Corporate Responsibility and Sustainability Report 2016

Our Approach

Our involvement begins locally but extends to the state and international levels. PG&E leaders joined California’s delegation at the COP21 international climate talks in Paris to voice our support for an agreement to slow global warming and highlight the role gas and electric providers can play in helping to deploy low-carbon technologies on the scale that’s needed to combat climate change.

Paris comes to San Francisco: PG&E, world energy ministers follow up on historic UN Climate Summit

PG&E participated in the seventh Clean Energy Ministerial (CEM7), which brought together energy ministers and delegates from more than 20 countries around the world. Together with business leaders, entrepreneurs, industry experts, and others, the energy ministers at CEM7 committed to expanding clean energy deployment and delivering on the pledges made for the historic Paris climate agreement.

Prior to the Paris talks, PG&E Corporation’s Chairman and CEO joined President Obama and senior administration officials at the White House as they announced new pledges by major companies to reduce greenhouse gases and address the impacts of global warming. PG&E was among the companies that signed on to the Administration’s American Business Act on Climate initiative, which aimed to rally U.S. companies behind the need for action on climate change.

At the state level, PG&E supported Senate Bill (SB) 350, which increases the state’s Renewables Portfolio Standard (RPS) to 50 percent by 2030 and doubles state energy efficiency goals. SB 350 supports the Governor’s April 2015 Executive Order, which set a new goal to reduce greenhouse gas emissions by 40 percent below 1990 levels by 2030.

PG&E views SB 350 as an important step toward achieving California’s climate change and clean energy goals. It continues our state’s long history of policy leadership, which has spurred advancements in technology and innovation, and kept California at the forefront of environmental progress.

To do our part, we are taking an integrated approach to help achieve sustainable GHG emission reductions in a way that manages costs for customers, delivers safe and reliable electric and gas service, and creates a model for others to follow.

Perfect score for PG&E on prestigious climate change disclosure list

PG&E was named to the S&P Climate Disclosure Leadership Index by the CDP, an organization that represents 822 institutional investors with $95 trillion in assets. PG&E earned a perfect 100 score from the organization and was one of only four U.S. gas and electric energy companies to make the list.

Reporting Our Impacts

We believe it is essential 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 reports its greenhouse gas emissions to the California Air Resources Board (ARB) and U.S. Environmental Protection Agency (EPA) on a mandatory basis. On a voluntary basis, PG&E reports a more comprehensive emissions inventory to The Climate Registry, a nonprofit organization. Each year, PG&E also reports its greenhouse gas emissions and climate change strategies to the Carbon Disclosure Project, an international not-for-profit organization that requests information on behalf of institutional investors.

Engaging Our Customers

An integral part of our effort to combat climate change involves working with customers to help them achieve energy savings and greenhouse gas emission reductions through some of the nation’s leading programs and incentives for energy efficiency, demand response and solar installation. These efforts include helping local governments develop strategies and implementation plans to reduce emissions, including providing them with community energy profiles to assess opportunities and connecting them with PG&E programs and other resources to help them reduce emissions.

Helping customers go solar

PG&E’s Solar Choice program offers customers the option to receive up to 100 percent solar power without the need to install rooftop solar panels. The solar energy is produced locally in Northern and Central California—reducing the carbon footprint of our customers and driving the development of solar resources within the state.

Addressing Our Own Carbon Footprint

PG&E joins EPA’s Methane Challenge

PG&E joined the U.S. Environmental Protection Agency’s (EPA) Natural Gas Methane Challenge as a founding partner along with 40 other U.S. companies. The challenge calls on oil and natural gas companies to voluntarily reduce methane emissions beyond regulatory requirements, and to highlight these efforts in a comprehensive and transparent manner. As part of the challenge, PG&E committed to further reduce emissions from its natural gas transmission and distribution systems and adopt five best management practices recommended by EPA over the next five years.

PG&E believes that gas and electric providers have a responsibility to reduce greenhouse gas emissions.

In step with California’s evolving energy policy, in June 2016 PG&E announced a Joint Proposal with labor and leading environmental organizations that would increase investment in energy efficiency, renewables and storage beyond current state mandates while phasing out PG&E’s production of nuclear power in California by 2025. It includes PG&E’s commitment to a 55 percent renewable energy target in 2031, an unprecedented voluntary commitment by a major U.S. energy company.

We are also committed to helping the state meet the long-term targets established by the Governor and, in the near term, California’s Global Warming Solutions Act, or AB 32.

AB 32 requires California to gradually reduce its greenhouse gas emissions to the 1990 level of 431 million metric tons of carbon dioxide (CO₂)-equivalent by 2020. The law covers emissions from PG&E’s fossil-fuel power plants, natural gas compressor stations and electricity imported into California. In 2015, the law was expanded to cover emissions from the combustion of natural gas delivered to customers.

In the interim, we are actively working to reduce our carbon footprint by increasing our supply of clean and renewable energy, reducing energy use in our facilities, avoiding emissions in our operations, investing in lower-emission vehicles and building a more sustainable supply chain.

Advancing Responsible Policy Solutions

PG&E is committed to promoting a diverse set of low- and zero-carbon solutions to advance clean energy innovation in California and beyond—reducing greenhouse gas emissions while spurring innovation and job creation.

We actively engage in ARB’s stakeholder activities to refine California’s cap-and-trade program implementation in order to meet AB 32’s greenhouse gas emissions reduction goals at the lowest possible cost to customers. Features of the program that will help mitigate costs to customers include free allocation of greenhouse gas emissions allowances to electric and natural gas utilities for the benefit of their customers, a sufficient supply of high-quality offset credits and an Allowance Price Containment Reserve (APCR) that reduces the risk of excessively high allowance prices, a price ceiling to ensure prices remain below the highest APCR price and linkage with other cap-and-trade programs.

More broadly, we remain focused on actions related to electric vehicle deployment, grid innovation and making the hydro-power licensing and relicensing process more effective and efficient.

In August 2015, EPA released the final Clean Power Plan, which includes guidelines for each state to develop plans to achieve greenhouse gas reduction targets under section 111(d) of the Clean Air Act. PG&E appreciated the significant outreach and stakeholder engagement conducted by EPA in conjunction with the rule’s development.

Following publication of EPA’s regulations, a number of parties challenged EPA’s section 111(d) regulations in the United States Court of Appeals for the District of Columbia Circuit and petitioned the Court to stay the regulations pending review of the appeal on the merits. The D.C. Circuit denied the request for a stay, but in February 2016, the U.S. Supreme Court granted a stay, pending review of the appeal by the D.C. Circuit. The Supreme Court’s decision may affect the nature, extent and timing of implementation of these regulations.

Ultimately, if the Clean Power Plan is upheld in court, PG&E wants to ensure that the EPA’s rules provide the flexibility to recognize the unique circumstances and emissions profiles of power companies and individual states across the country. We will also work with stakeholders to explore opportunities to develop multistate compliance approaches, including multistate cap-and-trade programs.

Central to our approach is engaging at the state, federal and international levels through a variety of policy think tanks and advocacy groups, such as the Center for a New Energy Economy, Georgetown Climate Center, Center for Climate and Energy Solutions, Alliance to Save Energy, Edison Electric Institute, Bipartisan Policy Center, Electric Power Research Institute, International Emissions Trading Association, Business Council for Sustainable Energy, Coalition for Emission Reduction Policy, Natural Gas Downstream Initiative and the Electric Drive Transportation Association.

Planning for Potential Climate Change Impacts

Advancing climate change resilience

PG&E published our first Climate Change Vulnerability Assessment, examining our exposure to the forces of climate change, including flooding during severe storms, sea level rise, land subsidence, heat waves, changes in precipitation patterns and wildfire danger. Developed as part of PG&E’s participation in the U.S. DOE’s Partnership for Energy Sector Climate Resilience, the report describes the steps we are taking to prepare for altered climate conditions.

Since 2008, PG&E has been investigating the potential physical risks of climate change to our system. We have identified a number of potential risks to our business, including sea level rise, temperature changes, rainfall and runoff patterns, wildfire risk and storm frequency and intensity.

There are four key aspects to PG&E’s approach to climate change resilience and adaptation:

• Near-term planning: Robust emergency response plans and procedures to address near-term risks, including more extreme storms, heat and wildfires.
• External engagement: Active engagement at the federal, state and local level on climate change adaptation and resilience.
• Risk assessment and operational planning: A multi-year, comprehensive risk assessment process to prioritize infrastructure investments for longer term risks, such as sea level rise.
• Staying abreast of the latest science: An in-house climate change science team that regularly reviews the most relevant science and integrates its research into PG&E’s risk assessment process.

We continue to make substantial investments to build a more modern and resilient gas and electric system that can better withstand extreme weather and natural disasters. PG&E’s progress and perspective can be found in our Climate Change Vulnerability Assessment.

As California experiences one of the most severe droughts on record, we are working diligently to manage our water resources in a responsible manner and ease the drought’s impact on customers, communities and our own operations. With regard to increased electricity demand from more extreme, persistent and frequent hot weather, PG&E believes its strategies to reduce greenhouse gas emissions—such as energy efficiency and demand response programs, infrastructure improvements and the support of renewable energy development and storage—will help address the state’s evolving energy demands.

We also continue to engage with key stakeholder groups on climate adaptation, including the Bay Area Council, U.S. Department of Energy’s Partnership for Energy Sector Climate Resilience and a variety of other forums at the local level in our service area.

PG&E shares progress on climate resilience

PG&E participated in a climate change adaptation workshop, co-hosted by the California Energy Commission and California Public Utilities Commission at which we shared our progress on climate change resilience. The event explored the physical vulnerabilities of California’s gas and electric systems due to climate change and the actions that gas and electric providers like PG&E are taking to adapt to those changes.

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2015 Milestones

In 2015, we continued to minimize our carbon footprint:

• Increased renewable energy. We remained on track to meet the state’s requirement to deliver 33 percent renewable energy by the end of 2020. By the end of 2015, we reached nearly 30 percent. An additional 6 percent came from large hydroelectric power, which does not count toward the state’s 33 percent requirement.
• Reduced facility energy use. We reduced energy use by 1.9 percent—spurred in part by employee participation in PG&E’s Step Up and Power Down initiative, a behavior-driven energy savings campaign.
• Reduced methane emissions. We avoided the release of more than 144,000 metric tons of CO₂-equivalent emissions. These savings were achieved primarily through upgrades to gas pipelines and other infrastructure and implementing a technique called cross compression, where natural gas is transferred from one pipeline to another during pipeline construction and repair projects rather than releasing it into the atmosphere.
• Continued to green our fleet. We added new plug-in electric vehicles to our fleet and joined the Edison Electric Institute (EEI) in calling on our industry to direct 5 percent of total fleet investment, or approximately $1 billion, toward plug-in electric vehicle technologies starting in 2015. PG&E plans to invest one-third of its annual fleet purchases on electric vehicles and plug-in hybrid vehicles over the next five years, totaling more than $100 million.

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Measuring Progress

Mandatory Emissions Reporting

Under AB 32’s annual reporting requirements, PG&E reports greenhouse gas emissions to the ARB. These reports include emissions from our electric generation facilities, natural gas compressor stations, natural gas supplied to customers and the fugitive emissions from our natural gas distribution system and compressor stations.

In 2015, as part of California’s cap-and-trade system, PG&E met a new compliance obligation associated with the emissions from the combustion of natural gas supplied to customers, excluding the fuel that is delivered to covered entities. The following table shows the greenhouse gas emissions data PG&E reported to ARB under AB 32.

• 1. PG&E’s utility-owned generation comprised about 40 percent of our delivered electricity in 2015. PG&E also reported N₂O and CH₄ emissions from each of our generating stations. Return to table
• 2. Includes all PG&E-owned generation sources, including nuclear, hydroelectric, and renewable energy. Return to table
• 3. Includes compressor stations emitting more than 25,000 metric tons of carbon dioxide-equivalent (CO₂-e) annually. Return to table
• 4. The increase in emissions between 2013 and 2014 was largely due to the inclusion of more sources in the mandatory reporting requirements, including customer meters and pipeline dig-ins. PG&E previously reported emissions from these sources only under its voluntary greenhouse gas emissions inventory. Return to table
• 5. Includes customer emissions from the combustion of natural gas delivered to all entities on PG&E’s distribution system, with the exception of gas delivered to other natural gas local distribution companies. This figure does not represent PG&E’s compliance obligation under AB 32, which is equivalent to the above reported value less the combustion emissions from the fuel that is delivered to covered entities as calculated by ARB. Return to table

PG&E also reports the greenhouse gas emissions from our facilities and operations to EPA under EPA’s mandatory reporting requirements.

Voluntary Emissions Reporting

PG&E’s voluntary greenhouse gas emissions reporting showed that PG&E’s CO₂ emissions rate was approximately one-third of the national average in 2014, the most recent year for which verified data are available. PG&E’s emissions rate of 435 pounds of CO₂ per megawatt-hour of delivered electricity takes into account both PG&E-owned power generation and power purchased from third parties.

From year to year, several factors affect PG&E’s power mix and emissions, including the availability of clean hydro power and flexibility of the power plants in our portfolio. Despite the slight year-over-year increase, PG&E’s emissions continued a downward trend as we increase the share of renewables in our power mix.

PG&E also saw a slight year-over-year rise in total carbon dioxide emissions from electricity sales, increasing from 15.81 to 15.91 million metric tons, in addition to other variations.

• 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. Return to table
• 2. The primary driver for the reported increase in emissions can be attributed to improved measurement methods. Return to table

Lower hydropower availability due to persistent drought conditions in California and a greater reliance on power from the wholesale market led to an overall increase in PG&E’s Scope 1 and Scope 2 greenhouse gas emissions. These emissions, from sources PG&E has direct control over—including owned power generation, fleet and our own electricity use—were just over 5 million metric tons CO₂-equivalent in 2014. Lower customer demand for natural gas was the primary driver for a decrease in Scope 3 emissions.

• 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. Return to table
• 2. The emissions associated with purchased 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. Return to table
• 3. This figure includes the emissions from the combustion of natural gas delivered to all entities on PG&E’s distribution system, with the exception of gas delivered to other natural gas local distribution companies, as well as gas delivered to PG&E facilities such as power plants, compressor stations and offices, the emissions of which are reported separately. Return to table

• 1. The primary driver for the reported increase in emissions can be attributed to improved measurement methods. Return to table

• 1. This figure includes the emissions from the combustion of natural gas delivered to all entities on PG&E’s distribution system, with the exception of gas delivered to other natural gas local distribution companies, as well as gas delivered to PG&E facilities such as power plants, compressor stations and offices, the emissions of which are reported separately. Return to table
• 2. Other Scope 3 emissions include the greenhouse gas emissions from business air travel, waste management and employee commuting. Return to table

Assistance to Local Communities

PG&E provides data, financial assistance and technical support to local governments for the development of greenhouse gas inventories and climate action plans tailored to the unique needs of individual communities. The inventories include analyses of energy consumption, vehicle fuel use and waste production to provide a baseline for measuring future greenhouse gas reductions. Local and regional Climate Action Plans outline a set of policies, programs and ordinances necessary to meet greenhouse gas reduction goals at the local level.

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Looking Ahead

As we work toward a low-carbon future, PG&E remains on track to meet California’s ambitious clean energy goals through renewables, energy efficiency and infrastructure investment, as well as support for distributed private resources and efforts to get more electric vehicles on the road.

We will continue to do our part to further reduce greenhouse gas emission levels in the energy sector. This includes our active engagement on state and local policy, such as California’s ambitious greenhouse gas reduction target, and our continued focus on providing some of the nation’s cleanest energy to our customers—including the option for customers to purchase up to 100 percent solar power through PG&E’s Solar Choice program.

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