One On One With PG& E Chairman & CEO and President Peter Darbee
Thursday, July 06, 2006JEFF YASTINE: PG&E, one of California`s largest utilities, is about to embark on a huge expansion project. It`s asking state regulators for permission to spend $12 billion upgrading its power plants, transmission lines and customer service. The utility`s come a long way from emerging from bankruptcy just two years ago. This afternoon I talked with PG&E`s Chairman & CEO and President Peter Darbee and began by asking if the capital improvements are key to the utility`s comeback plans. PETER DARBEE, CEO, PACIFIC GAS & ELECTRIC: The company has progressed very well and probably faster than our expectations. The stock is at or near an all-time high today as compared to the $6.50 a number of years ago. And so the company is strong. Its credit rating is just short of an A- rated -- A rating from the rating agencies. So we`re if good shape today and have the ability to fund that kind of capital program.
YASTINE: $12.5 billion over a five-year period. What is that money going to go towards there in California in your energy area?
DARBEE: Well, it`s really going to be spread over a number of different areas, more generation which we need in the company, basic infrastructure, cables, transformers, things of that nature. One of the largest new investments we`re making is in advanced metering which will give us the ability to read 9.5 million meters electronically every 15 minutes.
YASTINE: And you expect a large savings both for you and for consumers out of that? Because these actually allow consumers to monitor their own usage right there in the home, correct?
DARBEE: We anticipate that there will be modest savings with respect to our own operations, but it gives us the ability to implement time of use metering. And that will give consumers the ability to conserve their energy throughout the day and particularly during peak powered usage periods.
YASTINE: Let`s talk about not so much oil prices which are at record highs these days, but natural gas prices which are off something like 50 percent or so since just the fourth quarter of last year. What is that effect having on your own power generating plants?
DARBEE: Well, you are absolutely correct that what we saw with natural gas prices is they ran up very sharply and then the spot market, the prices that moved down. What we`ve also seen is if you look at the forward curve, prices have moved down, but not nearly as significantly as the spot market. So what we have experienced was a big run-up in natural gas prices that impacted on our customers. And they felt it in their pocketbook. If those prices continue to move down over time, that will help us and help our customers by providing lower cost to us which we pass through directly to our customers in terms of natural gas usage.
YASTINE: I mentioned about oil prices being, you know, $75 a barrel as of today. Do you focus more on renewable energy these days and what sort of plans has the company been putting into effect to bring more of that into the grid there in your system? DARBEE: Well, PG&E has in fact been a leader with respect to renewables. And so we`re moving forward with solar energy, with wind energy, and in fact recently have been in the press with respect to biomass. So we clearly have been pressing with respect to renewables and plan to accelerate our deployment of renewables over the next number of years.
YASTINE: Is renewable energy cost effective with oil at the present levels? Or does it need to move higher for it to begin to pay for itself?
DARBEE: It depends on the type of renewable power. Renewable power generally is somewhat more expensive than natural gas generated electricity. However, when one factors in the cost imposed on the environment or the externality, then that makes renewables more cost effective.
YASTINE: Let me ask you one final question about PG&E as the stock, as an investment. You are projecting 7.5 percent earnings growth over the next -- annually over the next four years. Where is that growth coming from?
DARBEE: Well, what we have been doing is investing back very significantly in our core business. And as we increase the amount of rate base we have, we are allowed a return on that. And so the short answer is we`re investing in the core business and we`re upgrading the infrastructure that is in place.
YASTINE: All right, Mr. Darbee, thank you very much. We appreciate your time on the program.
DARBEE: Thank you, Jeff.
YASTINE: Our guest Peter Darbee, chairman, president & CEO of PG&E Corporation.
