Message from the Chief Sustainability Officer

A Note to Our Stakeholders:

In last year’s edition of PG&E’s Corporate Responsibility and Sustainability Report, we presented the company’s performance on a broad range of measures, as the company for the first time fully articulated the importance of sustainability and the profound, positive impact of the Triple Bottom Line of people, planet and profit.

The context for the 2010 report is quite different, coming as it does on the heels of a turbulent year, one defined in many ways by missteps, controversy and tragedy. Put simply, our public challenges in rolling out SmartMeter™ technology, our support of a divisive statewide ballot initiative and the operational issues that have emerged in the aftermath of the San Bruno accident have led many of our customers and stakeholders to question both our technical competence and our business judgment.

The cumulative effects of these issues have been felt across the company, leading to a transitional period marked by a sweeping operational overhaul, new initiatives focused on the safety and operations of our core gas and electric business, and the addition of new executives at the highest levels of our company. Following six years in which he championed significant sustainability progress at PG&E and throughout our industry, Peter Darbee announced his retirement from PG&E in April and was replaced on an interim basis by PG&E Corporation’s lead director, C. Lee Cox. In September, Tony Earley will officially begin in his role as Chairman, CEO and President of the Corporation. Together, Tony’s appointment and the changes under way represent an opportunity for a new beginning, the flourishing of fresh ideas and the emergence of different perspectives that will help set the company back on the path toward industry leadership.

Despite the difficult challenges of the last year, PG&E has not lost sight of our sustainability goals and commitments. In fact, in the pages of this online report, you will find that in 2010 PG&E made substantial progress on key sustainability markers and initiatives, from reducing water and energy usage at our facilities to moving forward with our pioneering PowerPathway™ workforce development program and exceeding our customer energy efficiency targets.

These successes and others led to a variety of awards and recognition in 2010 from prestigious third-party entities. For the second year in a row, Newsweek magazine ranked PG&E as the greenest utility in the nation. We were once again named to the Dow Jones Sustainability World Index, one of only five U.S. utilities to earn that distinction. And the Carbon Disclosure Project recognized PG&E as one of the top 10 companies in the S&P 500 for climate-change-related disclosure and performance.

Looking ahead, the challenge we face is to build on these accomplishments during this time of transition. But it’s a challenge that we embrace, fueled by the knowledge and recognition that a focus on sustainability is even more important as we find solutions that meet and exceed the expectations of our customers, stakeholders and policy-makers.

Essential to our efforts will be continuing the dialogue PG&E has shared with a diverse group of stakeholders. In 2010 at a stakeholder dialogue facilitated by the sustainability experts at Ceres, PG&E senior leaders heard from representatives from a broad group of constituencies, including those from the customer, environmental, supplier, community and diversity arenas. Their input and thought leadership has been integral as PG&E’s understanding of sustainability has evolved beyond public policy to encompass a much broader view of its impacts and benefits. We thank them for sharing their perspectives and giving so freely of their time and expertise.

Working within our expanded definition of sustainability, we’ve taken important steps to weave sustainability more deeply into how we do business. It helped spur the work under way with our suppliers to reduce the environmental footprint, and particularly the carbon output, of our supply chain. It played a role in our proactive efforts to take responsibility for legacy PG&E or PG&E-predecessor-owned manufactured natural gas plant sites where remediation may be necessary. And it informed our ongoing efforts to address the aftereffects of operations of the Hinkley Natural Gas Compressor Station, including the formation of a Community Advisory Committee, comprised of local residents, to better understand and act on needs of the community there.

In these efforts and many others, PG&E has been fortunate to be able to lean so heavily on our employees. Their passion for protecting our environment and serving our customers, and their readiness to volunteer in their communities, has “turbo-charged” our sustainability journey. We will continue to count on their support in the future as we address the serious challenges that we now face.

Our pledge in 2011 and in the years to come is that we will continue to move forward on the safety, operational and sustainability fronts, and we recognize that long-term success requires us to focus on each of these fronts.

Finally, our commitment is that through it all, we will continue to report on our successes and challenges with clarity and transparency, always keeping in mind the value of listening to, engaging and expanding our universe of stakeholders. Our door is open. Our performance is an open book. We look forward to your feedback as we present our 2010 Corporate Responsibility and Sustainability Report.

Sincerely,

Steve Kline
Chief Sustainability Officer
PG&E Corporation