Self-inflicted wounds make PG&E's effort to rebuild trust a tall order

Sep 27 - San Jose Mercury News, Calif.

Speaking to a packed room of reporters barely a week after the pipeline explosion that killed seven people and wiped out a San Bruno neighborhood, Pacific Gas & Electric CEO Peter Darbee made a painful observation.

"We know it is going to take time to restore trust," he said. "We are here today to begin the process of restoring trust in PG&E."

But a series of political disasters and public relations missteps this year -- the worst year for the company since its bankruptcy in 2001 amid blackouts -- have made restoring public confidence in California's largest utility a major mountain to climb, experts say.

"PG&E does some wonderful things with renewable energy and climate change. They have all sorts of innovative solar and energy efficiency programs," said Chris Raphael, editor of California Energy Markets, a weekly publication that tracks the electricity industry.

"But at the same time they have this history of creating a rift sometimes between them and their customers."

Two such self-inflicted wounds now hamper PG&E as it struggles to recover from the San Bruno disaster.

First is the company's rollout of millions of its digital SmartMeters, which are designed to make the power grid run more efficiently, reducing pollution and global warming emissions. But some customers raised concerns about whether the meters were inaccurately driving up their utility bills. An independent audit this month concluded that

the devices are mechanically sound but had become a public relations disaster because customers with questions were "consistently treated by PG&E as wrong, until the customer proved to PG&E that they were right."

Further eroding public trust was Proposition 16. The PG&E-sponsored measure on the June ballot would have required a two-thirds vote for cities and counties to enter the retail power business.

PG&E said that the measure was about consumer choice. But groups from the AARP to the League of Women Voters to the Sierra Club slammed it as a bullying attempt to lock in a monopoly. Although PG&E spent $46 million on the campaign, the measure failed, doing worst where PG&E's customers live.

"They have been doing many things well. But they damaged themselves with Prop. 16," said James Sweeney, director of Stanford University's Precourt Energy Efficiency Center. "It left a lot of mud on their face."

Then, on Sept. 9, came the dramatic images of flames roaring through San Bruno, searing not only the landscape but also memories across the nation.

"Crises and disasters are very dramatic events, particularly when there is harm to innocent people, and very powerful images," said Matthew Seeger, a professor of communications at Wayne State University in Detroit and an expert on corporate crisis issues. "Think of the images from Hurricane Katrina or the otters covered with oil in the Exxon Valdez spill."

Seeger said PG&E will be answering to the public for the explosion on its Line 132 for a long time to come.

"The scope and scale of this is so big that there will be investigations," he said. "There will be a long legal process and legislation. Then there are anniversaries of the explosion. People with serious burns will come out of the hospital and be interviewed. It is likely that this story will be associated with this company for years."

PG&E is one of the largest utilities in the United States. Founded in 1905 in San Francisco, it expanded dramatically through the 1930s, bringing natural gas in huge pipelines from Texas to warm the homes of Californians. After World War II, it built great dams, strung thousands of miles of electrical wires and built a vast natural gas pipeline system.

Its rise was considered a benchmark of progress by many Californians. But in the 1960s, environmentalists and local leaders defeated its plans to build nuclear power plants at Bodega Bay and Davenport, and the company fought battles through the 1970s over its proposed Diablo Canyon nuclear plant in San Luis Obispo.

In 1996, a law signed by Gov. Pete Wilson to deregulate the electricity market forced PG&E to sell many of its power plants. But it opened the door for companies like Enron to manipulate the state's electricity supply, causing blackouts and blocking PG&E from passing on higher costs to ratepayers.

Crippled by spiraling costs, PG&E filed for Chapter 11 bankruptcy in 2001.

But for the past decade, PG&E's new CEO, Darbee, a former Goldman Sachs investment banker, positioned the utility as a 21st-century leader. PG&E put solar panels on the San Francisco Giants ballpark and Habitat for Humanity homes. It signed deals to build huge solar farms in the Mojave Desert and last year dropped out of the U.S. Chamber of Commerce when the organization fought climate change laws.

The goodwill it built up among Northern Californians is in jeopardy, experts say.

To restore public trust, PG&E must take responsibility and clearly tell the 15 million people who live in its territory between Bakersfield and Oregon how many people are inspecting its lines, when, and what they find, said Michael Fineman, a crisis communications expert and CEO of Fineman PR in San Francisco.

"Large companies like PG&E are always going to be suspect in the public eye," he said. "They have to work to extra hard to make sure they demonstrate they have the public interest at heart."

Contact Paul Rogers at 408-920-5045.

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