PG&E’s CEO targeted on security and tradition to rebuild the general public’s belief

The interview additionally covers constructing towards a decarbonized financial system, nuclear vitality, and why it’s time for employers to transcend the work-pay assemble to, as an alternative, lead with love. “I want my team to have the full expression of their skills, their talents, their gifts, and then the appreciation for one another as they achieve it,” mentioned Poppe.

Take heed to the episode or learn the transcript beneath.

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Transcript

Diane Brady: Management Subsequent is powered by the parents at Deloitte who, like me, are exploring the altering roles of enterprise management and the way CEOs are navigating this alteration.

Welcome to Management Subsequent, the podcast concerning the altering guidelines of enterprise management. I’m Diane Brady. 

Pacific Fuel and Electrical, PG&E, is the most important utility in California. For many of us inside and outside the state, it’s maybe greatest recognized for beginning one of many deadliest wildfires in U.S. historical past for which it confronted legal costs and hefty fines, to not point out chapter in 2019. The individual introduced in to show across the firm, the tradition, and its relationships with clients is CEO Patti Poppe. It’s a turnaround that’s confirmed to be powerful and expensive. I spoke to her concerning the powerful decisions that every one of us face in addressing local weather change, in addition to the position of innovation in vitality, and maybe most surprisingly, how Poppe feels that each AI and EVs are a boon in getting the place we have to go. Take a pay attention.

[Interview begins.]

Patti, thanks a lot for becoming a member of us right now.

Patti Poppe: Thanks. It’s good to be with you, Diane.

Brady: You recognize, you’re the primary feminine CEO to maneuver from main one Fortune 500 firm to a different. So I simply need to put that on the market. I feel that makes you a baller. Is that the precise time period? In all probability.

Poppe: That’s a very good time period, however I received’t be the final. In order that’s the excellent news.

Brady: Hear, you’ve been within the job now for three-and-a-half years at PG&E. You got here in after the corporate pled responsible to legal costs for the Camp fireplace. Clearly, you’ve obtained numerous challenges. You’ve talked about that this was a turnaround of tradition and security. Are you able to stroll us by means of, has it turned out as you anticipated it to be at this juncture? Or stroll us by means of a bit of bit what you’ve discovered.

Poppe: Yeah, you understand, it was essential to me after I took this position that it was, the truth is, an operational and cultural turnaround. I advised the board chair on the time that if this can be a monetary turnaround — the corporate had simply gone bankrupt, had simply exited chapter — I’m not excited a couple of monetary turnaround. However I’m enthusiastic about an operational and security turnaround and cultural turnaround. And so we actually put into place some foundational items with our what we name our efficiency playbook. I needed to get everyone on the identical web page in that playbook, study the fundamentals of a lean working system and a security administration system, and one thing we name breakthrough pondering. And that has confirmed to be very helpful to making a basis of bodily and monetary, however actually primarily bodily security that has been very consequential. We’ve lowered wildfire threat. Moody’s, the truth is, simply did an evaluation, and has indicated that we lowered the danger of financial harm by 93%. We’ve lowered the variety of acres burned by 99%. We’ve lowered our coworkers’ security incidents, each preventable motorized vehicle incidents and severe incidents, and most gratifying, fatalities on the job, dramatically. I feel that basis is strictly the muse that we want in order that we will then transfer into serving clients extra affordably, extra reliably, after which decarbonize the financial system, which is our nice ambition.

Brady: You recognize, I feel it’s good to level-set for listeners. Why is it so powerful to struggle wildfires in California? And you’ve got distinctive challenges, too, by way of the kind of panorama that PG&E is in.

Poppe: Properly, I’ll simply offer you an instance of the panorama. Simply final week, I used to be at one thing referred to as our Helms Energy Plant, and it’s a pumped storage energy plant that was, a giant tunnel was dynamited out of a mountain within the late seventies, and a whole bunch of hundreds of thousands of gallons of water are pumped between two reservoirs to supply vitality in California. However from a wildfire perspective, actually the vegetation that exists in our Sierras and our Santa Cruz Mountains, these mountainous territories going through the consequences of local weather change and excessive climate, excessive drought, subsequently leading to lifeless and dying timber at an alarming charge, make contact with an influence line that in any other case — at one time limit, was the bottom value method to ship vitality from level A to level B — that very same energy line is now a hazard. And electrical tools sparks,  it sparks in all places. Ours just isn’t distinctive. However ours sparks, beneath sure situations, these sparks can flip into an ignition. These ignitions can lead to catastrophic wildfire if, the truth is, we don’t mitigate these dangers. And so it’s very a lot, within the land of threat administration, we’ve needed to completely create what we name a fail-safe setting for our tools that used to fail protected day by day. We now have to trigger it now to fail protected in a really completely different method.

Brady: You recognize, it’s attention-grabbing as a result of what you’re speaking about will get to the purpose that the dialog round local weather change has switched to some extent from mitigating it, in fact, stopping it, however actually, it’s about adapting to it now, isn’t it?

Poppe: Yeah, I feel it’s each. We undoubtedly are constructing infrastructure that’s match for objective and the aim has modified and the dangers have modified. And so we have now to adapt that infrastructure, simply as you mentioned. And we additionally must mitigate and comprise and scale back the carbon emissions which might be the foundation trigger. And it might be a disgrace to cease at simply the variation. However the mixture of adapting and for us, we take into account that our journey to be trusted to take the subsequent step to decarbonizing the financial system, we first must show ourselves dependable and reliable in delivering the security basis and the tailored infrastructure is essential to incomes the precise to then ship the decarbonized financial system.

Brady: Now, anybody listening to this can’t see the image behind your head, which is a giant coronary heart. And I do know you speak about main with love. And love is a type of phrases that may be fairly fraught whenever you’re speaking about an employer, a utility, no matter. What precisely do you imply by love?

Poppe: Properly, I’ve two most important examples that I’ll use. First is relating to security. You recognize, I’ve had the unlucky obligation to attend the funeral of a fallen co-worker, any individual who died on the job. And the expression of affection in these moments is overwhelming and it’s lovely, but it surely’s too late. Love ought to have been expressed on the job when somebody was about to do one thing silly or make an inadvertent error or do one thing that was going to place themselves or another person at hurt, any individual ought to have spoken up and stopped the job. That’s the act of affection that we reinforce day in and time out with our groups and why I feel we’ve had a dramatic change in our security tradition that we acknowledge {that a} loving act is talking up. However the flipside of that can be, I feel, and that is for all company American executives, I need you to listen to me on this, I feel too typically firms cease at a work-pay assemble. You’re employed, we pay you. That’s the deal. You recognize, hopefully everyone wins. I have a look at athletes and athletic groups and the Olympics had been simply on, you understand, we noticed all these athletes expressing the complete vary of feelings of their pleasure for his or her craft. That’s their job, these individuals. These skilled athletes, their job is to compete on the athletic discipline. However on the finish of the sport, they don’t cease and say, okay, congratulations to the group and shake palms and stroll out of the stadium. No, they’re leaping up and down. They’re expressing full vary of pleasure and I feel that’s a model of affection. Like these groups wrap their arms round one another and say, I really like this man. Why do you’re keen on that man? Since you simply received with him. We win at work day by day. We obtain nice issues. And what I remind my group, what we do is far more necessary than placing a ball by means of a web for goodness sake. Why can’t we love one another whereas we try this and whereas we obtain the unachievable aspect by aspect? I need my group to have the complete expression of their expertise, their skills, their items, after which the appreciation for each other as they obtain it.

Brady: I really like that, in fact. Let’s look. I need to double down on the theme of affection a bit as a result of I’m curious, the place do you get probably the most pleasure out of your job?

Poppe: Properly, I like once we obtain the unachievable and after I see my group reaching what they thought was beforehand not possible. I really like that. I watch my group, we had a state of affairs in 2023 the place we had been burying, we had a goal to bury 350 miles of line, energy line as a part of our security initiative and our infrastructure for objective. And within the first quarter of the 12 months, we had three months nonstop of atmospheric rivers. These are huge, like an onshore form of hurricane-level storm for 3 months straight. It wasn’t a weekend, it wasn’t 48 hours. We had 15 successive atmospheric rivers. We misplaced three months of building once we had the aim to realize the most important quantity of energy traces ever buried in a single 12 months. And we achieved it. The group works collectively. We use our efficiency playbook. They made the challenges seen. They applied new requirements, they innovated new options. They labored it, they labored it, they labored it. I keep in mind seeing the group in mid-June and it was trying tough and so they had been trying tough, however they weren’t shedding religion. And I’ll inform you what, on the finish of the 12 months, once we delivered over 360 miles of line, the group couldn’t have been extra proud and I knew pure, unmitigated pleasure watching them obtain what they actually didn’t assume was attainable halfway by means of the 12 months.

Brady: Properly, and it will get to the purpose that doing that is costly, proper? You’re speaking about burying energy traces. I do know you’ve had some charge will increase in fact. Discuss a bit of bit about that. A part of the phrase “utility” generally evokes commodity to individuals, which it isn’t, insofar as you understand, there’s glorious service, there’s poor service, there’s, you understand, worth for cash. There’s not, how do you make these decisions in what’s obtained to be an costly career that you simply’re in, given the world that we reside in proper now?

Poppe: Diane, one factor I’ll say that I feel I’m pleased to bust the parable on this. What’s costly is what we’re doing right now. Wildfire is dear. Catastrophic wildfire is devastatingly costly. The quantity of vegetation administration that we’re doing is dear. So once we can exchange an annual upkeep value with an infrastructure funding that dramatically, 99% discount in threat, that’s decrease value. And it truly, as we have a look at our ten-year plan, we see billions of {dollars} of financial savings for purchasers versus the present mitigation method, which is simply slicing down each tree inside putting distance of the road. And right here’s simply an attention-grabbing step which may shock you: Infrastructure investments in a utility like ours, in an vitality firm like ours, truly is the bottom value funding for purchasers as a result of upkeep and annual bills yearly get totally absorbed by clients within the following 12 months. After we can unfold out the price of that infrastructure over the lifetime of the asset, 50, 60 years is way more reasonably priced. So it’s like making a mortgage cost versus paying money for the home. For us, one of the best utilities are over, spend about $2 of capital on infrastructure for each greenback that they spend to take care of or expense to take care of that tools. At PG&E due to the emergencies that we’ve been chasing, we spend about $0.80 of capital for each greenback of expense. So as an alternative of $2 for each greenback we spend, $0.80 for each greenback, which implies that annual value of sustaining our tools for our clients is way more costly. So once we examine ourselves to different vitality suppliers nationally, that’s the massive alternative. We will scale back value. That doesn’t imply not do the precise upkeep, each utility does upkeep, but it surely’s a two-to-one ratio as an alternative of an $0.80 to a greenback ratio. In order that’s a giant alternative for us to repair that. Our clients may have extra dependable tools, decrease threat, and a cheaper price, and we sit up for stabilizing these payments and ensuring the vitality that we’re offering is reasonably priced.

Brady: And people rolling blackouts you may have throughout disaster durations, possibly decreasing that as nicely.

Poppe: We now have lowered that. Actually, we simply had a giant check right here in July. We had eight consecutive days of the best, of excessive temperature mornings within the Bay Space. That has by no means occurred earlier than. Eight consecutive days. We had no flex alerts, no blackouts. The state and PG&E have invested in notably battery storage. The state has added ten gigawatts of battery storage that we will name on that matches when the solar energy that’s produced right here in California, and it truly creates an ideal match in order that on a sizzling summer time day now we have now the power to serve in a method that simply two years in the past we had been unable to. We truly added 9 gigawatts of recent energy sources within the final 12 months as a state. So we undoubtedly are in a a lot better place to cope with extra excessive climate and we’re not completed but. We’re not glad. We’re going to maintain working collectively as a state to guarantee that we maintain the lights on and that air con working on these sizzling days.

[Music starts.]

Brady: Inequality within the well being care system is among the hardest and most important points to handle. I learn a Deloitte report lately displaying that psychological well being inequities alone, if left unaddressed, might result in staggering extra prices. However we even have a staggering alternative to handle it. We spoke with Jason Girzadas, the CEO of Deloitte U.S., which is the very long time sponsor of this podcast. Right here’s what he needed to say.

Jason Girzadas: We truly consider that the well being fairness value to society might rise by as much as a trillion {dollars} by 2040. So that is an financial subject for all companies. The position of enterprise is to acknowledge that well being fairness impacts the workforces of each single enterprise, and it’s needing to be on the CEO agenda and board agendas for all organizations. In our nation your zip code can decide your well being standing, and that’s problematic. If you concentrate on the drain on employee productiveness, the associated fee to companies by way of the well being and well-being of their workforces, making this a precedence from the standpoint of what actions you’ll be able to take by means of your group round well being and advantages, in addition to the way it pertains particularly to the services and in addition the forms of companions that organizations group with to handle well being fairness points broadly. There are sources to take a look at the Deloitte Well being Fairness Institute, which has professional bono knowledge and analytical instruments to leverage which might be accessible to all organizations to start out on this journey of creating well being fairness not only a societal concern, however truly a enterprise precedence.

[Music ends.]

Brady: Patti, you level to one thing that I feel is de facto attention-grabbing as to the combination of renewables. You recognize, clearly there’s a transfer towards electrical autos, particularly in a spot like California. How is that impacting your technique?

Poppe: Yeah, it’s an necessary a part of the technique. Actually, final 12 months, PG&E delivered 100% carbon-free vitality to our clients. It’s not a pipe dream. So for people who’re in California or who could be suspect about what’s occurring in California, I can inform you there’s a lot of causes to consider {that a} carbon-free vitality system can the truth is, be dependable. Battery storage is a large recreation changer and issues like hydro storage, like I used to be simply speaking about, we have now a plant, the Helms pump storage energy plant. It’s a giant water battery. That’s a carbon-free vitality useful resource that each single day delivers 1200 megawatts that powers one million individuals’s properties and our nuclear energy plant. The state made a giant choice to increase the lifetime of our Diablo Canyon Nuclear Energy Plant. That was an incredible choice. The baseload energy, carbon-free that may be delivered from a safely operated nuclear energy plant like ours is a crucial a part of the combination as nicely. So I actually really feel like, I do know that we have now a path ahead. We take into account ourselves local weather optimists and, you understand, there’s numerous hand-wringing. It looks like individuals are second guessing one thing that’s already working in California right now. So it’s not such a leap of religion for us. We now have truly, the precise efficiency of our system to offer us confidence to maintain shifting ahead.

Brady: Do you assume that the dialog round nuclear vitality is altering? I imply, you and I each grew up in a time when, you understand, Three Mile Island, individuals take into consideration catastrophe, Chernobyl, you understand. How do you discover the receptiveness to the concept of even doubling down on nuclear energy?

Poppe: It undoubtedly, the dialog has modified globally and right here in the US. I used to be simply at a convention, Analysis Institute for Electrical Utilities, final week, and there was somebody there who was representing the worldwide nuclear energy business. They went by means of a listing of all the brand new nuclear items which might be being constructed around the globe and it’s fairly beautiful. We simply had our personal first main 4 new items inbuilt Georgia. I feel the nation has realized that we will function nuclear items safely, that, sure, it was scary within the seventies, however that’s a very long time in the past. And we have now realized that there are methods, identical to with wildfire prevention, the place we have now a threat mitigation system in place at our nuclear energy plant the place we will fail safely. So when an instrument fails, we have now a backup and we perceive what we have to do to guarantee that doesn’t cascade into a big incident. And I feel if everybody would truly have a look at the security file of our nuclear items throughout the globe, I feel we’d discover that they’re among the most secure form of energy technology items there are of any sort. And so I feel it’s very hopeful and I’m very optimistic concerning the position that nuclear energy performs sooner or later vitality system.

Brady: You recognize, one of many different large traits, in fact, is AI, each, you understand, helpful for what you are promoting, however a giant sucking noise in the case of vitality and knowledge facilities. Individuals speak about this tough selection between sustainability and AI. How do you concentrate on it and the way is it impacting you?

Poppe: I feel new knowledge middle load, AI-driven knowledge middle load, electrification, and electrical transportation are all contributors to the power to fund rebuilding of our grid, increasing our grid at a decrease unit value. And let me simply offer you some stats on that. So if we added a gigawatt, so take into account that energy for one million individuals, to serve an information middle, a gigawatt-sized knowledge middle, let’s say that got here on-line, we will spend as much as $2 billion to put money into that infrastructure, to serve that knowledge middle however the brand new income from that knowledge middle truly is greater than the associated fee to construct out that infrastructure that higher makes use of present grid belongings, plus makes the rebuild of these belongings extra dependable, extra resilient at a decrease unit value for all clients. In order that by growing the utilization of our present belongings and rebuilding them at a price that’s lower than the rise in income that will get put in opposition to these belongings, we have now a revenue margin story there that delivers a extra dependable system at a decrease unit value for purchasers. That’s a giant win. So I say we’re very fortunate to have load development for the primary time in a long time. That load development is definitely going to be what funds the rebuilding of an getting older infrastructure nationwide. We’re going to have the ability to rebuild that infrastructure. And definitely right here in California, that load development is unquestionably occurring and we’re going to have the ability to rebuild this grid in a extra reasonably priced method for purchasers. It’s a giant benefit.

Brady: Smarter grid. All of us need that. I discussed at the beginning that you simply’ve had a number of management roles, Patti. I’d love to listen to extra about your management journey. Did you begin out eager to be a CEO?

Poppe: Oh no, I used to be an engineer. I needed to make vehicles. I labored within the auto business for 15 years. My dream-come-true job was going to be plant supervisor at a Common Motors automotive plant. I believed that if I ever achieved that, I’d obtain my worldly aspirations. That occurred sooner than I anticipated. And I had a boss sooner or later say, ‘Patti, you’re going to must dream greater than that.’ And so I suppose it was then that I began occupied with the truth that I really like main individuals, that I suppose I used to be feeling like I used to be fairly good at it. And I then switched to the utility business the place I might make a giant distinction on the planet. You recognize, delivering vitality, delivering mild on the darkest evening and warmth on the coldest day in a method that retains individuals protected is, I feel, a noble pursuit. And it brings me pleasure to ship that for purchasers and to steer individuals to realize what they by no means thought was attainable is simply numerous enjoyable. And so I feel being a CEO ended up being a very good position for me.

Brady: I need to pivot to a bit of bit of recommendation. You recognize, I’m at all times a bit detest to speak about that ladies query as a result of, in fact, you’ve lived in your physique all of your life, as have I, and that’s the expertise we all know. However it’s true that I feel 10% now of Fortune 500 firms are led by girls. And I’m curious, one of many issues I take into consideration is that we regularly don’t prefer to admit that we’re bold, that we need to be in these management roles. Do you may have any recommendation to individuals who have a look at you as an inspiration or, whenever you’re speaking to anyone by yourself groups about taking up greater management roles, what are among the issues that you simply assume maintain individuals again?

Poppe: Properly, I do assume we expect we’re not imagined to utter the phrases. And so and in reality, I felt like possibly I wasn’t imagined to utter the phrases, and it took any individual form of pulling it out of me. So my recommendation can be utter the phrases. When you have an ambition that you simply need to be a CEO sometime, then get clear about that and be particular about that. Examine CEOs. What’s the path when the truth is, I simply had a mentor assembly this morning and I shared with a younger, very proficient lady that if she desires to be a CEO sometime, then she needs to be clear about that  however she ought to get the requisite experiences. And generally these are the exhausting jobs, generally these are operational jobs. You recognize, I took some jobs that had been powerful, not glamorous, however I obtained the stripes. I obtained the expertise I wanted. I didn’t simply need to be a CEO. I needed to be a very good one. And so after I’m out within the discipline with my crews, I’m comfy in a pair of shoes and a tough hat. I like being in a truck. I like being on a job web site as a result of I spent a few years of my life studying the enterprise there. And so doing core enterprise operations or engineering, if it’s an operations and engineering firm; finance, if it’s a finance firm; customer support, if it’s a buyer firm, you understand, perceive [what] the core enterprise is at your organization and do the core jobs even after they’re exhausting, even after they don’t look like it’s glamorous or enjoyable, it’s providing you with the expertise that you simply want so that you might be in place to compete for the highest job.

Brady: You referred to as your self a local weather optimist. Let me step again. Are you an optimist general about simply innovation and the place this nation’s going, the financial system, and so forth.?

Poppe: How can one not be? I imply, there’s so many proof factors particularly right here in America and California, I’m simply within the heartbeat of innovation. We will obtain something we set our thoughts out to. You recognize, there’s all types of examples of how the unachievable was achieved. I had truly one among our board members mentioned to me, he’s a four-star admiral and he has studied each nice army accomplishment. And I used to be feeling involved about wildfire after I first obtained right here and questioned, Can we will we overcome this? And he mentioned to me, ‘Patti, you have to remember two things about every great military accomplishment that ever happened. Number one, there were setbacks. And number two, they had a leader who never gave up.’

And so I see that as my position at OG&E to to by no means surrender and see us by means of no matter setbacks could come. We will do something. We will trigger our future to be completely different than our previous. We will create an organization that our clients might be proud to name their very own. And that’s actually what we’re as much as. And so I’m terribly optimistic. I consider in individuals, and I consider individuals can obtain something in the event that they set their thoughts to it.

Brady: You recognize, one different factor, after I take into consideration the army, there’s additionally the peacetime CEO and the wartime CEO. And whenever you’re coping with the variety of crises that frankly, should not going to go away, as you understand, you’re in the midst of it, I don’t need to make a false analogy, but it surely should change the mindset of getting to navigate volatility.

Poppe: I’ve a brand new appreciation for threat? I used to assume I understood threat, and now I truly perceive threat. And creating an setting the place we will fail protected takes a specific mindset, and there’s little question that the challenges that I encountered after I joined the PG&E household had been nice, are nice, and we’re not completed but. However we perceive the significance of threat identification, mitigation, controls, after which a failsafe assemble. And so we have now numerous it’s not simply will, it’s not simply optimism. It’s good strategies, visibility to our challenges, after which a every day dedication to make these challenges challenges of the previous that challenges of the longer term.

Brady: And is there the rest in your radar you need to placed on ours by way of even just a bit glimpse of what’s across the nook that excites you?

Poppe: Properly, I’ll inform you one factor that I’m enthusiastic about, and other people know that they’d be shocked if I didn’t point out whereas we had been collectively, Diane. I’m very optimistic concerning the position that electrical autos play within the grid. Lots of people will say to me, Oh, isn’t the grid overwhelmed? Aren’t the EVs going to pressure the grid? What I’m going to inform you is EVs are one of the best factor that ever occurred to the grid. Electrical autos are the primary type of dynamic demand. Till now, the grid was a requirement taker. No matter demand existed, we constructed the grid for that. A peak day is pushed by air con. Air conditioners come on when it’s sizzling, lights come on when it’s darkish, motors on the manufacturing unit flip when the manufacturing unit begins. EVs might be demanded at any time of the day. And if we ship the precise worth sign in the precise buyer expertise, then we will leverage extra energy that we have now day by day pushed by extra photo voltaic that’s producing vitality right here in California. We will use that extra energy to gasoline these vehicles, after which these vehicles can go forward and be dispatched again to the grid, which I feel is especially thrilling on a peak summer time day as a bit of mini energy plant. So sit up for listening to extra from us concerning the position that EVs play within the grid of the longer term.

Brady: I at all times love that concept. We might be our personal mini energy vegetation. Thanks for becoming a member of us, Patti.

Poppe: Thanks, Diane. Nice to be with you.

Brady: Management Subsequent is edited by Nicole Vergalla. Our audio engineer is Natasha Ortiz. Our govt producer is Hallie Steiner. Our producer is Mason Cohn. Our theme is by Jason Snell. Management Subsequent is a manufacturing of Fortune Media

Management Subsequent episodes are produced by Fortune‘s editorial group. The views and opinions expressed by podcast audio system and visitors are solely their very own and don’t replicate the opinions of Deloitte or its personnel. Nor does Deloitte advocate or endorse any people or entities featured on the episodes.