ALJ Allen: On the record. Good afternoon. Back at evidientary
hearings in Investigation 1909016. Joining us on the
bench today is President Batjer. President Batjer, do you have any comments you wish to make?
President Batjer: Yes, I'll just be brief. Good
afternoon, Judge Allen and parties. I wanted to say that
I'm pleased to be able to attend the first day of the hearings today, and your testimony
on the various elements of PG&E's proposed plan of reorganization. I wanted to also say
that I appreciate the tremendous amount of time and effort the parties have put into
the proceedings so far and believe it underscores the monumental importance of the issue that
is before us. With that, I will pass it back to you, Judge Allen to commence. And I will
be listening closely. Thank you all very much.
ALJ Allen: Thank you, President Batjer. PG&E,
please call your witness.
PG&E: Thank you, Your Honor. Our first witness is Mr William Johnson.
(inaudible from off mic)
Mr. Johnson: William Dean Johnson.
J-O-H-N-S-O-N.
ALJ Allen: Thank you.
Mr Manheim?
Mr. Manheim: Thank you, Your Honor. Mr. Johnson, can you state
your position for PG&E, please?
Mr. Johnson: I'm the President and chief executive officer of PG&E
Corporation.
Mr. Manheim: Thank you.
And you are sponsoring Chapter one of PG&E Exhibit-1
Is that correct?
Mr. Johnson: That is correct.
Mr. Manheim: And was that prepared by you or under your direction?
Mr. Johnson: It was.
Mr. Manheim: You have any corrections
to your testimony?
Mr. Manheim: I do not.
Mr. Manheim: Is it true and correct to the best of your knowledge?
Mr. Johnson: It is.
Mr. Manheim: Thank you. Mr. Johnson's
available for cross examination.
ALJ Allen: Thank you, Mr. Manheim. Mr Long?
Tom Long: Yes, thank you, Your Honor. Good afternoon, Mr Johnson. I'm Tom Long with
TURN. I want to begin by asking you to turn to Page 1-14 of your testimony. Let me know
when you're there.
Mr. Johnson: I'm there
Tom Long: In particular, with reference to the top of paragraph of
that testimony, and I'll give you just a moment to acquaint yourself with that.
Mr. Johnson: Yes, sir.
Tom Long: Okay, now I have, Ah,
(inaudible from off mic)
My question based on that paragraph
is, Mr Johnson, I take it then that you are aware that under AB1054, the
Commission must find that PG&E's post-bankruptcy governance structure is acceptable in light
of PG&E's safety history, among other things. That right?
Mr. Johnson: (inaudible from off mic)
Tom Long: So can we
agree then, that PG&E's safety history is very important in this case?
Mr. Johnson: (inaudible from off-mic)
Tom Long: Okay, so then
my question is, how would you characterize PG&E's safety history from the year 2010
to the present?
Mr. Johnson: (inaudible response from off mic)
I somehow turned by mic off, but I've turned it back on. Oh, sorry. Saying
we've been here about nine and 1\/2, 10 months. And so my exposure to the safety record of
the last 10 years is through study, through reading, through listening. But I would say
it's fair to say there've been some significant safety challenges in that last decade. San
Bruno, Camp Fire, some of the other fires. So I think safety has been an issue, and it's
certainly a top focus of myself and others at the company today.
Tom Long: So it's not a good
safety history, is it?
Mr. Johnson: You know, it is what it is, how about that? A lot of issues, big issues.
But we can characterize it however you'd like, but it's plenty of challenges in that
history.
Tom Long: Part of the reason I asked the question is that you, as the leader,
you're the leader of PG&E, at least at the executive level. And I guess I'm trying
to understand the extent to which you are aware of and acknowledged the depth of the
company's safety problem. What can you say to us to help us see what, show to us that
you do understand the depth of the problem?
Mr. Johnson: Well, I certainly understand the history of
the problems, and I think I know the depth of the problems today as well as anyone.
I mean when I came, the first thing I said to the organizations that we're gonna focus
on safety first, and that has been my focus every day. And I think the organization
is safer today than it was a year ago. Certainly safer in the wildfire aspects, safer in
industrial safety. Things are getting better, and part of the reason is because
there's a tremendous focus on it by me, by the members of management, and by the board.
This is our primary focus.
Tom Long: Again, what I'm trying to see is do you acknowledge, as the
top leader, not as a company, just as you, as the leader, you acknowledge just how serious
the problems teaching has had in the last, the seriousness of the problems PG&E has
had in the last decade, including San Bruno Explosion,
(audio cuts out) a criminal conviction including
gas distribution recordkeeping violations that led to a $35 million fine by the PUC,
including the 2017 North Bay wildfires, including the
2018 Camp Fire. (audio cuts out) long standing problems
with a Locate & Mark program from 2010 - 2017 that led this Commission to impose a $110
million penalty. The Kincaid fire from last October.
(audio cuts out) problems that PG&E had with
power shut offs last October. You (audio cuts out) What do you say about all of that? Was that just
evidence of significant challenges? That's all you, that's how you characterize all of
that?
Mr. Johnson: No, I would certainly say there are
substantial problems in the past with safety, leading
to catastrophe to fatality. I acknowledge all that. That's why on my first day here,
I said, we're gonna focus on safety first among all things. Let me just say one thing.
The Kincaid fire has not been attributed yet or causation hasn't been found. So to be clear
about that, but yeah, there's a significant safety problems in history. I'm trying to fix that.
Tom Long: So given that history, your efforts to come to grips with it and understand it, what do
you see, you personally see, as the root cause of those safety problems?
Mr. Johnson: I don't think there
is a single root cause. I think there are several contributing causes. One is I
don't think our first line supervisors have always felt that safety is their job. They
have felt that production is their job, and if you want to have safe operations, that's
where safety has to live, every day, is in the first line. We, I believe, are misorganized
meaning we're spread out in various places, which leads to safety issues. We drive a tremendous
amount. So I think some organizational changes, and frankly, I think there's been a lack
of accountability at some levels in the leadership to produce good safety results.
Tom Long: Thank you. I wanted to follow up on some
of those items that you mentioned when you mentioned
first line supervisors. Can you help us understand what you mean by that?
Mr. Johnson: You know, so these
are the people that supervised the actual work in the field everyday.
Tom Long: Okay, are they
directors or below the level of director?
Mr. Johnson: They're well, they're below directors.
Tom Long: Okay,
are they represented employees or non representative emloyees?
Mr. Johnson: There are two positions.
There's a typically a foreman position which runs the crew, which is represented. And then
there's a supervisor who is the first level of management, not represented.
Tom Long: And then, toward the end of your your answer
a moment ago, you talked about a lack of accountability.
at the at the senior leadership level. Is that what you were saying?
Mr. Johnson: Yes.
Tom Long: What did you mean by that? Can you elaborate
on what you what you meant by the problem there?
Mr. Johnson: Certainly. It is sort of a generic
thing. But the senior management of any organization
is the group responsible for producing the results of the organization. And so, to the
extent those results weren't being produced, that's where the accountability lies.
Tom Long: Why was there, to try again, to try to
understand, this is all in the effort to understand the
problem so that we can fix it going forward. What was the problem causing a lack of accountability?
Mr. Johnson: And that I cannot answer because I
wasn't here. That was before my time. And about 80%
of the people in that group are no longer with the organization.
Tom Long: Allow me to just push
back on that a little bit. Earlier you said you made a study. You've
been talking to people. Is it fair to say that because I wasn't here, I can't
try to figure out and come to an understanding as to why we didn't sufficiently hold leadership
accountable in the past?
Mr. Johnson: I think it's fair for me to say I don't know what was in the
hearts and minds of individuals at a time that I wasn't here. And I think the more important
thing for me to do than to ponder that point is to make sure we're clear on what the expectation
is going forward.
Tom Long: How would you explain what the expectation is going
forward? How would you characterize that?
Mr. Johnson: That we are going to work our way, over the
next couple of years, to be one of the best safety performers in both industrial, well,
industrial and wild fire safety, in the country. Particularly in industrial safety.
Tom Long: Let me try to clarify my question. In
terms of executive accountability, which you identify
it as a problem in the past, how are you going to make, what are you going to do to
clarify expectations? Regarding executive accountability?
Mr. Johnson: Well, the first thing is that,
if you study safety, and particularly industrial safety, leader presence in the field is one
of the key things that drives safety results. So one of the expectation is that we will
spend more time in the field with our workers and less time in our offices. We will also
understand what the safety programs and protocols are. We will enforce those at every meeting.
We will start with a safety message. Every work group in the morning will start with
a safety tail board, and we would just emphasize this as our greatest priority.
Tom Long: Okay, again,
though, I come back to this issue of executive accountability. I understand what you're saying.
That there's value to having leaders in the field. But how does that hold them accountable?
Mr. Johnson: Well, they're accountable for the results.
On of the ways you produce the results is you get
closer to the work and closer to the work. And you, coach, you observe work. You coach
workers on what the standard is. If there's a resource problem, you solve it. That's how
it leads to accountability for results.
Tom Long: Mr. Johnson, did you read the presiding officer
decision in the Locate and Mark investigation? That was the enforcement proceeding brought
by this Commission's Safety and Enforcement division against (audio cuts out) practices in the
past decade.
Mr. Johnson: That was the one that was recently issued.
Tom Long: Exactly.
Mr. Johnson: Yes, Yes.
Tom Long: You have read that?
Mr. Johnson: I read it. I skimmed it, but I did read it, yes.
Tom Long: Okay, well, that's good. That's good. Do you
take away, and in particular, it was, if you'll allow me to paraphrase, it was
critical of PG&E's management for failing to discover the problem sooner than it
did. And then once it was made aware of the problem, not acting to correct the problem
as soon as it should have. Do you accept that as a general summary of what that decision
said with respect to PG&E's senior Management?
Mr. Johnson: Yes.
Tom Long: What do you take away from
that and what can you learn from that and (audio cuts out)
Mr. Johnson: Well, there are a couple things in that
whole episode. One was don't let the hunt for metrics drive your performance. Right?
And sort of what happened in Locate & Mark was there were some metrics that were going
to be made come by hook or crook or whatever phrase you want to use. So don't let metrics
drive your behavior. Metrics are important. They guide your business. But you have to
be careful with it. Two, I mean, it's a basic, simple thing. Tell the truth. Tell the truth
about where you are, tell the truth about your problem. If you have something go wrong,
tell the truth about it. Don't try to cover it up.
Tom Long: Okay.
But in terms of, again, senior
management accountability. So there was a situation in there were one of the senior
managers of PG&E was made aware of the problems, allocated looking into the problems
to a subordinate, but then did not follow up on what the subordinate found. What
are you going to do about that kind of situation going forward?
Mr. Johnson: Well, part of that is expectation
management. Do you have the expectation that if you have a problem and you delegated, do
you know you need to follow up? Do you know you need to close the circle on that issue?
These are fairly basic management practices. That shouldn't be too hard to understand that
if you have an issue and you delegated, you need to check on.
Tom Long: But how are you going? If
if a senior manager that's working under you does not meet that expectation of following
up as necessary, What are you going to do?
Mr. Johnson: It depends on the significance of the issue.
Certainly a minimum would be counseling and coaching and perhaps termination.
Alright. I'm gonna shift now to a slightly different
topic of organizational structure. Governance
structure, since that, of course, is also an important
issue in this case. Your title is the Chief
Executive Officer and President of PG&E Corporation. Is that correct?
Mr. Johnson: Correct.
Tom Long: As opposed to the utility, correct?
Mr. Johnson: Correct.
Tom Long: How would just, generally, how would you describe your responsibilities
in that position?
Mr. Johnson: I'm responsible for the corporate functions and the corporate results.
So things like earnings, anything corporate, communication, all those things. And I also
have a hand in overseeing the utility or least contributing to it. But my main area
of accountability is the corporate programs and the corporate results.
Tom Long: Mr. Vesey is
the Chief Executive Officer and President of the utility. Correct?
Mr. Johnson: Mr Vesey. Yes.
Tom Long: Ok, thank
you. Does he report you?
Mr. Johnson: He actually reports to the chairman of the utility board.
Tom Long: Okay, so he does not report to you?
Mr. Johnson: Correct.
All right. So your responsibility is corporate functions
and corporate results. Not (audio cuts out) directly utility functions and utility results.
Mr. Johnson: That's a fair characterization,
I will say that Mr Vesey and I work pretty closely together on all things, but that's
a fair characterization.
Tom Long: What confused me a little bit is that well, putting that
aside, what does the corporation do that is distinct from the operation of the utility?
Mr. Johnson: <any things. Many of the support functions are there. Legal, HR, all the financial
functions, external affairs, communications. So all of those kind of functions are in the corp.
Tom Long: Are they all in service of the operation and management of the utility function?
Mr. Johnson: They're
in service of all of the functions. You need all of those functions to run a utility. You
need corporate communications, internal communications.
So I think they serve everybody in the organization.
Tom Long: I feel like I've seen a statistic that 99%, or maybe more of the revenues of PG&E
corporation are actually revenues of the utilities. Am I on the right wavelength there?
Mr. Johnson: I don't know what the exact numbers,
but that's, you're on the right wavelength. Yeah.
Tom Long: So in terms of, at least what produces
revenue, the corporation is entirely dependent on, almost
entirely dependent on the utility. Is that correct?
Mr. Johnson: That is correct today. Yes.
Tom Long: And then when
you say, for example, let's pick a function that, at least, I understand a little
bit, is the legal function. So you say the corporation is, has the legal function. But
the legal work that they're doing is on behalf of the utility, for the most part, isn't that right?
Mr. Johnson: I don't think it's that easy to say. I mean, they're doing securities work for
the corp, doing legal work for members of the corporation and the utility. I mean, obviously
the bulk of the work and the bulk of the revenue, and all of that is utility. But I don't think
the separation you're looking for is that easy.
Tom Long: To help us understand this a little better,
I'd like to ask you to turn to what's marked as TURN-X-2. Actually, I'm sorry, Your Honor,
I believe, maybe, has it been marked on the record yet? This is a cross examination exhibit that
I've shared with MrJohnson (audio cuts out)
ALJ Allen: So there is a, it has not yet been identified for the record. What
there is is a TURN cross examination exhibit PG&E response to turn data requests
17-1 to 17-4, including attachment to DR 17-3, and that's identified as TURN-X-2.
Tom Long: Thank you, Your Honor. Mr. Johnson, do you have been in front of you?
Mr. Johnson: I do.
Tom Long: Thanks.
This is a data request from PG&E, and in particular, I'm interested in asking
you to, I'd like to ask you to turn to the attachment, which consists of a PG&E organization
chart, at least excerpts from an organization chart. And if you look at the first page
of that organization chart, it states at the top, right, that it's as off 1-31-2020. Bottom
right, it shows page one. Turn to that page, I'd appreciate it.
Mr. Johnson: I have that page.
(audio cuts) This
shows that the top the top box being PG&E Corporation
has two boxes below it. The left hand box is
PG&E the utility. And that's led by Mr Vesey, correct?
Mr. Johnson: Correct.
Tom Long: And then the,
right hand box is the Office of President, CEO of the corporation.
I take it, and that's led by you. Is that correct?
Mr. Johnson: That's correct.
Tom Long: Okay. And
I'd like to ask you then to turn to many pages later in this document, and it's actually
labeled (audio cuts out) bottom right. Off of what
number that's below the box in the (audio cuts out)
Find that. The numbers are sequential, there are many gaps in the numbers in the bottom
right. But we'll eventually get to page 3283.
Mr. Johnson: All right, I have paged 32 83.
Tom Long: Okay. And
this is labeled at the top office of President and CEO. And this, does this describe then
is this then the organization chart that shows the organizations that report
to you?
Mr. Johnson: Yes.
Tom Long: So those organizations are, I mean, there's several people that are, like
executive assistants and others, but in terms of organisation, we have, ethics and compliance.
I'm seeing, second row. Human resources, loss strategy and policy, finance and risks. Are those
the organizations that report to you?
Mr. Johnson: Yes. Those were the ones that report directly to me.
Tom Long: Are there any others that are not shown
on this or that I didn't list in my question?
Mr. Johnson: There are several other organizations
that report to the senior folks. Like communications
and legal, that don't report directly to me, but that I interact directly with.
Tom Long: Don't report to you, but you interact directly with.
Does that mean that (audio cuts out) have responsibilities
in those areas, but it's just not reflected in the organization chart?
Mr. Johnson: I believe I have
responsibilities for everybody in this entire org chart. But no, it just means that I
work with, like the General Counsel, I work with every day, the communication people, I
work with. But they do not report to me.
Tom Long: I do not see any boxes here, and I think this
is consistent with what you've already said. But I just wanted to make sure I'm not missing
something. There's no box for, say, electric operation, for gas operation. That's not a
(audio cuts out) direct responsibility for. Is that right?
That's correct.
Tom Long: Yet you do feel responsible for them.
Is that fair to say as well?
Mr. Johnson: I feel responsible for everybody who works there and everything
they do every day, Yes,
Tom Long: But it's just not reflected in the organization chart?
Mr. Johnson: They don't
all report directly to me. Yes, that's correct.
Tom Long: Does it make a difference in terms of
the effective operation of the utility whether or not an organization shows up
on this chart, say, or that whether it shows up on the operable chart for Mr Vesey? What
does, what is the significance of having an organization report directly to you, as opposed
to reporting directly to Mr Vesey?
Mr. Johnson: A couple. I think. First of all, if all of these things
reported to one person that would be a lot, probably more than one person could do.
There's also a little difference in the skill set. So that thing's are reported to Mr Vesey are
much more operational. Things that report to me are much more corporate, political,
external, and so it sort of lines up with our backgrounds. But generally they could report
wherever, that would just be a tremendous amount of reporting the one person.
Tom Long: Okay, so there's
there's a need to avoid overburdening a position, I think is what you were just
saying, is that right?
Mr. Johnson: Yes.
Tom Long: Yet there there are proposals. There's there's a reason I'm
asking this question. There are proposals in PG&E testimony (audio cuts out) some people from
currently reporting through the utilities CEO, and I'm trying to understand what
is the significance of that? What does that mean? Why? Why would you?
Mr. Johnson: For a couple reasons.
One is just the visibility of them reporting to the highest officer in the corporation.
That indicates just how important those functions are, and at least the Chief Risk Officer,
that is as much a corporate function as an operational one, and perhaps more so when
you think about risk analytics and modeling and those things. But really, the idea there
is to bring greater visibility, attention, and hence strength to those organizations.
ALJ Allen: Excuse me, Mr. Long, can I just ask a clarifying question. When you want to bring
more attention to those, is that something you're trying to get more attention and visibility
internally or externally?
Mr. Johnson: Both, I believe. Not visibility so much externally, but
credibility. I mean, the other thing that happens with these two jobs is that their
scope narrows. So, for example, a Chief Risk Officer is now Risk and Audit will become
just risk. And so credibility, visibility, oomph, whatever the word is, that's an unusual
word I know. Internally and then to deal externally with entities like the Commission.
I just, you know, making the higher level position I think will help bring all those
things to it.
ALJ Allen: Thank you. Go ahead, Mr Long.
Tom Long: You gave the example of elevating the chief
Risk Officer reporting to you as opposed to reporting to Mr Vesey (audio cuts out)
Mr. Johnson: Yes.
Tom Long: And
benefit of that is to provide more visibility to that position. Or oomph to to use your word.
(audio cuts out) expressed concern a moment ago about overburdening the position. Does
it? Is it within the skill set, and I'll lead with that, that the skill set of the
of the President and CEO of the corporation?
The current skill set?
Tom Long: I guess, I guess we'll
put it that way for (audio cuts out)
Mr. Johnson: Yeah. I think my experience in safety and risk management
is as good as anybody else is in the business. So I think it does fit at least my skill set.
Limited skill set I have.
Tom Long: I'm going now to shift to a third topic (audio
cuts out) plan I touch on page one (audio cuts out)
(audio cuts out)
Mr. Johnson: Yes, I do.
(inaudible, mic off)
Mr. Johnson: There is a plan to make a plan.
There's an outline
of a plan. We've actually done a lot of studying on this, but we don't have a final plan to
submit to the Commission yet.
Tom Long: (inaudible, mic off)
Mr. Johnson: Sure. Well, let me back up a step and say
why we're doing this. I mean, this is a way to get back closer to your customer. I think
the utility business is a local operating business. Every day when you get close to
your customers, better for everybody. I think we have, over the years gotten too far away
from our customers. And I think when you have as much centralisation as we do in such a
diverse service territory, you know, the Stockton and San Francisco are two different places
with two different sets of customers and customer interest in those things. This is really about
one, getting close to a customer, two, local
decision making and risk management with centralized
support. So what will this look like? I would predict it will be four or five regions. We have
studied a number of different models and then we have a number of things to determine. How
to divide them up? Is this by county? By circuit? By, what is the, what is it? Divisor. And then
Tom Long: Did you say Divisor? D-I-V-I-S-O-R?
Mr. Johnson: Yes. I think that's a word.
I was a liberal arts major. The stage right now is we're
determining what is a local decision, local function? What is a centralized function and
what is in between? Those are basically the three buckets and it's gonna take us a
couple of months, I think, to sort all this out. But I do think it's a good idea.
Tom Long: Would there be (audio cuts out) both of the electric
operations and the gas operations be subject (audio cuts out).
Mr. Johnson: So our current thinking
and let me focus on current thinking, subject to change, is that we would have some of the
everyday functions of gas and electric be localized. Responsiveness to the customer.
Other things you would centralize and keep the way they are, say transmission of electricity,
transmission of gas, asset management, these things. There's still a lot of work to do
here, but if you think about our business, responsiveness to day-to-day customer needs,
relighting pilot lights, hooking up outage lights, the more local you could do that better.
Tom Long: Current thinking that the gas operations, to the extent that there were
regions where gas and electric operations that the regions would be the
same for both gas and electric.
Mr. Johnson: That's a good general starting proposition. I don't
know that it will work exactly that way. The other thing we need to make sure of is that
operating safety, of both gas and electric, we don't take any steps that are anything
other than positive toward more safe operations. So that's another character
issue we have to identify as we move forward.
Tom Long: (inaudible, off mic) element, and you need a little bit
more time. What is PG&E's thinking? What is your thinking about when PG&E will be
ready to present a complete proposal? Publicly.
Mr. Johnson: I don't have a complete answer to that.
I think there was a assigned Commissioner's ruling in this docket that may ask us some
questions about this and maybe when we're gonna file a plan. So I don't know the answer.
But sometime before confirmation, before June 30.
Tom Long: You would have a well developed plan
that's ready to present sometime before June 30?
Mr. Johnson: Correct.
Tom Long: Will the board be involved in
shaping this plan in any way?
Mr. Johnson: Absolutely
Tom Long: Both regional officers that I think you referenced in your
testimony, (audio cuts out)
Mr. Johnson: Again. That hasn't been determined.
It could go either way. I would think logically, the utility CEO. But they will also have corporate
functions. I think, like local politics. That's not the right way to say it. Local public affairs
and those kind of things. We're still working that point.
Tom Long: I'm going to stop there. Thank
you for your time today, Mr Johnson. And (audio cuts out) all my questions for now.
ALJ Allen: Thank you, Mr Long.
Let's go off the record for a moment.
(OFF THE RECORD)
ALJ Allen: On the record. While we were off the record,
we marked some exhibits from Mr Abrams. We'll go over those numbers in a minute. I believe
the next for cross examination will be Miss Sherrif. Miss Sherrif.
Nora Sherrif: Thank you, Your Honor. Good
afternoon, Mr Johnson. Afternoon. My name is Nora Sheriff. I represent the California
Large Energy Consumers Association, or CLECA, a group of large power customers in PG&E's
service territory and Southern California Edison Company's service territory. Just one
quick clarifying question in your discussion with Mr Long, you referenced the term industrial.
Did you mean industrial in the context of the electric utility or industrial in a broader
sense?
Nora Sherrif: I believe I was referencing industrial
safety. I was talking about compared in the
utility industry.
Nora Sherrif: Okay. Thank you.
Mr. Johnson: Or maybe personnel safety is a better way to describe it.
Nora Sherrif: Thank you for that clarification. If we could turn to your testimony, Page 1-10.
You discuss the pending proposals in the safety culture investigation, which include
periodic review of the certificate of public convenience and necessity for the holding company
structure. Please let me know when you're a page 1-10.
Mr. Johnson: I'm at 1-10.
Nora Sherrif: As you know,
President Batjer's proposal suggests the possibility of a future review of the certificate
of public convenience and necessity. Yet you've suggested here a moratorium on the pending
proposals in the safety culture investigation. At line's not 7 to 9, quote, "for at least the
"proposed initial time period for the regional restructuring plan." What is that proposed
initial time period for the regional restructuring plan?
Mr. Johnson: We will have a plan before
the Commission before June 30th of this year.
Nora Sherrif: I understand that's when you plan to submit
your plan. I'm asking, what time period would you like to hold these other pending proposals?
Have a moratorium on them?
Mr. Johnson: You know, there's a practical reality to this statement. First
of all, I don't quibble with the idea that Commission has the power to review and potentially
revoke, with due process, a CPCN. So that's really not the issue. The issue here is
we have to emerge somehow in some form from bankruptcy, and if we are debating at the
same time what the corporate form or structure is, I don't think both of those things could
happen at the same time. So the suggestion here is we try the regionalization approach
and see how that works.
Nora Sherrif: Again, for how long is it? The five year period that's referenced
later in the testimony? A five year initial period for the regional restructuring?
Mr. Johnson: Actually, I think that I would like to have five years. The time will be whatever the
Commission says the time will be. I think it will take a while to do the restructuring,
and a while to look at the results, but I can ask for the time. I don't get to decide
the time.
Nora Sherrif: Okay. And are you suggesting this
moratorium on the other pending proposals while the
regional restructuring plan is in place and has been has been implemented because you
believe that regional restructuring plan will help PG&E improve?
Mr. Johnson: Absolutely. I think
it will help us improve.
Nora Sherrif: Okay. Are you aware that the discussion of the regional restructuring
plan in your testimony and then Mr Vesey's testimony lacks detail?
Mr. Johnson: Yes. I'm quite aware of that fact.
Nora Sherrif: Do you know when PG&E's next general rate case filing is due?
Mr. Johnson: I think it's a while.
2023 or four, maybe.
Apparently, that's not the right answer. I don't know is the right answer.
Mr. Johnson: Mr. Johnson, would you accept, subject
to check perhaps, that your next Phase One filing is
due in the summer of 2021?
Mr. Johnson: I will accept. Yes, I will accept that.
Nora Sherrif: And you have said
that the company is working on restructuring plan. Do you think given the scope of analysis
and the scope of work, that you could do, you could develop a complete and detailed regional
restructuring plan to include in the general rate case filing in the summer of 2021?
Mr. Johnson: Yes.
Nora Sherrif: And would it be possible for you to take
initial steps now towards greater responsiveness to
customers in a more regional alignment while you're developing that more complete and detailed
regional restructuring plan?
Mr. Johnson: Yes
Nora Sherrif: Later in the in the testimony. And this is not in your
specific testimony, but you are the head of the organization, as it were, the proposal
is for the regional restructuring plan to be in place for, quote, "at least five years,"
end quote. Why so short?
Mr. Johnson: Well, at some point, you would like to measure results, right?
And see if it was the right answer. I think a five year period is plenty of time to know
whether this organizational design and structure works.
Nora Sherrif: Would you be opposed to considering
eight years, considering the fact that your general rate case cycles are four year periods,
so you would have two general rate case cycles with which to fully implement the plan and
then review and analyze the impact of that greater regionalisation.
Mr. Johnson: I wouldn't be opposed
to that as a general proposition. If in year five or six we figured out this wasn't the
right idea, I would hate to be bound to continue it. I do think it's the right idea. I
don't think that will happen. So as a general proposition, yes, on eight years.
But, you know, we should think about this as we go along and evaluate as we go along.
Nora Sherrif: And, PG&E has also suggested in other forums that the public safety power shut off
events would occur for 10 years. Would you consider committing PG&E to the regional
restructuring plan for a period of 12 years, so three general rate case cycles, with
the caveat that if it's clearly not working out, there could be due process and evidence
to show that and things can change, but committing it to a 12 year period to extend beyond the
10 years proposed for the public safety power shut off events?
Mr. Johnson: This is a hard question because
it's tied to a 10 year PSPS plan that I think we need to shorten to a much shorter period
to the extent we can. You know, I'm committing, people who will be sitting in this chair
long after I am to an organizational design here. Which I hate to do for more than eight years.
Just seems for me to make a decision for other people 10 years from now would be difficult.
Nora Sherrif: Thank you, Mr Johnson. Thank you, Your Honor. I have nothing further.
ALJ Allen: Thank you, Ms. Sheriff.
Let's go off the record.
(OFF THE RECORD)
ALJ Allen: On the record. While we're off
the record, earlier, Mr Abrams provided his exhibits. Both his previously served testimony
and a number of cross examination exhibits. So, document William B. Abrams reply testimony,
dated February 21, 2020, is marked as Abrams-1. Cross examination exhibit.
My version has a handwritten cover sheet. William B. Abrams, Exhibit A, motion to reconsider
TCCRSA. Which is a cover sheet on a filing from the United States Bankruptcy Court.
It's marked his Abrams-X-2. Next exhibit. William B. Abrams Exhibit B. Objection to
note holders RSA, cover sheet that's hand written over a filing from the U. S. Bankruptcy
court is marked as Abrams-X-3. Next is William B. Abrams Exhibit C, victim letters
to the court, which is a series of attachments that is marked as Abrams-X-4
And then we have William B. Abrams, Exhibit D. Governor Newsom, December 13th letter
is marked as Abrams-X-5. Mr. Abrams, you may go ahead.
Will Abrams: Thank you, Your Honor. Mr. Johnson,
thanks very much for being here and taking my questions. Just wanted to give you a little
background on who I am. I am not a attorney and so I'm sure my questions will be different
than the others that came before me. I am a wildfire survivor. I am a victim of the
PG&E wildfires in 2017. I've been working since that time to work collaboratively as
best as I can towards solutions as we move forward.
And I appreciate the challenges associated
with PG&E, and I'm here today to try to work towards solutions. So I hope you take
that and I will do my best to try to separate my emotionality around these issues
from the pragmatic tasks ahead.
ALJ Allen: Thank you.
Will Abrams: Thanks. So on a page one of your testimony,
you indicated that PG&E's in the process of making and is dedicated to transformative
change. And I was wondering if you would characterize
what is in the plan of reorganization as transformative
change.
Mr. Johnson: I believe when all of the steps are
taken, it will amount to transformative change. Yes.
Will Abrams: And are you referring to, because I think in some circles, some of these things
are a bit conflated in terms of the testimony around the plan of restructuring versus the
actual legal document that's going to be put into the bankruptcy court. Can you clarify?
Is it, do you mean which of those you mean?
Mr. Johnson: my reference here is more toward the
materials filed in this docket in this proceeding, more related to AB1054 and the Commission's
jurisdiction on whatever other basis. I think there are some of this in the bankruptcy
filing but more here.
Will Abrams: Okay, and part of my concern and other victims has been
that as you can imagine, over the years,
understanding what PG&E has stated publicly doesn't
always match what is necessarily in the plan and committed to in terms of dollars and cents,
in terms of staffing. How do you sort of reconcile the fact that there are
these separate documents filed with CPUC around what you intend to do, which, of
course, could change based on the situations in what you commit to do legally in the US
Bankruptcy court?
Mr. Johnson: Well, first of all, if I say something, I write something down, I'm
gonna do it. Let's, I'm gonna start there. If I make
a commitment, you can count on it. But here there'
sort of a virtuous cycle or circle. The Commission has to approve what it does. The
bankruptcy court has to approve of what it does, and then they sort of have to approve
of what each other does. There was a multi level approval process that I think will knit
all of these things together.
Will Abrams: And would it be fair to expect, as a victim who is, you
know, soon to be part of a trust where 50% of they're rebuilding their homes and their
lives is is counted on that an expectation that what is in testimony and what is submitted
to the CPUC will be incorporated into the plain of restructuring?
Mr. Johnson: So I'm not quibbling
at all with what you said. I don't know how things get in from one document to the other,
but I think they will both be approved or maybe approved as one document, and the commitments
in those documents, I fully intend to keep, regardless of if its one or two.
Will Abrams: Yeah, I appreciate that.
And, part of the reason why I'm asking that question is in reference to what you
said in earlier statement that, you know, you are responsible for what you're responsible
while you're here in this position, and that folks who come after you, may not be bound
by the same words that you speak here or the testimony and may count on something more
formal for the path ahead. And while other parties may look one year in the
future or five years into the future for a PG&E, you know, it's really the residents, it's
the ratepayers, its victims, who live around the PG&E lines who are rebuilding
their home and don't want that to be just a five year investment. But they want that
home to be a long-term investment. And so, you know, counting on and trusting is
something that is difficult to do. And so marrying that and making sure that it's formally
submitted would provide a lot of reassurance to those who are looking for it. Would you
agree with that?
Mr. Johnson: I would agree with that, and I would agree with the fact that that's
something we need to do. Can I say something here in response here? I don't know this for
a fact, but I believe this to be true, that this proceeding and the scrutiny that the
company is under from the Commissioners, the Commission, the Governor's office,
I'm pretty sure the state has never seen anything like this before. And perhaps no state has
seen this, and my point here is, I believe, the Commission and whoever else has a say
is going to hold us to these commitments. I mean, there's the recent ruling
about the additional testimony we need to file. That looked to me like an exercise
in holding us to our commitments. So I just share that. I think that, you know, we say
people who will make sure we do it, including me, but not limited to me.
Will Abrams: I appreciate that.
Thank you. You know, I think the commitment is is really key. And one of the things
that I think is difficult with some of the testimony and some of what's been
said are what you mentioned earlier that, you know, safety, a safety first focus.
And I think for those who have been here in PG&E service territory for a very long
time, we have heard that mantra for a very long time. And so a commitment of safety first
focus often rings hollow from whoever is sitting in your chair. And you know, myself and
others, victims, residents are looking for the metrics. And I know you said that that is
a difficult thing, and you have to be careful where those are applied but part of what I was
hoping to see in the plan of reorganization is a commitment to 30% reduction in risk over
x period of time, and measurement of that risk so that we can get over this trust gap
and get beyond--
ALJ Allen: Mr. Abrams, if you can try and make it more of a question and
less of a statement so that, this is the time for cross examination rather than quite as
much of a dialogue. And I understand that you have a deep background on this, but if
you could focus on the specific questions you have for Mr Johnson that would help us
move it along.
Will Abrams: I'll try to be more direct. I was tryingto provide background, but I appreciate
that. Thank you, Your Honor..
ALJ Allen: Thank you. Go ahead.
Will Abrams: So directly, safety metrics, performance
metrics that residents can rely on. Can those be built into the plan? And can those be tied
to what your investors receive and what ratepayer reimbursement you receive? Can that be a
goal of this plan of reorganization?
Mr. Johnson: It certainly can be a goal and a result for the company
to show risk mitigation through its metrics. In fact, I think we've done that. I think
it Mr Lowe's testimony, that's exactly what we're showing, that we will have incentives
for the workers that are 75% focused on safety. And now, that safety requires risk reduction.
We measure that in terms of, say, ignitions avoided, system miles hardened, those things.
But those are all risk reduction measures. There'll be another set of metrics that go
with the wildfire plan that we will develop in conjunction with the Commission. That will
be the same exact thing, which is all focused on mitigation of the wildfire risk. So I think
we're headed exactly on the path you've described.
Will Abrams: And where's the tie to the the return?
So, part of what I'm concerned about is that what you've laid out, assuming that that's
how we proceed, is disconnected from the return that
investors shareholders receive and disconnected
from ratepayer reimbursement. So, you know, from someone who has worked in a bunch of
corporations, you know, part of what I understand is the dollars are important and,
you know, really primary motivators for how a corporation should operate, amongst other
things. So how do we make sure that the dollars are tied to the performance?
Mr. Johnson: I think the, let's
say return, shareholder return is tied directly to performance already. This is how the
company got in bankruptcy. All right. The performance was such that there was no return
to the investor. I don't think it's a good idea to try to condition the return in a rate
setting concept to any particular metric like safety. I think that is a financial function
of the cost to raise capital to pay for the use of that capital. But I do think the performance
of the entity, particularly in safety, particularly
here, is gonna bear directly on the shareholder's
returns. If you don't perform, that return's not gonna be good. So I think they're linked
already.
Will Abrams: I appreciate that. And the reason why I am asking that question, and just by
way of example, you know, one of the corporations that I used to work for was Bell Atlantic,
became a Verizon, and realized that, you know, the financials didn't match what they were
doing with Verizon Wireless. It was needed to be innovative and needed to be, as you
stated in your testimony, transformative, and so part of what they did was to really carve
out Verizon Wireless with longer term investment horizons, so there wasn't so much of the company
that they were used to was driven out by the short term yield because that was problematic
to looking forward and competing in that wireless marketplace that required innovation.
So I know you have been receiving a lot of suggestions regarding innovations to the
grid and to whatever extent you feel that innovation in terms of the business processes
and the technology is important, wouldn't orienting the finances to that longer term
horizon be effective?
Mr. Johnson: Yes. I think you should always play the long game, strategically, financially
and otherwise. That's one reason we have put out there a five year plan to show you,
the public, at least, what the next five years are. But yeah, I certainly agree with
the importance of a strategy that goes long,
And one of the reasons why I, excuse
me, why I bring that up is you know, part of what I've seen developing in this plan of
reorganization, and the restructuring support agreements that you referenced in your testimony,
is that the longer term investors are, gonna get a little drink here. The longer term investors
who have been with the company for a long time now, the bondholders, the noteholders,
who had a competing plan drop that because they were able to hedge and get asset liens
and protect their investments over the short term. I'll do the same thing. Thank you.
Protect their interests over the short term. And so the investors that are really there
because they have to be for the long-term, the way this is restructured, are the victims.
So 21% of shares will be held by this victim trust. And so I'm concerned as not being
a CFA, certified financial analyst, myself that when I see investors who are more savvy
than I am positioning themselves and only dropping their plan when they have asset lins
and are hedging and are waiting for eventualities that may occur, whether that be the next wildfire
or a public takeover or whatever those things are. When I see them doing that, who know
more than I and are more financially savvy, I worry about the longer term implications
for investments by the public, investments by unsecured shareholders and victims. Can
you help me understand that?
Mr. Johnson: There's a lot to unpack there. So whenever you're in a distressed
asset situation, I've learned a lot of new terms in the last year. Distressed asset situation.
You're gonna have money that comes in and goes out. There are people that do this for
a living, right? And that's just the way that is. What we're trying to do is set
up a situation where we have the traditional, usual way utility investors come back
into the stock. And the traditional people that are in the in the debt markets. Particularly
in the equity and one of my personal goals, frankly, I mean, one of the reasons I came
here was to help victims get paid. And so I want to do everything I can to make that
stock and that trust go up in price and value, so that when the trust sells it, people like
you get the compensation you deserve. That's really one of the things I'm focused on.
Will Abrams: Thank you. And certainly there are a lot of
victims out there who appreciate that. And I appreciate
that being said, and--
ALJ Allen: Just a minute, please. Let's go off the record for a second?
(OFF THE RECORD)
ALJ Allen: On the record.
Go ahead, Mr Abrams.
Will Abrams: Thank you. Thank you. One of the points that you make, which I think
you just spoke to, is this issue of fairness. And it's it's one of these things that
gets talked a lot about about what is fair. And I guess this points to some of that, some
of those issues that you mentioned, which is, you know, really the only group, of
claimants in this plan of restructuring that are getting compensated in unsecure stock
are the victims. And so you would think, for fairness purposes, that the investors who are
more savvy, who are more connected to the company, would be those with those unsecured
standing. So that victims, to your point, who you have made a first priority in your
testimony are the ones who are paid in cash, and it, you know, and part of this also goes
to the point of fairness, in that, let me just very quickly make a brief analogy. A man burns
down your home, doesn't have enough money to pay for it. He says, "look I can only pay you
"for 50% of your rebuilding costs. But I got a great investment for you for the rest of
"the 50%. Trust me, I got you covered." Doesn't strike me is really fair. And so I know an
individual isn't exactly like a corporation. But you would think in a plan of restructuring
in terms of the priorities that you state in your testimony that you would make that
a top priority to make sure that those victims are made whole in cash and that the folks
who are more savvy investors who understand how to hedge their risk are the ones who are
subject to the changes in the marketplace and more subject to the next wildfire. Is
that fair?
Unknown1: Your Honor, at this point, I'm going to object. I think we've crossed over
to the issues that are in bankruptcy court not before this Commission.
ALJ Allen: Well, I think there's a question
here if Mr Johnson can answer it. I think if Mr Abrams, if I'm understanding the question you're
asking, is there a reason why the victims are unsecured and the investors are secured?
Is that correct?
Will Abrams: That's correct. And it's because of the future of the company, right?
So part of the reason why I'm asking it is because this is who's going to be responsible.
ALJ Allen: Objection's overruled. You may answer the question if you understand it.
Mr. Johnson: Thank you.
I'm trying to say this in a intelligent way, which is eluding me. Fairness, you know, often in
the eye of the beholder. And I do not get to make the rules in the bankruptcy courts of the
United States. Nor did I have a hand in the, in fashioning the settlements or the RSAS,
or any of those things. You know, that is the work of a series of legal
and financial professionals and they know that work, and I don't. So, I understand
exactly what you're saying. I'm gonna do everything I can to make that stock valuable,
but I can't, I can't fix this issue, so I just can't, I don't have the power to do it.
Will Abrams: And help me understand that. Or help help us understand that. As the CEO, if you
were to instruct those who are putting this deal together to say I've stated my top priority
is the victims, go get it done. Is that not something that you have the authority to do?
Mr. Johnson: I'm not sure I do, because that deal,
for lack of a better word, I'm not using a pejorative
term. You know, there's an official tort claimant's
committee in the bankruptcy court, an official
committee. That means something in bankruptcy, that these are the people representing
the tort claimants interest. We have a plan sponsor on our side. And before that, there
were a couple of plan sponsors. They're the ones that make these arrangements. And then
do we support 'em or not? That's really how it works.
Will Abrams: So your understanding is that the
Tort Claimants Committee are the folks who went in that direction?
Mr. Johnson: Well, I think a
bunch of folks went in that direction come because that's where it ended up. So a bunch
of everybody had to go in that direction at some point.
Will Abrams: Okay, thank you. Also on page
one of your testimony, you state that safe and reliable service, I think it's third on
the list. I'm not sure it was necessarily in priority order. I'm wondering how, at
the executive level, are you measuring safe and are you measuring reliable? So what are
those charts and figures that you look at to assess whether we're operating safely and
reliably.
Mr. Johnson: So let's start with safety. There are
two main categories. Personnel safety, which is
things like dart rate, OSHA rate, how well our own employees and our folks working
safely. And then there are external measures. And the real external measure of focus at
the moment has to do with wildfire mitigation. Right? So if we had catastrophic wildfires,
Are we doing the right thing in PSPS? All those things. There's a bunch of metrics
that go with that. So a sort of public safety and personnel safety measures. Reliability
is, used to be easy. It used to be how many outages, how long did they last and what
caused them? Reliability now also has to take into account the impacts of PSPS events.
How big was the scope? How long did it last? How long was restoration? So that has
been added to the measures of reliability.
Will Abrams: Mr Pender in the Wildfire Mitigation plan
proceeding mentioned that PG&E was looking to have shorter public PSPS events, but perhaps
more of them during a period of extreme weather. And I'm wondering how PG&E came to the
point of understanding that more power shut offs rather than an extended power shut off.
So just to put a example out there, one power shut off for two days versus five power shut
offs all being an hour and 1\/2 each, over those, that same period of time. What brought
the company to the understanding that that was the better path forward?
Mr. Johnson: So, first of
all, I am not familiar with him saying that. I'm not questioning it, but I'm just not familiar
with that. But I can speculate which my lawyers are now shaking their heads no. But the
precision that we should be able to gain over time based on more granular information, more
artificial intelligence, so that we could move to a position like San Diego Gas and Electric.
They have about a 10 year head start on us. We're copying everything they do as fast as
we can, but you can do this surgically in small areas for small periods of time. That's
what I think he was referring to. And there are a lot of tools we're working on that should
help us be able to do that.
Will Abrams: Sort of bringing this back around to the plan of reorganization.
You know, these executive level measures of safety and reliability. You know, I know part
of what you're talking about is making sure that those are incentivized within the organization.
Again, part of what myself and other parties have put forward is have that
tied to a bottom line metric, like a return on safety, similar to what an ROI or ROE
might look look like. And have you thought about having as a bottom line metric tied
to your investments? Something like a return on safety to incorporate in the plan for structuring?
Mr. Johnson: I have thought about including metrics
that are heavily weighted towards safety, but not
entirely, because I think there are other things that matter. I think, customer
service, customer welfare matters. I actually think financial health matters and that there
ought to be some relatively small compared to safety piece, but my own experience, in my
own view, the safest companies are frequently the most financially healthy, have the greatest
customer satisfaction, and are the best run, so I think those things all go together. But
as a single thing on safety, I believe there are other elements in a report.
Will Abrams: And I appreciate that
And I think that's fair.
ALJ Allen: Excuse me, Mr Abrams, at this time, I'd like to take
a brief recess, so we'll be in recess until 2:35 by the wall clock. Thank you. Off the record.
Will Abrams: Thank you, Your Honor.
Mr. Johnson, thanks for continuing with me.
At the bottom of page 1-4 leading into 1-5, you describe, you know, the wildfires
that PG&E is taking account of, and absent from that list, as you mentioned earlier from
Mr. Long's questions, is the Kincaid fire. And part of what I certainly understand
from your statement is that PG&E is not prepared, at this point, to take responsibility
for that. And I guess part of what I'm trying to ask is specific to Kincaid but more broadly,
which is doesn't it not make good corporate sense for company looking to rebuild trust
to not wait necessarily for some outside source to come in with a gotcha jumper picture or
a photo that makes it clear and convincing that PG&E started the fire. But would
it not make sense for this or for other incidences,
for PG&E to step forward and say, yes,
we take responsibility, and whether that's in part caused by PG&E and other factors,
but that we take responsibility for that fire or for other similar instances? How do you
evaluate as a company and as an executive when to step forward and take responsibility
before others point to it?
Mr. Johnson: So I suspect if this was a very clear situation, we would
know by now who started that fire, and it is not clear, it's a complex situation. CalFire's
investigating, and so a direct response to your question, I don't think any company
should hurry out to admit to things they didn't do, particularly if it has consequences
for customers, for communities, for shareholders. I'll tell you, I think we've been very transparent
about this. As soon as you event happened, as soon as we knew that our tower was in the
fire area, we have been public and very open about this and very open with the CalFire,
but I just don't think the fact that we had had fires in the past that were related
to our equipment would somehow make it smart for us to admit to things that we didn't
do. I mean, one of the funny things I saw in the fire season that we were blamed for
the Getty Fire in Los Angeles. So I don't think we should admit to these things that
can't possibly be true.
Will Abrams: Understood. And, you know, part of that is sort of the difficulty
with what may be prudent financially to take ownership for isn't necessarily the best thing
from a trust building communication standpoint to take ownership for. And so how do you--
(inaudible from audience)
Will Abrams: Take, sorry, take ownership for? So
how does that, help me understand the PG&E processes
for looking at those types of things? Is it, you know, while there's 5% here, that is absolutely
our responsiblity, and we're gonna get ahead of this and take ownership for that 5%. Or
is it, look, it's only 5% now, and until it gets to 25, 30% that's when, you know, how do
those discussions take place?
Mr. Johnson: So those discussions are, in fact, bound by SEC disclosure and
GAP accounting rules. When you have a situation, and I'm not an accountant, that
is likely versus probable versus possible, those all require different disclosures
in both your SEC and in your accounting rolls. So what we do is we take the facts that we
know. Kincaid, we know there was a fire in that area and we know that this tower with
the jumpers was in the fire area. That's what we know. So is that likely that we caused
it? Is it possible? And that's exactly how we evaluate him according to the SEC requirements
on disclosure.
Will Abrams: Okay. And I think, you know, just part of that is a difficulty for the
folks on the ground, right? And so part of what will help to ensure that PG&E
has a bright future, and this plan of reorganization
turns into healthy utility is gonna really
depend on the public's perception of the path forward. And so, you know, I have friends
who lost homes from the Kincaid fire. And people are rebuilding their homes where these
fires are occurring. And part of what folks understand from a general perspective is corporate
citizenship. Is things like that. What makes a good corporate citizen?
ALJ Allen: Mr. Abrams?
Will Abrams: Yeah.
ALJ Allen: If you could focus on a question. This is Mr Johnson's turn to testify rather than
your turn to testify.
ALJ Allen: Thank you. Sorry.
I understand this. Is that an important
issue for you, but--
Will Abrams: it is.
ALJ Allen: We need to try--
Will Abrams: I will be more succinct.
ALJ Allen: Thank you.
Will Abrams: So how do you convince a public that you are have a plan forward that's for
good corporate citizenry as opposed to ensuring SEC filings and the financial interests of
your investors.
Mr. Johnson: And the financial interests of our customers who should not be paying
for fires that they're not responsible for. But how do you rebuild trust and confidence?
I think there is a pretty straightforward answer to this. Flawless execution of your business
over time. No more disasters, no more fatalities.
No more catastrophes. That's step one. Two, deliver
on your commitments every day. Reliability, affordability clean with a smile. You know,
I don't think we can buy our way back into the good graces of anybody. Nor do I
think, we're gonna build trust and confidence by agreeing to pay for things that we didn't
do. Lord knows we have done enough things that we actually did and have to pay for. I don't
think we need to be, you know, paying for things we don't. But I think it's a much simpler
proposition. Avoid catastrophe. Go about your business in the right way. Serve your customers.
Make 'em happy to take service from you. Take a while. Drive that stock price up for the trust.
Will Abrams: Okay, so in your testimony, in one of
the sections, it was, the header is Backdrop to PG&E's
Plan of Reorganization. And you seem to say it is part of your struggles
with management is that PG&E is so big that it's very difficult to manage, and
that you have, that it is unfair, in some ways, to compare PG&E to San Diego Gas
and Electric with a smaller territory and maybe less breadth. Do you feel that you're,
the size of your company is more of a help or hindrance in terms of how you're restructured
in moving forward?
Mr. Johnson: So size is always both. As a person of size, I can tell you this personally,
you know, the scale, size and scale, in terms of finance, in terms of bringing expertise
from your workforce, in terms of restoration, size and scale is hugely important.
It complicates, it can complicate operations, but that is a function of who you have doing
the operations more than it is just size. You know, there are organizations within 20
miles of here, maybe 30 much, much larger than PG&E and quite successful. So I don't
mean to imply that there's any excuse about our performance based on size.
Will Abrams: Thank you.
I appreciate that. And I think that's good to hear. So how are you leveraging those
economies of scale in how you operate your business?
Mr. Johnson: So a number of ways. You get to do
it in the supply chain and purchasing and procurement where you are at scale. Certainly
in restoration work where you could move people around. Diversity of thinking with that number
of employees turns out to be a very valuable thing. So I think there's a lot of ways that
scale helps us.
Will Abrams: So part of my reason for asking those questions is I think when incidences
have come up and things that you point to in your plan of reorganization that will
change. Part of what that is are pointing to external factors as to why disasters occur,
and how risk is measured associated with those external factors and the internal factors,
and would like to get a sense of how those come together in a plan of reorganization.
So part of what this is how do you put forward these are risks externally and these are the
risks internally to the company so that we understand that the risks moving forward as
a public?
Mr. Johnson: So we have a, what I would say, robust risk identification and management system
that will improve as we go along here, but fairly robust, and tomorrow or whenever
Mr Veseyi is up, he has this in his testimony, but what we do is we identify internal and
external risks. We do what's called a bow tie analysis, which is a risk consequence
mitigation in a three part fashion and probably the biggest external risk at the moment is
climate change and what it's doing to the wildfire risk. But, you know, we address these
things in our enterprise and operational risk
management program, prioritize 'em, measure 'em, and
have plans to mitigate those that we can.
Will Abrams: I understand and I think so, again managing
expectation. So I think many of victims to these fires will listen to climate change,
and will hear that and will say, "Well, they've been neglecting their infrastructure for so
"long that of course, climate change caught up to them. But it's their neglect of their
"infrastructure that really is the main focus. And every time an incident happens that they
"point to this external climate change, it's not taking responsibility for the neglected
"infrastructure." Is there a way to get over that trust gap?
Mr. Johnson: So I think it's both. Both
equipment and climate. Again, I haven't studied this because it's too hard to study
and I came here to look forward and not backwards, but an observation for me is that the risk
of the equipment lagged the risk of the fire. I'm not saying this well. That if we look
back five or six years and the same equipment in the same condition does the same thing,
it's a much different risk than it is in 2019. So I think a lot of the condition of the equipment
that was okay a decade ago isn't okay anymore. If you go back less than a decade, the
theory was you're not gonna have a wildfire in Northern California. But obviously there
are some problems with the equipment. Camp Fire, failed hook. I mean, so it's both and
I think we have to address both. I don't think we should be allowed, well, we shouldn't say
this, and we shouldn't be allowed to say that that this is just climate change. It's not
just external. We have a piece of this, right? And under inverse, it doesn't matter what
the condition of the equipment was. It either was affected part of the fire or not, but
it's definitely both of those things that are causing the risk.
Will Abrams: Thank you. So how do
the, what new financial mechanisms are within this plan of reorganization to address that,
those infrastructure deficiencies? So what I mean by that is, you know, having greater
return, perhaps for investors on risk mitigation, innovation, shortening the timeline associated
with the deployment of new technology, of testing. How do you manage those,
that financial picture when your investors are looking for month over month, short term
yield?
Mr. Johnson: In our business, in the utility business, the regulated utility business,
we don't just get to go invest in what we want to go invest in. I mean, these things
require Commission approval, and the plan that we have put out said we have a five year
projection of, I forget, 40 billion of investment that we have to raise through equity and otherwise
that is generally devoted toward what you have said. Infrastructure improvement, wildfire
risk reduction and mitigation. We're doing a number of other things that are innovative,
but they're not innovative in the financial sense.
Will Abrams: Have you considered that, so part of
this is, you know, these big buckets of money, we're not quite sure, as investors, shareholders,
or as the public that those big buckets of money are going to go to necessarily the things
that we care about which are mitigating risks. So have you considered financial mechanisms
to target risk, to target innovation? Have you considered those things as an executive
team?
Mr. Johnson: We have certainly considered
innovation to mitigate risk in terms of big data and
AI and predictive versus forecast, those things. I don't think we have a mechanism to tie
that to the finances.
Will Abrams: So that has not been looked at?
Mr. Johnson: No.
Will Abrams: Okay, so one of the things
that you stated in your testimony was that you felt that the Safety Culture OII
should be put in a moratorium, I think was the word that was used. How do you, how
does that make sense to approve a plan of reorganization, and then, figure out if the
culture is oriented to safety? Does it not make logical sense to first figure out is
the culture safe and then exit bankruptcy?
Mr. Johnson: I think in our request to stay the proceeding,
we're only staying the part related to, for lack of a better word, corporate form. You
know, what is the best form or format for the company to operate in? I think the rest of it
will continue, but as a practical matter, as I said earlier, we have to emerge as something,
we have to do a very large equity and debt raise. We have to be something to do that.
We hope to be a regional for some period of time. But our ask on that piece was really
just on the structural piece of the safety culture OII.
Will Abrams: Thank you. Do you think that
regulating culture is an achievable task?
Mr. Johnson: Would you repeat that question, please?
Will Abrams: So,
regulating culture. So culture within a corporation can mean lots of different things.
But essentially, it's how you think and how that transfers into action. So the culture
within an organization, the Commission has been charged withregulating a safety
culture. Is that something that a regulatory body can regulate? Can they regulate culture?
Mr. Johnson: Well, they can regulate whatever is
within their purview, their jurisdiction. If you're
asking me whether I think they can actually get to regulating culture, I think that is
a very difficult thing. I think the regulatory role is to make sure we're doing the things
we need to do to generate good safety culture. I think it's very difficult for anybody to
do that at a distance. It is difficulty up close, impossible from a distance.
Will Abrams: So what tools
do you think should be used? So, metrics that they should look at, monitoring tools,
to get at that, given what you said, that safety culture is hard to regulate.
What are the tools that would be leveraged for that?
Mr. Johnson: So, the way I think
about this, safety is essentially an exercise in risk identification and mitigation, and
so there for me, the answer to this is tied up into your risk management programs.
Things like you EORM and RAMP and the Safety Modeling S-Map. I think the Commission has
a number of these tools that we apply in conjunction
with our own program. And I think that's
really where the the action is. Do you understand your risks? Are you appropriately mitigating
them? That's where I think you can really, I mean, if you look at the history
of PG&E over the last decade, one of the things you could draw a conclusion was didn't
appreciate the risks. Right? It seems like a fair assessment to me. So safety
metrics, risk programs in conjunction with the regulators' view with this, I think
that's really where you need to go.
Will Abrams: Okay, I appreciate that. In your testimony on
page 1-5, lines 11 through 13, you state that boards have extensive expertise in utility
operations, in regulation and safety and renewable energy finance and technology. Can you talk
a little bit about what is their specific safety background that you're referencing
there?
Mr. Johnson: Certainly. Four of the board members,
and until recently, five of them, came out of the
utility backgrounds where safety was essential part of their everyday business. And I've
never actually seen a utility board with five utility folks on it before. So I thought the
direct experience and safety in the utility space, gas, electric and nuclear was pretty
broad.
Will Abrams: Are there skills that you feel are not as well represented on the board that
you think should be there?
Mr. Johnson: There's a good question I'm not gonna answer. My answer
is that Chair Nora Brownell will be available, and her testimony covers a number of these
topics, and I think she'd be a better one to ask.
Will Abrams: Fair enough. Fair enough.
Mr. Johnson: I think they're doing a great job.
Will Abrams: Thank you. So I'm trying to inquire about transferable
skills and to whatever extent you feel like that is really important to have on the board.
So I've appreciated that there are a number of folks who have safety skills from the
utility space or maybe more broadly, the energy space. But I think you know, part of this
is their safety applications from other industries,
whether they be tech or telecom or manufacturing
or other skill sets that are perhaps removed from the day to day business of PG&E
to be leveraged. And I'm wondering to what extent you feel like bringing those in for
some, you know, reorganization might be possible.
Mr. Johnson: I would welcome the addition of safety skills
from outside the industry whenever the board is refreshed. When I got here, we had
a board member who was a high level executive at Alaska Airlines and was put on the board
specifically because of the expertise of safety in the airline industry. He has since
departed, but that kind of different view of the same issues, I think, would be helpful.
Will Abrams: Good to hear you say that. One of those things that comes from the aviation industry
that is leveraged there to a very large extent. as, I'm sure you're aware, is measurement
and management of risk. So everything that goes on an airplane is assessed based on its
risk. Do you feel like that level of risk assessment up and down the infrastructure
is important for PG&E to measure, assess and report out?
Mr. Johnson: I think some level
of oversight assessment, whatever term we're using here, is appropriate. I think it differs
depending on the asset category. The asset location. Not all assets are of the same risk
where the same importance, so I don't think it's...like in an airplane. Everything is really
important, I think is a little different in our space. They all have to have some analysis
and oversight, but I would think it varies greatly depending on what they are and where
they are.
Will Abrams: If the Kincaid fire is assessed and this jumper is shown to be the cause, are
those types of findings that perhaps were not on your radar in terms of assessing risk?
Do they not point to perhaps a greater analysis of risk in the company? And shouldn't a plan
of reorganization be structured around a broader assessment of risk? Because these outliers,
as maybe they would be described prior to events, end up being causes of fires?
Mr. Johnson: I think
the POR, in all of its pieces, including the piece we're here on, is based on a broad
risk assessment platform. I mean, we're not just getting a CRO, in Mr Vesey's testimony, there is
a lot of information about the upgrade to our own risk management systems and how sophisticated
they are. I will say on the Kincaid, you know, sometimes things just break. And here's
why I say that. I don't know. As I said, we don't know who caused the fire, what started
the fire. But that tower was inspected a number of times over the last 24 months by high level
qualified electrical workers and found to be fit for duty, fit for purpose. So I'm not
sure you can ever get to the point where you can identify every risk. There you go.
Will Abrams: So part of that, I think, is a difficult
message to get across to the public, that sometimes things
just break, especially when the company seems to have these things occurring on a very regular
basis. Does that statement not carry with it sort of a lack of recognition
in terms of how that might be perceived in terms of the actions moving forward? In other
words, if things just break, then we move on. But if we assess them, measure them, mitigate
them. Isn't that what the public and the Commission is looking for?
Mr. Johnson: And I think that's what I
said we did at Kincaid. We inspected. We measured. We analyzed and found it to be suitable for
purpose. And I think the short answer to a long question is we cannot eliminate the risk.
We cannot eliminate the risk of fire. We cannot eliminate the risk of equipment failure. We
can mitigate it. We could do everything we can to mitigate it. But you cannot eliminate it.
Will Abrams: At the bottom of Page 1-5 of your
testimony, you state PG&E's dedicated to emerging from
Chapter 11 as utility that safely and reliably delivers affordable and clean energy to your
customers and communities. How many PG&E ignited fires, during a wildfire season,
do you think would demonstrate that you did not emerge from Chapter 11 as utility that
delivers safety?
Mr. Johnson: I don't think there's any way from me to conjure an answer to that question.
Will Abrams: What I'm trying to understand are success metrics. So if this plan of reorganization
is successful, so going into wildfire season, it's no coincidence, right, that June 30th
is a deadline for this plan, and it also happens to be the start of wildfire season. So if
there's a large wildfire that happens, would you say that your plan of restructuring has
failed and the company has failed completely? Or is it two fires? How do you assess
success?
Mr. Johnson: I don't think we have enough facts in the equation. What caused these fires?
Were they are distribution? Were they on transmission? Were they in areas where you
would rather suppress the fire than prevent it and hence get out of PSPS regime in
that area? I just, we will have fires next year, this year, whatever year we're in.
The goal is no catastrophic, no fatal. That's the goal.
Will Abrams: And I'm trying to bring this back to
the plan. I'm trying to understand how we assess and how we look at this plan, assuming
that it's approved and understand it was, how do you assess the plan? What is your
measure of this was a successful plan?
Mr. Johnson: So when Debbie Powell is here, in her testimony,
she has a number of the metrics we will use to determine whether we're making the right
progress on the plan. And then there will be a little more qualitative judgment by me.
Did we have fires? Were they catastrophic? That's not
gonna be qualitative, that's gonna be quantitative.
Is there anything we should have done differently? Could we have done something
differently? That's how I'm going to evaluate them.
Will Abrams: Do you think that those subjective determinations
are enough now? Don't we have to have specific numbers to say, you know, it's no more than
two fires with X number of acres, and those types of things to understand if the plan
was successful?
Mr. Johnson: So I think there are some of those kind of measures in Mr Lowe's testimony.
How many ignitions? And if my memory is correct, I think in the Commissioner's ruling,
there are some references to things like 1000 houses and other specific metrics, so I think
we do have those, and we don't have them yet. I'm confident we'll have 'em by the time we're
through with this proceeding
Will Abrams: on page 1-6, lines five and six of your testimony, you state
that in addition to PG&E carefully considering views expressed by the California's
Governor regarding its prior plan, I would, so you reference his letter on December
13th stating that you have taken his views into consideration. Is that a fair characterization
of how you responded to the Governor's letter on December 13?
Mr. Johnson: Yes, that's fair.
Will Abrams: Are you
aware that the Governor also stated when he sent that letter that he was concerned, quote,
"that this was a sub optimal plan"?
Mr. Johnson: I remember the letter pretty well, actually, it's seared on
my retinas. Whether that particular line is in there, but the idea was certainly
in there. Yeah.
Will Abrams: So are you aware that, before this letter was written, that there was a clause
in the TCCRSA that gave the Governor of the ability to disapprove it? To not approve
the RSA, and that after he expressed his dissatisfaction with the plan, that his ability
to disapprove of the RSA was removed.
Mr. Johnson: Yes, I do know that.
Will Abrams: Do you think that that is
taking the Governors thoughts into consideration?
Mr. Johnson: Absolutely. I think that's why the Governor's
office was okay with removing it. The Governor's office, the Governor's a party to the bankruptcy.
He could have enforced this provision and chose to let it go through. And I think, in large
part, because we were meeting with the Governor's office and working on the issues in his letter.
Will Abrams: So you think that instead of incorporating
his recommendations and suggestions into the
restructuring support agreement that he wanted to have in there, you think that it was taking
his concerns by not changing it and just saying that he can't disapprove it, that is taking
his concerns into effect?
Mr. Johnson: No, I think if you look at the testimony we filed in this proceeding
and bounce it against the December 13th letter, you will find a great deal of fidelity between
the issues he raised and the issues we have responded to. So I think we have paid significant
attention to those issues. The same kinds of issues
have now showed up in the Assigned Commissioner's
ruling, which we will certainly pay great attention to, so I don't think there's
anything nefarious at all here. I think we listen to his views, we worked on them, and we're
still working on them. I think it's common public knowledge that we're doing this. And
so absolutely, we've been working on his views.
Will Abrams: Do you think that the June 30th date for plan
confirmation to be able to access the $21 billion Wildfire Fund, do you think that that
is, in addition to motivating PG&E, as you stated in your testimony, to move expeditiously,
do you also think that maybe puts pressure on victims to sign off on a plan and the CPUC
to sign off on a plan quickly?
Mr. Johnson: I don't think I can answer that for either the victims
or the CPUC. I mean, we are here. There is a schedule that has been published that
gets us, assuming everything goes well, to June 30th. My own view of the June 30th date is
a little different, and again, complete speculation.
I think it was put in the law to make sure that
the victims got paid and got paid promptly and certainly changed the negotiating leverage
of the people who are gonna pay the claims. So that's what it looked like to me.
But whether it's squeezing people, here we are in a proceeding.
Will Abrams: Yeah, and to that point
of squeezing people on, Page 1-6, Line 15 of your testimony, you state it is PG&E's intent
to fully and fairly compensate all eligible wildfire victims, and I want to understand
a little bit more what you mean by fully. What do you mean by fully?
Mr. Johnson: That the claims
are paid according to what the bankruptcy court and all the committees and everybody
else agrees is full payment.
Will Abrams: So I guess what I'm trying to understand is for the victim
who's trying to understand and assess this plan to understand if they're gonna be able
to rebuild their home, is fully, if you're, the cost of your house is a $1,000,000, do
you think that fully is $1,000,000 to pay for the rebuilding of their home?
Mr. Johnson: Not to be, well, I think fully means
whatever the Bankruptcy Court process provides as an
agreed upon plan that everybody agrees to. That's fully, by definition, in the court.
Will Abrams: I appreciate that. But you know, someone,
as you can imagine, who's reading your testimony
and wants to understand what PG&E stands by and to say that fully and fairly compensate
victims. So you're saying that that's a legal term that you're, fully is a legal term that
you're using and not a colloquial term of what fully might mean?
Mr. Johnson: I think it can only
mean what the bankruptcy court concludes it means.
Will Abrams: So what you mean by it is your deferring
to whatever comes out of bankruptcy? That's fully enough. So if a person whose home is
worth a $1,000,000 they get paid a buck because that's what the bankruptcy court determines,
you would still consider that fully--
Unknown1: Objection (inaudible from off mic).
ALJ Allen: Sustained. Can you, I think you've gotten
the answer you're going to get. You can move on to the
next line of questioning, please. Actually, let's,
Mr. Abrams, let's do a time check. Where you at in, kind of like, proportion of your cross?
How far are we through here?
Will Abrams: I would say I'm about halfway through.
ALJ Allen: Okay, go ahead
and continue to be concise. Thank you.
Will Abrams: Thank you.
Let me get a gets a little more
around this question of fully and to see if the still holds true. If there's a child who
was injured from a PG&E caused wildfire and they have a disability because of it,
what would you say fully compensates that child for that injury sustained?
Unknown1: Ojection.
ALJ Allen: Sustained. Please ask
another question.
Will Abrams: Yeah. You know, I think that this is very pertinent to not only how
we look back, but also how we look forward. Because if there isn't accountability moving
forward for the actions, and fully is anywhere from a dollar to whole, then I think we have
some real problems moving forward. But I'll leave it there.
ALJ Allen: Mr. Abrams, I think fundamentally
that question was impossible for this witness to answer. And that is why I sustain the objection.
So, this is the President and CEO of the corporation, and he has expertise in certain
areas. If you wish to make arguments about what fully and fairly is, you can make those
arguments in your brief.
Will Abrams: Understood. Thank you.
On page 1-6 of your testimony, line 16
and 17, you state PG&E has now entered into settlements as embodied in the corresponding
restructuring support agreements. Given that statement, that these embody the settlements,
I would like to ask you a few questions regarding those agreements and the objections that I
filed regarding those RSAs. Have you been following the bankruptcy proceeding?
In terms of the changes to the restructuring support agreements?
Mr. Johnson: I've been following the
bankruptcy proceeding mostly in terms of what is decided, not what is argued. So I'm not
reading the pleadings, I'm not, when something happens, I get a report on that.
Will Abrams: So given
that you stated in your testimony that these restructuring support agreements are embodying
the plan, do you feel like they need to incorporate a measurement of risk?
Mr. Johnson: I think the testimony
says that the settlements are embodied in the RSAs.
Will Abrams: It says the settlement as
embodied in the corresponding restructuring support agreements. I'm just pointing to line
16 and 17 of 1-6.
Mr. Johnson: I'm confused. The question you asked me was about the plan of reorganization,
not the RSA or the settlement. So?
Will Abrams: Right, So I'm pointing to the fact that in your testimony
you indicate that the restructuring support agreements embodies the plan. So does it embody
the plan?
Will Abrams: Objection on the states as testimony.
ALJ Allen: Let's just get clarification. Do you understand
the question, Ms Johnson?
Mr. Johnson: I think maybe I understand the question
we're trying to get to. Shall I answer that one?
ALJ Allen: Yes, go ahead.
Mr. Johnson: If the question is, should we have risk metrics in
the RSA, the settlements, or those things, then the answer is no. I don't think we should.
I think they belong in this proceeding. And they're in this proceeding in various pieces
of testimony to be supplemented in conjunction with the assigned Commissioner ruling of, I think.
last week.
Will Abrams: So in the restructuring, in the plan of reorganization, it does describe the
risks associated with the noteholders and provides a substantial amount of real estate
describing how those investments are secured and how those risks are taken care of. And
I guess I'm pointing out that that's in contrast to no description of risk associated with
what is brought up through the TCCRSA, and the risks exposed to victims. Why
is it that risks in the plan are addressed regarding the noteholders, but not the victims?
Mr. Johnson: I don't know the answer to that question.
I know that the risks, the company are, I would
say encyclopedicly catalogued in our security documents, but I don't know, the question you've
asked, I don't know the answer to.
Will Abrams: So as the CEO having responsibility to shareholders,
I'm assuming that if this plan of reorganization goes through and this trust has 21% of the
shares, that you will have a fiscal responsibility to that trust and the victims whose lives
are somewhat depended on that trust moving forward. Is that a correct statement?
Mr. Johnson: You
have asked a legal question that I don't know the answer to. Obviously, as the CEO of a
publicly owned company with shareholders, I have a fiduciary obligation to shareholders, right?
I don't know how that translates into the trust, and hence whoever is managing the trust,
and paying the victims.
(inaudible from off mic)
Mr. Johnson: And paying the victims, selling the stock and paying the victims. I'm
sorry. I just don't know how that works.
Mr. Johnson: Okay, So just to clarify so you don't know
if you will have a fiduciary responsibility to the trust that holds 21% of the shares.
Mr. Johnson: Yes. I don't know the answer that. I know I have a fiduciary obligation today
to the shareholders, but how that translates into the question you've asked, I really
don't know the answer to. But there is an answer to this question that I'm thinking
we'll be finding here pretty quick after the hearing ends today.
Will Abrams: So help me understand
that, in contrast, then what other large shareholders
would receive to assess their financial risks.
So if a large investor wanted to purchase a large block of PG&E stock, what
typically would be provided by the company?
Unknown1: Objection. This is beyond the scope of the
testimony.
Will Abrams: It's in his testimony.
ALJ Allen: What are you trying to get to with this, Mr Abrams?
Will Abrams: I'm
trying to get to the stability and financial security of PG&E.
ALJ Allen: I think you're
kind of wandering a little farther afield from that. If you can focus down a little
more that would be useful. I mean, I think a lot of what's, and some of this witness's prior
answers, a lot of this is addressed by the securities laws, and this is not their securities
attorney. So there is a lot of coverage of SEC rules and regulations, so if you could
focus on the point you're trying to get to a little more directly, that'd be appreciated.
Will Abrams: So a prospectus. So do you feel that the
public who is now taking on a much larger stake in
PG&E and victims should be given a prospectus on their risks the same way a large shareholder
might?
Mr. Johnson: So let me say a little bit about this. We tell all investors the same thing.
There is no category of investor who gets special or additional knowledge. If you own
one share or one million shares. This is a function of Rule FD, full disclosure, we
cannot favor investors. So if I was going to make an investment of one share or two
shares, I would go look at our recent most recent SEC filings, and I'd look at the
risk statements and I'd look at the financials. But that's how we do it with everybody. We
don't have special information. We don't, we might go on a road show and talk
to big investors. All public information. So whatever we know and believe is on the
website in our financial documents.
Will Abrams: Would it surprise you to know that victims who are
now being receiving text messages to sign off on a plan that hasn't been baked yet,
that they have not been provided with the prospectus.
Mr. Johnson: I have no idea what the answer to
that is.
Will Abrams: Are you aware of what the concessions
were to the noteholders previously? The ad
hoc committee of unsecured noteholders. What concessions were made to them to allow them
to drop their competing plan?
Unknown1: Objection.
ALJ Allen: Sustained.
Will Abrams: Would it be surprising for you to know that
the concessions that the noteholders received for them dropping their plan were asset liens
to ensure that their stake in PG&E was more protected?
Unknown1: Objection.
ALJ Allen: Sustained.
Will Abrams: Let me ask a question regarding the short
term risks associated with PG&E. Should the Commission
and the public be concerned that the investors who are mitigating their risks, including
fund managers, bondholders, noteholders and others are positioning themselves for exits
if things don't go well?
Mr. Johnson: I don't know they're doing that. I don't know that people
are positioning for exits.
Will Abrams: So are there more? Let me ask this question. Are there
more asset liens than there were prior to the plan of reorganization?
Mr. Johnson: I do not know
the answer to that.
Will Abrams: You do not know?
Mr. Johnson: No I don't.
ALJ Allen: Mr Abrams, are you asking about now
or after the plan of reorganization is in place?
Will Abrams: I'm asking about the impacts of the
plan of reorganization on PG&E's financial future.
ALJ Allen: I understand that. The question you asked,
I wasn't sure of the time you asked. Are there more asset liens now than before?
Will Abrams: Incorperated
into the plan of restructuring so that, upon exit, there will be investors who have financial
exit routes that weren't there before?
ALJ Allen: With that clarification. Mr. Johnson, do you
know the answer to the question?
Mr. Johnson: I do not. Our CFO, Jason Wells, will be here. And
if anybody knows the answer that I assume he will, but I do not.
Will Abrams: Towards the bottom
of page 1-7 of your testimony, you state upon the plans effective date, all power
purchase agreements, renewable energy power purchase
agreements and community choice aggregation
servicing agreements of the debtor shall be deemed assumed. Assuming these agreements
will continue PG&E's commitment to providing energy from renewable sources and further
evidence of achieving the state's climate goals in accordance with the choices of local
communities. I was hoping you could help me understand this. How would these agreements
be affected with, say, another wildfire this season?
Mr. Johnson: Depends on the fire. The cause
of it, when it happens, have we emerged from bankruptcy? Are we still in bankruptcy? It's
hard to say without more facts.
Will Abrams: So would you say that, is it a fair assessment that thes
agreements are contingent upon what occurs this wildfire season in terms of the amount
of fires and the destruction of fires?
Mr. Johnson: I don't think I'm saying that. Actually, I don't think
I understand the question.
Will Abrams: Okay, I'm just trying to understand myself because part of
this is a getting underneath what the commitment is here. So what I'm trying to understand
is that you indicate this path, right? And so part of the Commission's job is to ensure
that you're on a path to the California's climate objectives. And so what I'm trying
to understand is are you still on that path if there's another wildfire, or do those agreements
go south?
Mr. Johnson: So what we're trying to say here is that in bankruptcy, sometimes you have
the opportunity to shed contracts, to revise them, whatever, and we have not done that here,
particularly on the CCA servicing agreements and the renewable PPAs because we support the
California energy policy. I think we've been amongst the greatest supporters and the greater
supporter of this issue across the country. 1054 says that our plan has to demonstrate
that we can continue to be supportive of these climate goals. So this is simply a statement
saying we had the opportunity or the option in this bankruptcy to do something with these,
and we chose to leave them alone and proceed ahead. Now what happens if we have another
fire? Again, are we back in bankruptcy? If we're not, then these contracts are affirmed
and assumed and nothing should happen to them.
Will Abrams: So I'd like to lift up the lens a
bit here regarding the plan of reorganization and try to understand its direction. So help
me understand sort of what is inspiring about PG&E and about how you plan to move forward.
So part of what I understand in terms of working with an organization and adressing new challenges
and taking on new innovative approaches is that there needs to be a sense of of innovation
and a sense of a corporate culture that's going to reward that type of behavior. Can you talk
about that in terms of how you inspire?
Mr. Johnson: So we might have a little semantic difference
here because I don't believe I can inspire anybody. But I believe that perhaps I can
create the conditions where people will inspire themselves. And instead of vision or innovation
I think the most important thing in an organization for people is purpose. I actually
think the three key things in driving performance, you can't drive performance, but purpose, mastery
and autonomy. If you want to go places, those are three things to worko on. And for us, purpose.
I mean, where we're going to focus its purpose. Why do we exist? We exist for one reason.
To serve customers. The privilege of serving the public. That is, so, in many senses, the
transformation here is going to return us closer to our roots of being a public utility
that is proud to be in service of public. And if you think about it, that's not a bad purpose.
I'd get up in the morning for that. In fact, I do.
Will Abrams: Absolutely. And part of an evaluation
of this plan of reorganization, I think is comparative to how other companies have
turned around at points in their history, where they've managed to chart a new course.
Can you talk a little bit about examples that you look to for organizations that have been
in trouble and that have turned around? And what qualities do you feel are represented
in your plan of reorganization that are seen in those examples?
Mr. Johnson: So I've read about a number
of these examples, but perhaps more pertinently, I've done this twice before, turned around
companies that were lagging into pretty good performers. And the simpler you make it, the
better. The fewer moving parts you have in the strategy, the better, and I'll go back
to you got to start with a purpose. Then you have to align people around the purpose.
And the alignment is probably the hardest piece of this because you have history and
culture and people who have done it a different way 100 years. But once you have alignment,
you can now get engagement, you can get people behind this idea and then you go to work.
You set targets. You set financial targets, headcount targets. Whatever the targets
are you need to meet. But, in many ways, this is like the most old fashioned of management
things. I mean, this is just like managing your business, which is not that exciting.
Will Abrams: And what companies would you point to? I mean, you know, what corporation
would you point to that exited bankruptcy in a way that you feel like this plan is oriented
towards>
Mr. Johnson: So I didn't study people coming out of bankruptcy. I'm sorry. Maybe
I should. Maybe I'll do that later. But that's a good point, actually.
Will Abrams: Yeah, just,
you know, in preparation for this, I was struck by some of those examples. I'm going to turn,
just, I guess, to the last part of my testimony here, I guess to specific concerns
for the public, which is reflected in this document. So part of what you mentioned here
is that fairness is first and foremost in your mind for victims. And I think that
I've been going through the letters that have been sent into the bankruptcy court with concerns
about the plan. Have you been aware of these letters with the public concerns about this
plan and what it means for their future?
Mr. Johnson: I have heard about the letters. I have not received
them nor read them.
Will Abrams: Do you know how many roughly how many letters have been sent into
the courts with concern?
Mr. Johnson: I do not.
Will Abrams: So are you aware of how many letters have been sent
to the court in support of the plan?
Mr. Johnson: Similarly, No.
Will Abrams: So would it surprise you to know that
there's been hundreds of letters from victims sent into the court and I'm not aware one
of them that was in favor of the plan?
Unknown1: Objection. No foundation.
(inaudible from off mic)
He doesn't know anything about the letters. There's no foundation for the question.
(inaudible from off mic)
ALJ Allen: And he doesn't know.
Will Abrams: So how does an executive get a sense of the impact on customers and
victims who are potentially going to be victimized again by the plan? How do you get a sense
of what they're feeling about this plan? Whether it's fair, if you don't look at the letters,
don't have any sense of the number of letters and haven't looked at them?
Will Abrams: Mr. Abrams, please
moderate your tone. Focus on a narrow question, please.
Will Abrams: How do you get a sense of the victims'
interests?
Mr. Johnson: If I was asking you questions, I would ask you do you know how many letters
I get? I get a lot of letters, not about the plan, but about what this company has done.
What has happened. I get a lot of them. So I think I have a general sense of anger, the whatever.
Now, as I said earlier, I'm not in charge of that plan. This is a process in the bankruptcy
court. This is how it works. And I do not have the power to change it. And obviously
a lot of people support the plan because there's a restructuring agreement around it, and it's
been approved by the bankruptcy court. So somebody approves it. Some level of participants
must be happy with it.
Will Abrams: So how do you ensure that your customers are happy with the plan?
Mr. Johnson: I don't think I could make them all happy with the plan.
Will Abrams: But what is your,
let me restate the question. What are the communication vehicles that you use to get
them comfortable with the plan and the fact that they may be holding 50% of their future
in PG&E stock?
Mr. Johnson: So I believe my role in this is to get them comfortable with what
is in this testimony book here. I don't think it is my role or the company's role to get
comfortable with the procedures of the United States Bankruptcy Court. Similarly, I don't
think it was our job to make people comfortable with the United States District Court. There
are processes. This is a system of laws. This is how it works. You may not like it. None
of us might like it. How it works.
Will Abrams: So in one of the letters sent to the court, Lisa
Williams states--
Objection, Your Honor. There's no foundation to question this witness.
ALJ Allen: I'm going to let him finish the question, he
has also provided at the exhibit, I believe
Abrams-X-$, letters to the court. Are you referring
to a letter that's part of a Abrams-X-4?
Will Abrams: Yes, I am.
ALJ Allen: Okay, go ahead with your question.
Will Abrams: In a letter from Lisa Williams, it
states I have included pictures representing what life
is currently like in Paradise. These pictures include men and women standing in a long line
on a cold January day for free food at a church, men and women standing in a long line on a
cold day in January. How do you respond to these victims who are looking to you to
understand your fairness, understand the company's fairness, and understand that they're going
to be rebuilding their lives? Whether that's purchasing a home or rebuilding home, that
addresses those concerns.
Mr. Johnson: And my answer to this is we have in addition to all the things
that we will do, there's $25.5 billion going to pay these claims, and they are administered
by the people who represent these victims. I do not represent these victims, but somebody
does. I don't know if it's an individual lawyer or the Tort Claims Committee. I don't know.
But as I said, somebody represents these people. And there's enough of a agreement about this
that the bankruptcy court approved it.
Will Abrams: So related to--
Mr. Johnson: Wait a minute.
Will Abrams: Sorry. Go
ahead.
Mr. Johnson: So there's always
gonna be objections, right? So what are we, are we gonna have, we're gonna say the
bankruptcy court, you ordered this, but we're not doing it. I tried that once. I was in
jail for two days, held for contempt. I'm not doing it again. Just you know, I can't.
I can't defy a bankruptcy court or federal district judge. I just cannot do it.
Will Abrams: The reason
why I'm asking is that this goes to the corporate culture, which the CPUC has purview to regulate.
And so if the public feels that the corporate culture looks at fairness as whatever the
SEC determines is fair and whatever is full treatment for victims is whatever the
bankruptcy court determines, where does that leave corporate responsibility? Where does
that leave a culture for safety? If you are stating that as a corporation, sorry, this
has nothing to do with us?
Mr. Johnson: I am proud of a corporate culture
there says We abide by the
law, which is what I'm saying to you here, we abide by the line. If you want to deviate
from that practices a social norm, we're gonna be in serious trouble in this country.
Will Abrams: So would you say then, that the PG&E
culture is governed by whatever is legal but above
and beyond that, in terms of ethical treatment of customers, ethical treatment of victims
above and beyond that is not the corporate culture of PG&E?
Mr. Johnson: I'm not saying that.
I'm saying as a baseline, we'll obey the law. We've had some compliance issues. So for
us to say we stand by the law is a good thing. But I do not agree with your assessment of
what is ethical, what is moral or those things.
Will Abrams: I haven't assessed that. I'm just asking what
you see as ethical.
ALJ Allen: Hold on. Stop. Okay, We're going nowhere with this right
now. I think you can make this in an argument. I think you've gotten a number of different
answers from Mr Johnson. And we are not relitigating
what the bankruptcy court has done. There
is what the Commission has with this. I know you're trying to relate this to PG&E's
safety culture. I think you've gotten the answer you're going to get. Do you have other
questions to ask?
Will Abrams: I do, Your Honor.
ALJ Allen: Go ahead with those, please.
Will Abrams: There's a letter that
was sent into the court by a Tina Wrestler that states that adults and people with disabilities
have been adversely impacted and disproportionately
impacted by the fires caused by PG&E.
How do you ensure, other than what is dictated to you by legal terms, how you do outreach
to people with disabilities?
Mr. Johnson: So, and we learned a lot about this in last year's PSPS
events. We actually make a tremendous effort to reach out to people with disabilities, medical,
baseline people, access needs, all of these people. We have a multi-step program where
we try to reach out. If we can get them electronically,
we actually go to their house. We have partnered
with the local communities, the counties, the county emergency operations folks to make
sure that we know who these people are and where they are and we can get notice to them.
We are making contributions and other things into not for profit, non-profit organizations
that apply, that give out batteries for wheelchairs
and other medical devices. So I think we're
doing a lot of work in this area
Will Abrams: And part of the reason why I'm bringing
These letters onto the record, and I think there are so important to bring in is that
largely, in these hearings and in these discussions, the victims are not represented. And,
there has not been outreach to the public to get their sense of the plan. And I
think it's important as the California Public Utilities Commission that this information
is read into the record and that questions are asked from victims. James Cox sent a letter
into the court stating that he was concerned that there was not coordination with the Red
Cross with wildfires.
ALJ Allen: So, Mr Abrams, my understanding is these are all letters to the bankruptcy
court for the bankruptcy court to consider in their process. Is that correct?
Will Abrams: No, they're not, Your honor. These air
letters from victims with concern about the plan of
reorganization, which is what this proceeding is focused on, and whether it will provide
a safe future for them as they move forward. And I just want to make sure that the victim's
voices are hear.
ALJ Allen: What I'm seeing in your, um, Abrams-X-4,
Exhibit C, is I see a letter to the honorable
Judge Montali. Good morning, Honorable Judge Montali. This one is to whom it may concern.
Many of these seem to be addressing the bankruptcy. Honorable Dennis Montali,
honorable Judge Montali. I do not want to re litigate the bankruptcy proceeding.
Will Abrams: And I'm not looking
to do that here. The plan of reorganization is the bankruptcy proceeding. All of the RSAs
that are mentioned are in the bankruptcy proceeding. All of the relevant documents
in the plan is at the bankruptcy proceedings. So it
would only make sense, if I'm a victim concerned
about the impacts of this that I would send the letter there. It doesn't mean that because
those documents, amongst all the other ones that we're looking at, are sent into the bankruptcy
proceeding. I still think they're relevant here, just like all the other documents from
the investors and all of the other folks that have stakeholder stake in this decision. The
victims do, too.
Will Abrams: So, Mr Abrams, you have marked an exhibit that has the letters.
Will Abrams: Yes,
ALJ Allen: It appears
that you are trying to lay a foundation for that. If you've laid an adequate foundation
that these are letters, that they're relevant, you can move this into the record, and then
you can site to this in your argument. I think that might be more effective than reading
every letter out loud or reading a number of letters out loud to Mr Johnson. So, in
terms of the interest of time, you can seek to move this in, rather than reading a series
of letters addressed to the bankruptcy court.
Will Abrams: So what I'm trying to do is what I'm trying
to do is ensure that the questions that victims have regarding the plan are asked and answered
by the PG&E executives because I think that the public is looking to understand
the answers to these questions, and I think it's, again--
ALJ Allen: Then what you need to do is ask
the narrow question. If there's a narrow question that someone asks, that you wish to
ask Mr Johnson, that's fine. This is not your time to testify. You have filed testimony.
You are allowed to ask Mr Johnson questions, so please focus the questions. If you want
to paraphrase one of the letters, go ahead and do that. But this is time for questions
for Mr Johnson.
Will Abrams: Thank you, I will try to keep them very specific. Carrie Lockhart,
in her letter to the court, stated, I left a job I loved doing mediations for Butte
County Superior Court because we had nowhere to live. How is PG&E making sure that
if she's living around PG&E lines that she is rebuilding or purchasing a home that
she can has have a level of safety moving into this wildfire season?
Mr. Johnson: Well, we have an
extensive rebuilding programme in Paradise, so if she wants to live in Paradise, we will
provide service there in a very good fashion. We have a number of enhancements to our wildfire
mitigation plan that are in Debbie Powell's testimony
that we filed the plan last week, the week before,
and so I think we have a number of enhancements that will make it safer and be a good place
to start.
Will Abrams: Michelle Barker, in her letter to the court, pointed to the issue associated
with homeowners insurance. As I'm sure you're aware, getting affordable homeowners insurance
or just getting insurance at all, given the PG&E fires is becoming more and more difficult.
So as the Commission looks to assess the impacts on customers in the public associated with
this plan, what have you done to look to ensure what you are doing makes sure that
we have insurance for homeowners in the state?
Mr. Johnson: Well, we are paying $25.5 billion
to resolve all claims, and some of those proceeds, I think, would be used to purchase insurance.
Will Abrams: So part of what the insurance companies
look at is they have a very measured approach of
how they assess risk. They're looking to insure, to measure, to understand if they
can insure home or not. How are you working with them to ensure that they, when they
measure risk, they take into account your mitigation efforts?
Unknown1: Objection, Your honor.
Availability of property insurance is not within the scope of this proceeding.
ALJ Allen: I'll let the witness answer. If he knows.
Mr. Johnson: I really don't know the answer to that question.
Will Abrams: Would
you say that part of what needs to be in a plan of reorganization to ensure that PG&E's
financial future is tied to the customers and ratepayers is to make sure that that relationship
is built upon and that you are working collaboratively
with them as a company to ensure that we have
insurance in the state?
Mr. Johnson: No, I would not say that. I don't think that's our role at all
to be in the insurance business. We're partnered with people in the insurance business.
Will Abrams: Are
there other community partners that you have? That talk to the broader culture?
Mr. Johnson: We have a number
of community partners who, mostly NGOs, not for profits that we do many programs with, yes.
ALJ Allen: Mr Abrams. I'm gonna want to use the last five minutes in case we have any
administrative item. So if you could do your last question, please.
Will Abrams: Let me just ask. I guess
one last question related to these efforts. What can you do as an executive to ensure
that these issues that victims are bringing up that dramatically affect their lives are
at the forefront of how PG&E moves forward with the plan of reorganization?
Mr. Johnson: So I hate
to inject myself personally into this story, but I'm going to. So I've been to Paradise
five times. And one of those trips, at the request of Judge House, we took a bus
tour and we listen to 911 tapes and watched video and looked at remains. So if you think
I am unaffected by this, by the victims, in this treatment, you're wrong. This has
affected me deeply. And so my point is, I'm gonna do everything I can to make this right.
There are some constraints. I don't control the courts of the United States, but I'm gonna
do everything I can to make this right. That's my answer to your question.
Will Abrams: I appreciate that.
I hope that that compassion that you just showed is translated into the actions of PG&E.
Thank you.
ALJ Allen: Thank you, Mr Abrams. Thank you, Mr Johnson. Let's go off the record
for a second and touch based on witness timing and scheduling.
(OFF THE RECORD)
ALJ Allen: On the record. Tomorrow morning, we'll
start with Mr Johnson again. For now, we will be continue to start a 10 AM. The first cross
for Mr Johnson will be from the Center for Accessible Technology. We will try to get
through Mr Johnson first, and after Mr Johnson will be Mr Plaster. And we'll figure out
who's next after that. But it would be another PG&E witness. Are there any other
matters that we need to address today? Do we have any resolution on any of the issues
we discussed this morning? Confidentiality issues?
Unknown2: I need a overnight to research this
question. I'm hopeful we'll resolve it in the morning.
ALJ Allen: Okay. And then also the nature of the clarification
document.
Let's discuss that in the morning as well. And then I'll consider
the ACR scheduling issues and, actually, if parties, if parties have some sort of consensus,
we can address that or have more discussion on that.
Unknown2: I was going to suggest
we might get together tomorrow morning. (audio cuts out)
ALJ Allen: That would probably be a good idea. Because if the parties
can come to something that's close, that's workable for me. The main thing I'm interested
in is I don't want anything coming into me after that March 26. So, and I have limited
availability to move hearing dates, so I will have to check hearing room availability. So
if you want hearing dates on other than March 18-20, I will have to confirm whether they're
available or not. But I will do so once. I know dates. Ma'am in back.
Melissa Katznitz: Melissa Kaznitz, Center for Accessible Technology.
I have a procedural question which I can ask on the record or off.
ALJ Allen: We're on the record. Go ahead.
Melissa Katznitz: I'd like to request that someone, presumably
PG&E, send emials to the service list on what is happening
with witness order, so those of us who aren't available to
spend each day in the hearing room can be advised as to
just who's coming next and have the best understanding
available of what to expect for scheduling.
Weisman: We'll be happy to do that.
ALJ Allen: Okay. Thank you. Mr. Weisman.
Mr. Finkelstein?
Finklestein: (inaudible, no mic)
ALJ Allen: I might revise it slightly, but yeah, I was kind of hoping the parties were going to do
one. Didn't happen this time. So, Miss Herbert did that for me. So it is, in fact, very
useful. Yeah, we will. I'll send around. We'll send around a revised version of that with
it has the cross estimates on it. Mr. Fox?
Fox: Your Honor, the question that you asked
Mr Weisman earlier about confidentiality is that with respect to the
confidential version of the (mumbles).
Weisman: (mumbles) And I was just commenting that over the tonight,
we're gonna figure out the, whether there's a need to maintain confidentiality of the
portion of the joint CCA testimony as well as the A4NR testimony. I still report back
on that in the morning.
Thank you, Mr Weisman. Miss Kelly?
Miss Kelly: Yes. Thank you, Your Honor. I had one last question on
hearing transcripts, and when they might end up being available, given the expedited timeline
of this proceeding.
ALJ Allen: That's a good question. I would defer that to our reporters. I don't
know that I have a precise answer for you. Maybe we can get you an answer in the
morning.
Miss Kelly: Thank you very much.
ALJ Allen: Okay.
Anything else we need to address today? Ookay. Thank
you very much. We are adjourned until 10 AM tomorrow.