measures. We also continue to engage with thought leaders from the business, government, academic and non-profit sectors to more accurately determine the physical impacts of climate change on our business, share best practices and plan for the future.

In 2009, California released a discussion draft of its Climate Change Adaptation Strategy. The strategy summarized the most up-to-date scientific understanding of climate change impacts to California, assessed California’s vulnerability to the identified impacts and outlined possible actions that state government agencies could take to promote resiliency. PG&E contributed to this report by sharing suggestions regarding adaptation strategies for possible impacts to hydroelectric generation from climate change.

PG&E science and policy staff continue to engage with researchers in academia and government to assist in their research. For example, PG&E representatives serve on a California Energy Commission-sponsored Technical Advisory Committee for a forthcoming report entitled "Quantifying Risk to California Energy Infrastructure from Projected Climate Change."

According to climate scientists, sometime in the next several decades, climate change will result in more extreme and frequent hot weather events in California. This impact is, in turn, projected to increase Californians’ demand for electricity. PG&E’s adaptation strategies for this potential climate change impact include expanded customer energy efficiency and demand response programs and improvements to our electric grid.

Climate scientists also predict that climate change will result in significant reductions in snowpack in the Sierra Nevada Mountains. This impact could, in turn, affect PG&E’s hydroelectric generation. PG&E is proactively evaluating the potential impacts of climate change on its hydroelectric system.

At this time, we do not anticipate that reductions in Sierra Nevada snowpack will have a significant impact on our hydroelectric generation, due in large part to our adaptation strategies. For example, one adaptation strategy we are developing is a combination of operating changes that may include, but are not limited to, higher winter carryover reservoir storage levels, reducing conveyance flows in canals and flumes in response to an increased portion of precipitation falling as rain and reduced discretionary reservoir water releases during the late spring and summer.

PG&E is also working with both the U.S. Geological Survey (USGS) and the California Department of Water Resources to begin using a USGS watershed model which is well suited to help manage reservoirs on watersheds experiencing loss of mountain snowpack. Because PG&E anticipates that reductions in snowpack due to climate change are likely to impact our low-elevation hydroelectric facilities first, we will put the USGS model to use on the relatively low-elevation North Fork Feather River first.

PG&E is also exploring an adaptation strategy that would increase the amount of water in the aquifers that feed our hydroelectric facilities in the southern Cascade Mountains. Unlike the Sierra Nevada Mountains, whose snowpack stores water above our hydroelectric facilities, the southern Cascades are a volcanic mountain range whose underground aquifers serve as the water storage upstream from our hydroelectric facilities. A potential means of increasing the amount of groundwater in the aquifers is through cloud-seeding during snow-producing storms. Increasing water storage in the southern Cascades may help offset the reductions in hydroelectric generation in PG&E’s low-elevation facilities, such as the North Fork Feather River and South Yuba River-Bear systems.

If PG&E is not successful in fully adapting to projected reductions in snowpack over the coming decades, it may become necessary to replace some of our hydroelectricity from other sources, including greenhouse gas-emitting natural gas-fired power plants.

Finally, climate scientists also project that climate change will cause an increase in sea levels along California’s coast, which may result in higher flooding potential at PG&E’s coastal facilities. Like a growing number of businesses, communities and governments across California, PG&E is aware of this long-term risk and will address it over time working with other affected stakeholders.

In Congress, several bills have been introduced to reduce greenhouse gas emissions.

In September 2009, the U.S. EPA issued regulations requiring the reporting of greenhouse gas emissions from sources emitting greater than 25,000 metric tons (CO₂-equivalent) per year. The EPA’s regulations will require PG&E to report on the greenhouse gas emissions of our power plants and natural gas compressor stations, starting in 2011.

Also in September 2009, the EPA and the U.S. Department of Transportation’s National Highway Traffic Safety Administration proposed regulations that would reduce greenhouse gas emissions and improve the fuel economy of new cars and trucks. As a result of provisions in the Clean Air Act, if the EPA regulates motor vehicle emissions, then greenhouse gas emissions from stationary sources, such as power plants and natural gas compressor stations, also become subject to the EPA regulation.

In November 2009, the EPA issued a finding that greenhouse gas emissions cause or contribute to air pollution that endangers public health and welfare. This so-called "Endangerment Finding" was required before the EPA could issue its final motor vehicle greenhouse gas emissions regulations or proceed with regulating stationary sources. It is expected that the EPA will issue its motor vehicle greenhouse gas regulations in 2010.

AB 32 requires the gradual reduction of greenhouse gas emissions in California to 1990 levels by 2020 beginning in 2012.

In December 2008, the ARB adopted an AB 32 "scoping plan" that contains recommendations for achieving the maximum technologically feasible and cost-effective greenhouse gas reductions to meet the 2020 reduction target. Recommendations most relevant to PG&E include implementing a 33 percent renewable portfolio standard by 2020, increasing energy efficiency goals, expanding the use of combined heat and power facilities and developing a multi-sector cap-and-trade program. AB 32 requires ARB to adopt implementing regulations before January 1, 2011 to become effective on January 1, 2012.

In November 2009, the ARB issued proposed regulations to establish a cap-and-trade program. The ARB’s final regulations to establish a cap-and-trade program are scheduled to be considered by the Board for adoption by the end of 2010. An advisory committee to the ARB, the Economic and Allocation Advisory Committee, recommended that utilities be required to pay for emission allowances rather than receive all or a portion of such allowances for free. PG&E strenuously opposes this approach because it does not adequately protect our customers from increased costs.

California Senate Bill 1368, which was supported by PG&E and became law in 2007, prohibits any load-serving entity in California, including investor-owned electric utilities, from entering into a long-term financial commitment for conventional electricity generation unless the generation complies with a greenhouse gas emission performance standard, which the CPUC has set—on an interim basis—at 1,100 pounds of CO₂ per MWh.

At the regional level, the Western Climate Initiative (WCI), comprising seven states and four Canadian provinces, proposed to establish a regional cap-and-trade program to reduce greenhouse gas emissions beginning in 2012. California has indicated that it will proceed with AB 32 implementation regardless of whether the WCI cap-and-trade program is implemented.