PG&E : Response to request for final report

Case 3:14-cr-00175-WHA Document 1519 Filed 11/17/21 Page 1 of 44

JENNER & BLOCK LLP Reid J. Schar (pro hac vice) [e-mail]

353 N. Clark Street Chicago, IL 60654-3456

Telephone: [phone]

Facsimile: [phone]

CLARENCE DYER & COHEN LLP Kate Dyer (Bar No. 171891) [e-mail]

899 Ellis Street

San Francisco, CA 94109-7807 Telephone: [phone] Facsimile: [phone]

CRAVATH, SWAINE & MOORE LLP Kevin J. Orsini (pro hac vice) [e-mail]

825 Eighth Avenue New York, NY 10019

Telephone: [phone]

Facsimile: [phone]

Attorneys for Defendant PACIFIC GAS AND ELECTRIC

COMPANY

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN FRANCISCO DIVISION

UNITED STATES OF AMERICA,

Plaintiff,

v.

PACIFIC GAS AND ELECTRIC COMPANY,

Defendant.

Case No. 14-CR-00175-WHA

RESPONSE TO REQUEST FOR A FINAL REPORT

Judge: Hon. William Alsup

RESPONSE TO REQUEST FOR A FINAL REPORT

Case No. 14-CR-00175-WHA

Case 3:14-cr-00175-WHA Document 1519 Filed 11/17/21 Page 2 of 44

PG&E values the Court's oversight during its probation and appreciates this opportunity to address PG&E's progress in mitigating wildfire risk and improving the safety of its gas operations, as well as its remaining challenges. The Company's ongoing dialogue with the Court has led to numerous concrete actions that have made PG&E's system safer. PG&E would also like to thank the Federal Monitor for a consistently productive and constructive working relationship that has provided helpful insights, tangible improvements and valuable accountability for PG&E in both its electric and gas operations over the entire term of the probation.

Preliminary Statement

In the decade following the tragic San Bruno pipeline rupture, PG&E has transformed its gas business, which originally was the primary focus of PG&E's probation and federal monitorship. Among many other efforts, PG&E: (1) conducted a rigorous collection, review and analysis of four million records-enabling the Company to effectively conduct integrity management program work, locate mains and services and plan for construction; (2) strength-tested hundreds of miles of gas transmission pipelines and confirmed those pipelines' Maximum Allowable Operating Pressures ("MAOP"); (3) increased the ability to inspect gas transmission pipelines using state-of-the-art technology; and (4) reduced the number of third-party gas dig-ins to a level that puts PG&E's gas dig-in rate in the top quartile of gas utility companies in the United States. More opportunities for improvement remain and PG&E is continually working to improve safety outcomes through gas infrastructure modernization, investments in technology, improved asset management and new and enhanced training.

In response to the catastrophic wildfires that occurred during PG&E's probation, the Federal Monitor's and the Court's supervision expanded to PG&E's electric operations. PG&E acknowledges, deeply regrets and owns the tragic consequences of the wildfires caused by its equipment. The Company has taken a stand that catastrophic wildfires shall stop. Over the course of the past four years, PG&E's electric grid is fundamentally safer, in part due to the engagement on wildfire prevention with stakeholders such as this Court, the Federal Monitor, the CPUC and the California Governor's Office Operational Observer. At the same time, PG&E recognizes that there is

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more work to do to meet the extraordinary challenges facing the Company. PG&E is committed to taking bold actions to combat the threat of wildfires faced by the communities it is privileged to serve.

PG&E today is led by a board and senior management team that is new compared to those in place at the time of the San Bruno tragedy, the North Bay Fires and the Camp Fire. Since 2018, PG&E has onboarded a new set of directors, most of whom began in mid-2020. The chart below lists when each current non-executive director joined the board and highlights some of the experience each brings to PG&E.

Table 1: Non-Executive Directors Who Joined PG&E's Board Since 2018

	Year
Director	Joined	Experience
Robert Flexon	2020	Former President and CEO of Dynegy Inc.; also served as CFO of
Chair of the Board		UGI Utilities and CFO and COO of NRG
Rajat Bahri	2020	CFO of Wish, an e-commerce company
Cheryl Campbell	2019	Former Senior Vice President at Xcel Energy; also served as
		President and CEO of WestGas InterState
Kerry Cooper	2020	Former President and COO of Rothy's; also served as CEO of
		Choose Energy
Jessica Denecour	2020	Former Senior Vice President and Chief Information Officer at
		Varian Medical Systems
Mark Ferguson III	2020	Retired Navy Admiral who, during 38-year career, served as
		Commander of the U.S. Naval Forces in Europe and Africa and
		NATO Allied Joint Force Command
W. Craig Fugate	2020	Chief Emergency Management Officer at One Concern;
		previously served as Administrator of the Federal Emergency
		Management Agency ("FEMA") and Director of the Florida
		Division of Emergency Management
Arno Harris	2020	Managing Partner of AHC; formerly Executive Chair and CEO of
		Alta Motors and founder and CEO of Prevalent Power, Inc.
Michael Niggli	2020	Former President and COO of San Diego Gas & Electric; also
		served as COO of Southern California Gas and President of
		Sempra Generation
Dean Seavers	2020	Former President and Executive Director of National Grid
William Smith	2019	Former President of AT&T Technology Operations; previously
		served as AT&T's President of Network Operations
Benjamin Wilson	2020	Chairman of law firm Beveridge & Diamond PC, who served as
		Monitor for the Duke Energy coal ash spill remediation project
		and as Deputy Monitor in the Volkswagen emissions proceedings

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Recognizing the need for the best thinking on operations, safety and risk, the Company has hired leaders from stable, safe and operationally excellent utilities around the country to help PG&E address the challenges of operating in a high-risk environment, including PG&E's new Chief Executive Officer (the former CEO of CMS Energy); Chief Operating Officer (the former CEO of MidAmerican Energy Company); the new head of electric operations (the former VP of Grid Development at American Electric Power); the new head of gas operations (the former VP of Gas Operations at Public Service Electric & Gas Company); the new head of electrical engineering (the former executive in charge of U.S. utility operations for AES corporation); and the new head of gas engineering (the former executive in charge of gas systems engineering at National Grid).1 Stopping wildfires is front and center in the minds of PG&E's leaders, and they have put in place and are executing on a plan that they firmly believe will over time achieve the mission of stopping catastrophic wildfires.

PG&E believes it is on the right path, but there are no fast or fail-proof options to respond to the continuing change in climate that has occurred in Northern California. PG&E operates a vast electric infrastructure that provides power to 16 million Northern Californians, with enough electric lines to stretch from the West Coast to the East Coast and back more than 20 times. It was built to provide power to residents anywhere they chose to live in the state, including in remote and heavily forested areas. The system was built over many decades-it consists of millions of components and runs along many millions of trees. When the system was built, the risk from an ignition was small compared to what it is today, and it was built without a focus on wildfire risk.

Electrified power lines have always caused sparks in Northern California and across the country, principally due to trees or other objects hitting the lines or component failures. But the risks faced by potential sparking from PG&E's equipment have changed dramatically. For example, in 2012, about 15% of PG&E's service territory was in CPUC-designatedhigh-fire threat areas.

1 Additional information on the experience of PG&E's senior leaders who joined the Company in 2021 is set forth in Exhibit 1.

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Today, less than a decade later, more than 50% of PG&E's service territory is in a High-Fire Threat District ("HFTD"), and the areas that meet HFTD criteria continue to increase. Each ignition in that extensive land area-about 35,000 square miles-has, depending on the weather, the potential to cause devastation. Further, most of California's forested land is in PG&E's service territory, meaning PG&E must contend with the majority of the 147 million trees that the United States Forest Service estimates have died in California from drought and invasive beetles.

The challenge has ratcheted up each year. For example, in 2020, wildfires burned a staggering four million acres in California, including five of the six then-largest wildfires in California's history. In 2021, large areas of the Sierras experienced their hottest summer on record, in the midst of a record-breaking drought. As a result, soil and vegetation dryness created vegetation flammability that was "off-the-charts" and was "reflected by [] extraordinary and extreme fire behavior".2 Indeed, fuel monitoring stations in the foothills of the Sacramento Valley and the Northern Sierras registered moisture levels "lower than kiln-dried lumber, near and sometimes below the lowest levels ever recorded for the date".3

For the last four years, PG&E has undertaken hundreds of actions, big and small, to make its system safer and respond to the changed climate and increased risks. PG&E's Public Safety Power Shutoff ("PSPS") program is one illustration of the progress PG&E has made. In 2017, when the weather event that caused the North Bay Fires was bearing down on PG&E's service territory, PG&E did not have a PSPS program in place and thus could do little more than prepare to restore service after the windstorm had passed. Today, in response to an impending high fire-risk weather event:

1. See Daniel Swain, Major monsoonal moisture surge to bring fairly widespread California thunderstorms (wetter south, drier north), with NorCal fire weather concerns, WEATHER WEST (July 25, 2021), https://weatherwest.com/archives/10210.
2. See Bill Gabbert, Why are the fires in the West growing larger this year?, WILDFIRE TODAY (Aug. 25, 2021),https://wildfiretoday.com/2021/08/25/why-are-fires-in-the-west-growing-larger- this-year/.

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Case No. 14-CR-00175-WHA