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-: At this time we will call to the stand Ms. Brownell.
Please stand and raise your right hand.
Do you solemnly swear or affirm the testimony
you are about to give, to be the truth,
the whole truth and nothing but the truth?
Ms. Brownell: I do.
-: Thank you.
Please be seated and state your name and place of business
for the record.
-: My name is Nora Mead Brownell.
My place of business currently is at PG&E in California.
Judge: Thank you.
Mr. Weissman.
-: Good afternoon, Ms. Brownell.
What is your position at PG&E?
Ms. Brownell: I'm the chairman of the board
of the corporation.
-: That would be PG&E corporation?
Ms. Brownell: That's correct.
-: Do you have before you what's been marked
for identification as PG&E One?
Ms. Brownell: I do.
-: The volume of of prepared testimony?
Ms. Brownell: I do.
-: And within that volume are you sponsoring chapter four?
Ms. Brownell: I am.
-: Do you have before you what's been marked
for identification as PG&E or,
just a volume of exhibits for your testimony?
-: Yes, oops. Mr. Weissman: Excuse me.
Within PG&E, you have before you,
what's been marked for identification as PG&E four?
-: Yes.
Mr. Weissman: Okay.
Within PG&E four, are you sponsoring
exhibit one to your testimony?
-: Yes.
Mr. Weissman: Do you have before you,
it's been marked for identification as PG&E five?
-: Yes.
Mr. Weissman: And within that volume, that comprises
exhibits two through seven of your testimony,
which you're sponsoring, correct?
-: Yes.
Mr. Weissman: and you have before you,
what's being marked as PG&E six?
-: Yes.
-: And within that volume,
that contains exhibits eight through 23 to your testimony,
which you're also sponsoring, correct?
Ms. Brownell: Yes.
-: You have before you, what's been marked for identification
as PG&E seven, which contains supplemental testimony,
including a rota?
Ms. Brownell: Yes.
-: And within volume, does that include the, a rota to,
or testimony in chapter four?
-: It does.
-: So I've just identified the
portions of the exhibits that you are sponsoring.
Was that, was that material prepared by you,
or at your direction?
-: It was.
-: And do you adopt that as your testimony?
-: I do.
-: Is it true and correct
to the best of your knowledge and belief?
-: It is.
-: Your honor, the witness is available
for cross-examination.
Judge: Thank you Mr. Weissman.
Let's be off the record briefly.
Does anybody have any cross-examination
exhibits for Ms. Brownell?
Okay, great.
Let's be back on the record.
At this time we'll have cross-examination by
Ms. Sheriff for CLECA.
Ms. Sheriff: Thank you your honor.
Good afternoon Ms. Brownell.
-: Good afternoon.
-: My name is Nora Sheriff,
I represent the California Large Energy
Consumers Association, or CLECA.
They are large industrial customers
of PG&E and Southern California Edison company.
At page four-eight of your testimony,
in what's been marked for identification,
exhibit PG&E one, you discuss director independence.
Am I correct in understanding that you mean
the general idea, is that the board
shouldn't be too close to management?
-: I think it's a board, owes its responsibility
to the corporation, shouldn't be too close to management,
shouldn't be too close to anyone with
vested interests in the company.
I think it's pretty well defined
in the New York Stock Exchange rules.
-: Okay.
And on that same page, you also talk about
the committee of board members being able to quote,
"Require reports from management" end quote.
Do you agree that management shouldn't be the
only source of information for the board?
-: Absolutely.
-: Okay, so having a separate source of technical information
and evaluation would improve the independence of the board?
-: It would improve the independence and it would expand the
information that you use in decision-making,
and in fact we do have reports from technical experts,
including the experts by, hired by the CPUC, North Star.
-: Okay.
Other than North Star, did those technical exports,
experts report to the board,
or do they report to management of the company?
-: They report to management, but the board has
unfettered access. -: Okay, thank you.
At page four-32, you reference public safety
power shut off events,
and the utilities worker safety.
Are you aware of the potential for calamitous impact
to worker safety, should a complex industrial site
suddenly and with no notice lose power?
-: Yes I am.
-: Are you aware of the potentially hazardous environmental
impacts that could occur in such a situation?
-: Yes I am.
-: Are you aware that some industrial customers
in PG&E's service territory lost power
due to the October 2019,
public safety power shut off events,
and had no notice multiple times?
-: I've read that, I'm not aware of it personally
and didn't see it at the time, but it is certainly possible.
-: And are you aware that those industrial customers
who lost power multiple times,
with absolutely no notice from PG&E,
did not see an improvement in PG&E's execution
of the fall 2019, PSPS events?
-: I'm aware that we've had a number of complaints
about our notification and communication,
and we're working very hard to improve that.
-: And as you said earlier,
you're aware of the potential danger
to worker safety and environment for this?
-: I am.
-: What do you think can be done to make sure
that those events of fall 2019,
and the risks they pose to worker safety at industrial sites
and the environment, do not happen again in 2020.
-: I think we're taking a number of steps,
and recently reviewed the wildfire safety plan,
that has been submitted,
in addition to the other activities.
First and foremost, our notification system
has to be better, has to be more accurate,
and we've taken considerable steps to do that.
Secondly, the work on hardening our systems
vegetation management and all the other sectionalization.
Geo-tagging our lines will give us better information
and allow us to manage those with smaller scope
and hopefully shorter duration.
Sorry. Ms. Sheriff: Excuse me,
I only have 5 minutes. -: Go ahead.
Ms. Sheriff: And I just have one final question.
-: Sure. Ms. Sheriff: And you can
expand on redirect with your council.
Do you think there should be a targeted focus effort
for large power industrial customers,
because of these additional risks that they see?
Attorney: Question acquitted.
-: In terms of making sure that the
2020 public safety power shut off events
do not pose the same risks to large power customers,
with complex industrial sites, where there's concern
over worker safety, and hazards impact to the environment,
should a sudden loss of power occur with no notice.
Do you think, Ms. Brownell, that there should be
a focused effort at those large power customers?
-: I absolutely believe there should be a focused effort
at those customers, and all at-risk customers,
and there is particular focus on doing
a far better job than that.
So I certainly understand.
Ms. Sheriff: Okay, thank you.
I have no further questions.
Judge: All right, thank you.
Given that Ms. Sheriff needs to leave,
I'm gonna to take the unusual step of saying,
is there any redirect related to her questions?
-: No your honor.
Judge: All right, thank you.
-: Thank you very much your honor.
I appreciate that.
Judge: All right, thank you.
And also for the record, Commissioner Rechtschaffen
has rejoined me on the dais
during that earlier line of questioning.
Next is Ms. Kelly MCE.
Ms. Kelly: Thank you very much.
Good afternoon, welcome.
I have a few short questions,
would you please turn to page four-four
of your testimony?
-: I'm there.
-: Thank you.
So in the first bullet
a board fulfills it's role in a variety of ways,
including, and what does your first bullet there say?
-: "Setting an appropriate tone from the top"
"to actively cultivate a corporate culture"
"that gives priority to integrity, ethical standards,"
"full compliance with legal requirements,"
"professionalism, fair dealing, socially responsible"
"pursuit of a company's business objectives".
-: So does the board of PG&E corporation
currently, set an appropriate tone from the top
to actively cultivate a corporate culture
through this whole first bullet?
-: I absolutely believe that it does,
and it includes getting to know the employees
at the local level, doubling the number of field visits,
actually more than doubling, to 80,
to get a really intense deep dive into
all of the business practices of the company,
and a number of other activities.
So we've tried to be visible, engaged, and knowledgeable.
-: Great, and does PG&E generally have a corporate culture
that gives priority to integrity,
ethical standards, full compliance with legal requirements,
professionalism, fair dealing,
and socially responsible pursuit of the
company's business objectives?
-: I believe we have 23,000 employees
who work very hard to live up to those obligations
and to set a culture of integrity,
and all of the things we list below.
-: So in, on a yes or no basis, does the corporate
culture have those attributes at this time?
-: Yes.
-: So I reviewed many of your,
the exhibits to your testimony,
and you don't need to turn to any of them in particular,
but I did notice that none of them specifically addressed
governance related to investor owned utilities,
or entities in the public good,
so why, why is that?
-: I believe the same rules apply,
whether your a utility, or a chemical company,
although I think with the utility,
or when I worked at a bank, when you have
a regulated monopoly, you have a special obligation,
and I think that's a social responsibility,
as well as a responsible, in a utility,
to deliver safe, reliable, affordable service.
Ms. Kelly: And so is that social responsibility
of fiduciary duty?
-: I think a successful company,
with a board that fulfills
it's fiduciary responsibility,
is committed to all those things, safety for example,
is a platform--
Ms. Kelly: Thank you. -: for fulfilling your
fiduciary responsibility.
Ms. Kelly: Thank you, that's efficient.
And if you turn to page four-19 of your testimony.
-: I'm there.
-: Great, at the second bullet, this relates to
the target of PG&E to have at least 50%
California resident directors at chapter 11 emergence.
-: That's correct.
-: And is that an on going goal and commitment?
-: It is.
-: and have you considered commitments to
having directors within PG&E's service territory?
Or have you evaluated it?
-: We have not yet, we've just begun the refresh process,
but certainly can take that into consideration.
We currently have several members who are in fact
in PG&E's service territory.
-: Thank you.
I have no further questions your honor.
Judge: All right thank you.
Next up is Mr. Geesman for A4NR.
-: I may have been unclear
in interpreting your earlier inquiry about
cross-examination exhibits, I would like to use
a couple of the exhibits that I utilized early this week.
A4NR X3, A4NR X4.
Judge: Okay, let's be off the record.
Do you have copies of those Ms. Brownell?
Ms. Brownell: I don't, I don't believe I do.
Judge: Okay, we'll get those for you while--
Ms. Brownell: Thank you. Judge: We are--
-: I'm sorry your honor.
Judge: That's all right.
While we're off the record we'll do that.
-: I have them.
Okay.
(background chatter)
Man: Does anybody else have one, I'd like to borrow.
Oh yeah, nevermind.
Woman: Thank you.
Judge: All right everybody's got
A4NR3, X3, and X4?
Okay, let's be back on the record.
Go ahead Mr. Geesman.
-: Good afternoon Ms. Brownell.
-: Afternoon.
-: My name is John Geesman.
We met each other years and years ago.
-: We did indeed.
-: Today I'm representing the alliance
for nuclear responsibility.
It's in their interest in this proceeding,
is the impact of the PG&E plan
of reorganization rate payers.
At page four-23, lines 31 and 32 of your testimony,
you describe part of PG&E's fundamental objective,
as "Delivering affordable energy to its customers".
And in page four-25, lines three and four,
you speak of PG&E's mission of safely and reliably,
delivering affordable service.
As a former utility regulator, what do you mean
when you use that word affordable?
-: I think that's a, that's a good question,
because sometimes it's interpreted as eye of the beholder,
and I don't think that's the standard.
I think a utility has operate
as efficiently as it possibly can,
in allocating capital to the appropriate resources,
that will not only provide safe infrastructure,
but infrastructure that is cost-efficient.
I believe it needs to manage its resources,
certainly the resources of both of its rate payers,
very carefully to bring down the costs,
and in fact as part of our plan of reorganization,
we through the finance committee,
but through all of the boards,
are taking a good look at our business processes,
as our procurement at our IT,
to make sure that we are operating appropriately
and efficiently, and I think there's room for improvement.
So we hope to be able to bring down costs
in our operating systems.
Mr. Geesman: Is there any quantitative performance metric
that you believe the board should apply,
in determining whether PG&E's successful
in this affordable objective?
-: I think there are a number of metrics.
One of metrics that the finance committee is using,
working with the CFO, is a monthly report on costs,
on number of employees, on individual budgets,
for which the directors of those budgets,
owners of those budgets, are held accountable
both to the finance committee, as well as the board.
Mr. Geesman: Do those cost reduction steps
that the board has initiated extend to reviewing
utility owned generation, for cost related retirement?
-: We have not yet done that.
I can't say it's not being done.
I have not yet seen any material on that.
Mr. Geesman: But so far it's not been
at the top of your priority list?
-: I wouldn't say it's not been at the
top of my priority list, I just haven't seen any work
that's been done.
There any number of initiatives being looked at
as part of our restructuring.
Mr. Geesman: Can I ask you to take a look at the
cross-examination exhibit A4NR X3?
Which is a table found on page 21 of the company's
February 18th, 2020, form 10K filing.
-: A4NR X3, sorry I got it.
Mr. Geesman: It's a table taken from the 10K--
-: I see.
I'd like you to focus on that 44.6% number
near the bottom of the table,
right above the line that says total 100.0%.
-: Yes.
-: You ought to read the footnotes
associated with that as well.
-: Give me a moment. -: Sure.
-: I'm old now.
I think I have it.
-: Would it be correct to say that in 2019,
PG&E sold off a sizable proportion of it's generation
and procurement portfolio?
-: I'm not entirely familiar with the details of that.
We did...
I don't recall that we have actually.
-: Well 44.6% is a pretty large number, is it not?
-: Yep.
I'd have to really get back to you sir
with the details of that.
-: Okay.
I'm not talking about selling off the underlying assets,
talking about selling off the output.
-: Oh. -: Give it what hours
of electricity generated.
-: Yep.
-: As I read that table, it suggests that
you sold 44.6% of it to the Cal ISO market place.
-: I believe that to be accurate,
but I honestly really would need to
familiarize myself with the details.
-: If in fact that 44.6% was an accurate number,
that would represent a lot of churn, would it not?
-: It would.
-: Do you think it's consistent with PG&E's
affordability objective, to maintain an
electricity supply portfolio, that is that much in excess
of your customers needs?
-: I think that we need to carefully balance that.
I certainly understand the nature of your question.
I do believe it would be responsible to look at that.
-: At page four-27, lines three to five,
you testify that the new boards are working with management
to identify ways to, and I'm quoting
"Achieve greater operational efficiency"
"in financial discipline to enhance"
"value to customers", close quote.
You've been there a little while now,
could you describe any progress you've made on that score?
-: Yes.
We have looked hard and long at our procurement process,
which we found to be inefficient, and reactive,
and I think that can be said for one of the things,
if you look at some of the issues we're confronting,
that the company has been in a reactive mode.
We have reassigned procurement at a higher level.
We've been working with our restructuring experts
to streamline the process,
but at the same time get better transparency,
and more discipline, RFP's that clearly articulate the need
before we signed a contract, as opposed to after
we've signed a contract.
During the initial disasters,
people were just hiring contractors at will,
and we've walked that back so there's better accountability,
and frankly I think more consolidation of information
and data, which has been an issue at the company,
so that we can better manage that process.
I spoke about the work of--
Judge: Ms. Brownell. -: Sorry.
Judge: I'm sorry to interrupt,
when you said procurement, looking at the
procurement process, are you speaking about
procurement of goods and services versus power procurement?
-: Yes.
Judge: Thank you.
-: Thank you for that.
As I mentioned working with the finance committee,
we're trying to look and hold people accountable
at a director level, for managing budgets more carefully.
We're trying to work with the HR folks,
not only to streamline this system
so that we can hire the right people in an appropriate time,
but with less cumbersome bureaucracy, and paperwork,
and more responsive to the business needs.
We have looked at our IT systems,
and are speaking with a very sophisticated data management
artificial intelligence company based in California,
to help us with an overlay of our data,
so that we can get a more integrated picture
of various parts of the business,
including safety, procurement, finance.
-: Page four-29, line 16,
all of the way through page four-31, line 19,
you provide and extended description
of PG&E's two SnO committees.
-: Yes.
-: Can you tell me what the letters SnO stand for?
-: Safety Nuclear Oversight.
-: There's an SnO committee at the utility,
and one at the holding company as well right?
-: There is an SnO committee that is comprised
of the same people that serves both the utility
and the corporation.
-: And you're a member of committee?
-: I am a member.
-: And are you aware that the Commission requires
in a decision of, identified as
D1906-008, PG&E need to supply it,
with non-confidential versions
of the minutes of all board of directors
and SnO committee meeting?
-: I am.
-: Are you aware that controversy over,
when the minutes got sent in,
that I discussed with Mr. Beasley yesterday?
-: I am aware of it, and I can certainly comment,
that has been a huge issue,
since we came to the company we've had probably,
I don't know, four or five times as many meetings,
they completely overwhelm the corporate secretaries office,
so we've done a number of things.
First I outsourced the committee meeting minutes
and the board minutes, to our outside counsel,
it's an expensive solution, but needed to be done,
because we can't afford to get behind.
We've chosen a new corporate secretary,
who is restructuring the department
so that we can be more timely,
it's an embarrassment frankly to the,
to me personally, as well as the company,
and we respect the Commission and our obligations.
We also frankly respect good corporate governance,
and that is not a demonstration.
Mr. Geesman: I really wanna thank you
for being here today.
Those are all of my questions.
Thank you your honor.
Judge: Thank you
Mr. Geesman. -: Good to see you.
Judge: All right, our next cross-examiner is
Mr. Long from TURN.
Mr. Long: Thank you your honor.
Good afternoon Ms. Brownell, I'm Tom Long with TURN.
I want to start by talking a little,
just a little bit about your resume.
I know you're a former state and federal regulator.
Are you a lawyer?
-: I am not.
Mr. Long: Well lucky you.
You're probably a happier person for it.
-: Well one of my mentors was governor Dick Thornburgh
and when I told him I was going to law school he said,
he said, "You will hate law school, don't do it",
so I took his advice, 'cause he's a smart guy.
-: Okay good.
Now you joined the board in April, 2019, is that right?
-: I did.
-: Now what were the key elements
of PG&E's history, that you felt you needed to be
informed about, in order to be an effective board chair?
-: Well first let me say that
having been involved in the energy crisis in 2001,
during my tenure at the FERC, I followed PG&E's history,
and California's history very closely.
We certainly had an onboarding process,
that reviewed all of the major incidents
that had occurred in the recent and fairly past history,
to get a better understanding of the causes,
and of the solutions, again that has
formed some of our views in the things that we needed
to focus on at the company.
We also looked at issues like employee safety,
which is a major concern for me,
the company's been in the fourth quartile
of employee safety for almost 20 years,
that's just not a record we wanna continue,
we wanna see our employee's, as well as the public,
as safe as possible, so I don't know
if that answers your question.
We looked at a lot of things during our onboarding,
and continue to do so.
-: Okay you said that in this on boarding process
you reviewed, I think you said all major incidents
of the past and recent years,
based on what you've learnt about PG&E's safety problems
of the past decade, what is your perception of
the reason or reasons for those problems?
-: It's hard for me to
repeat history when I wasn't there,
but my observations are one,
we need to renew our commitment to safety,
two, we need to and have a revamped our compensation
with a much greater focus on safety metrics,
to capture everyone's attention,
and to get them to focus on the right issue,
three, we need to develop better data
and better datasets, hence our recent consultation with
several firms who do that, third,
I think we need to be sure that our employees
have a better tools, one of the issues with recordkeeping
is that it was paper driven, which increases both the
opportunity for just simple human error,
it's also time consuming and took supervisors
out of the field, where their presence is critical
to managing safety issues.
I could go on and on, but I hope that gives you a picture.
-: But looking at the types of problems that--
Judge: Let's be off the record for a second.
Unlike everybody else, you're too close.
(laughing) -: Yeah okay.
Judge: That might explain (drown out by laughter).
All right. -: Got it.
Judge: Let's be back on the record.
-: Looking at the types of problems that have
taken place in the past decade,
and I'm just gonna go over quick summary of some of them,
there was a problem with the located mark tracking system.
There were problems with recordkeeping,
in both the gas transmission system,
and the gas distribution system?
Yeah see you're nodding your head to--
-: Yes. -: For both of these you've
agreed that there are -: yes, yes I have agreed.
-: They're again problems. -: Yep.
-: The monitor, the federal monitor,
identified problems with enhanced vegetation management
recordkeeping, that right?
-: Yes.
-: Okay.
There were problems with, in the October PSPS events with
the website and communications, is that right?
-: Yes.
-: There were inspections that failed to find
unsafe equipment leading to wildfires,
that right? -: Yes.
-: And again back to located mark,
there was a management failure to correct problems
that were widely known in the organization,
is that right?
-: Apparently, I wasn't there but yes.
-: So to me these, these strike me as a wide-ranging problems
that in a diversity of areas of operations and,
and various aspects of the operation,
so does it strike you that way as well?
-: It strikes me as
a problem with underlying business fundamentals.
I spoke earlier of a procurement process
that was not as transparent, or financially disciplined,
or focused on the right things.
I think I've mentioned our IT systems,
and in fact that is one of the problems with
our record keeping.
I've mentioned technology as a solution to
at least part of the inputs to those datasets,
so you might define them as wide-ranging,
and they certainly are,
but I don't think the solutions are difficult to find.
I think while we're certainly focused on wildfire safety,
and improving all of that, we also have to make this
an organization that follows, what I would call,
common business practices.
-: When you have a diversity of problems like this,
doesn't that also indicate that there were problems
at the senior management level?
-: I can't speak to a period of time
in which I was not present.
-: Okay and your onboarding and learning about history
didn't inform you, enable you to inform yourself about that?
That question?
-: It certainly informs the way we look forward,
and the way we hold our current management accountable,
the way we interact with our management,
the level of engagement of this board,
unlike a board that you would find in a typical company,
is what I would almost call an activist board,
really doing deep dives into places
that you normally wouldn't go.
-: But the statute that's the reason we're here
AB10 54, says we're supposed to
consider PG&E's governance in light of its safety history.
So that's why I, that's why I'm focusing on history,
and I'm asking whether, based on the history
that you've seen, whether you have concerns about
how senior management has conducted itself?
-: Again, on our onboarding we looked at,
certainly the history, and then what it does is inform me
on what we need to have for management going forward.
Could I speculate on failures of management,
or people who are participants and employees?
I could, but I honestly, it would be speculation.
Mr. Long: Okay and you did not undertake an effort
to determine whether issues with senior management
were in any way responsible for the, the types of issues
we just went over?
-: I believe it informs what I do today,
I don't know that spending time speculating
on the behavior of previous management
would be particularly helpful.
I need to spend my time on fixing problems and
holding people accountable going forward.
Mr. Long: Do you have an opinion about whether
PG&E has been sufficiently clear about its expectations
for senior management in the past?
-: Again I wasn't there, in the past,
so I really can't speculate, what I can say is,
we've changed our compensation to reflect,
what I believe, is a greater degree of accountability
for public safety, employee safety, wildfire mitigation,
and infrastructure management.
-: Okay, I'm gonna shift now to a different topic
and ask you to look at page four-eight
of your testimony.
And I'm again going to, as Ms. Sheriff did ask you
a question or two about the word, the term independence
that you use on a page, in the second paragraph,
as I know, I know Ms. Sheriff asked you a question
or two about that, but I just want to get a clear definition
from you, does independence as you use it
on line 10, mean that the board member is not an officer
or employer, employee of the company?
Is that what you mean by independence?
-: I think no, more than that, I mean
they're independent from any material interests
in the company, or partners to the company,
I think they're independent from any special influence,
if I had to paraphrase the New York Stock Exchange.
So that would include all kinds of people,
including vendors, including shareholders,
including politics, we need not to be,
we need to be free of anything
that might compromise decision making.
-: So the board...
So a board member to be independent,
should not be a shareholder?
-: I'm not saying that.
In fact in many boards, you're encouraged
to be a shareholder, because it's a demonstration
of your belief in the long-term viability
and success in the company.
So I think if you were a majority shareholder
of the company that probably
would not be viewed as independent
from, by the New York Stock Exchange.
Mr. Long: Okay, so independence includes
not being a majority shareholder?
But it's okay to be a shareholder?
-: I think in many cases it does,
it does give you a common interests with the company.
I am not a shareholder and by the way.
-: And you said, mention, vendors,
To be independent, a director should not be
bouyed by a vendor?
Is that what you mean?
-: I would suggest that could possibly compromise them,
and as you know FERC has a rule about a board members
not serving on a utility board,
as well so board of a vendor.
I think anything that might even
create the perception of compromised decision-making
would be considered under the independence definition.
-: Okay, now I wanna delve into this a little more
by looking at a passage from page four-nine,
beginning on line seven, and I'm going to read that,
it says "The directors of PG&E, in my experience"
"have taken into account impacts on customers"
"and other stakeholders, as we have discharged"
"these fiduciary duties."
"Directors must be free to consider and balance"
"all such considerations in an unbiased fashion, and must"
"avoid conflicts of interest that could impair"
"their ability to do so", and then it goes on.
You see that?
-: I do.
-: Okay.
So you mentioned that passage, fiduciary duties,
and earlier that same paragraph you had stated that
the board members have a fiduciary duty
to act in the best interests of shareholders,
is that correct?
-: That is correct, that is the commonly held definition,
and I believe the law.
-: Right I was just gonna ask that, that is a legal duty?
-: Yes.
-: Okay.
-: Now you do not have a similar fiduciary duty to customers,
is that correct?
-: I believe a fiduciary responsibility to shareholders,
means that we do everything possible
to deliver value to the customers,
to the communities, and to other stakeholders,
that's particularly true, I think,
in a utility, where both the economy,
but the very well-being of individuals and the community,
is part of that duty.
-: Okay, and I am gonna repeat my question,
in which was a yes or no question,
you do not have a fiduciary duty, as a director,
to customers, is that right?
-: As it's defined in the law, yes.
-: Okay.
-: Yet you say the board takes into account,
impacts on customers, and other stakeholders,
and should do so in an unbiased fashion.
So the question that raises from me is,
how do you take customer considerations, interests,
into account, without bias, when you're fiduciary duty is
to the shareholders, and you don't have such a duty
to the customer?
-: If I'm not serving the customers,
if I have a massive failure in safety,
as we have seen, if the people who purchase my services
and pay my bills, are not satisfied,
that has a direct translation into the financial well-being
of the company, in other words,
the stock price declines significantly
when you have ignored these fundamental responsibilities,
so I think it's, you asked the question honestly
as if they're mutually exclusive,
and I don't believe that's actually a
reflection of how it works.
-: Okay.
But doesn't fiduciary duty mean that
if there is a conflict between customer interests
and shareholder interests,
then you have to put the interests of shareholders first?
-: I can't imagine in which a conflict,
we have not been presented with one,
nor have I ever, candidly on the boards that I've served.
-: Okay let's think about this issue,
whether shareholders should pay
for billions of dollars of wildfire liability,
or should try to recover those costs in higher rates
paid by rate payers?
Do you not see a potential tension or a conflict of interest
between the position of shareholders there,
and the interests of customers?
-: I think in our case the shareholders have
actually offered to pay a significant amount.
I think it depends honestly on the determination
of those kind of events.
Mr. Long: Let's not, let's divorce it from
the particular, the plan of
reorganization here-- -: Okay.
Mr. Long: And just talk generally about a
situation that could arise,
and it could be a gas explosion,
it could be anything where's an issue about
whether or not PG&E is, whether its shareholders
are paying for the costs, or whether seeking
the liability costs that result from an incident,
or whether those costs are requested to be recovered
from rate payers.
Do you not see that there's the
potential for a conflict there?
-: Perhaps there is a potential for conflict,
I don't feel that potential,
and I think it is very dependent on circumstances,
on the regulatory compact, on what rules
under which people are our operating,
and the consistency of those rules.
So I understand why you might perceive that,
I just haven't had that experience at this point.
-: And let me ask you another, another hypothetical.
Let's say that there's a director on the PG&E board
that is an avowed customer advocate,
say I'm gonna put customer interests first,
would that be a conflict of interest?
-: I'd like to believe that all of our board members
are customer advocates, and I've seen
a lot of demonstrations of that in board decisions.
-: And so if that person said "On this matter"
"I'm going to put the interests of customers"
"ahead of the interests of shareholders",
would that person have a conflict of interest?
-: I'm honestly...
I don't believe, as I've said, these are mutually exclusive.
-: Okay I understand your position, that's okay,
we don't, we don't--
-: Okay.
-: Yeah.
I'm not trying to cut you off, it's just
I realize the question was getting a little repetitive,
and I just wanted
to move on, so. -: Sure.
-: Let's talk about a slightly different issue,
on page four-23 of your testimony,
and this, there are gonna be echos
of what we've just been talking about.
I acknowledge-- -: Okay, that's all right.
-: But it is slightly different.
And this is a section E one, and this is about how the goals
of safety and financial performance relate to each other.
Do you see that section I'm talking about?
-: I do.
-: Now I think your position is that safety
and financial performance are not conflicting goals,
is that right now?
-: That's correct.
-: Okay.
-: Now are you saying then, that it is not even possible
for those goals to come into conflict?
-: I don't see a set of circumstances in which
that would happen.
Safety would always, always be first,
because it's an underlying element of financial performance,
and you can see that in the stock price of PG&E,
or any other company that had a major safety issue.
Mr. Long: Okay so, I don't know if your aware,
TURN has recommended that PG&E directors,
that you're required to agree in writing,
that if shareholder interests and safety come into conflict,
that safety takes priority,
do you have a problem with that recommendation by TURN?
-: I'd have to think about that.
I'm aware of the recommendation, but we could also sign
something that says "If fiduciary responsibilities"
"and reliability came into conflict", or "sustainability",
or "environmental stewardship", Y'know,
all of those are underpinnings of a successful company,
and therefore it's financial, it's financial stability,
and performance.
So I understand why you would like that,
I just would have to have a better understanding of how
one would define that, I believe we're held accountable
to a standard of performance,
particularly when you're elected year by year,
so I appreciate that suggestion,
and I'm happy to take it under consideration,
I can't make that commitment without a
fuller understanding of what that would actually mean.
-: Well, with all respect this was a proposal
that we put in our December 13th testimony,
we've asked PG&E about the data request responses,
and we've got nothing but evasion,
and so I was hoping you would give me an answer,
and I'm sorry but it sounds like you're still
not able to answer the question
of whether you would agree with that recommendation.
-: I understand the recommendation,
I respect the recommendation, I need to understand
the implications of that, before I commit an entire board.
-: Now, in terms of whether safety
and financial performance can ever come into conflict,
I assume you're aware that
leading up to the San Bruno explosion,
there was, and this is what the Commission identified
as part of the problem, that there was an excessive focus
on financial performance, to the detriment
of doing the work that was necessary
to have a safe gas infrastructure,
are you familiar with that?
-: I'm familiar that San Bruno was a call to action
for the entire pipeline community, who,
who's recordkeeping had not kept up,
Whether that was illustrated at preference for
financial performance, and not spending
the necessary capital, or whether it was
simply an inexcusable oversight, I do know
it caused an entire industry to rethink,
and also check on their own records,
because I was on a pipeline board at the time.
-: So, but my question is are you ready,
can you accept,
or do you agree, that part of what happened there
was that PG&E emphasized financial performance
to the detriment of safety.
-: If the Commission determined that,
I accept the Commissions definition.
I think there are a lot of things that can go wrong
with recordkeeping, and I've seen some of them,
none of which have to do with not spending adequate
financial resources to support
the core mission of the company.
-: Okay I'm gonna move onto a new topic,
which you've raised a couple times,
you've talked about compensation for executives?
-: Yes. -: That's what I want,
just to talk about it, a very high level with you now,
I know there's a, another witness
who's going to go into the details,
but I'm gonna ask you from a high level board perspective.
-: Yes. -: Okay.
-: So, and actually, if you could just look at page
four-four, the last bullet,
that you have on that page about
how the board fulfills its roles.
Let me know when you're at four-four.
-: I'm there.
-: Okay the last bullet says "One of the ways"
"for the board to fulfill its roles"
"is to hold the CEO and management accountable for results",
can we agree that one way the board can do that
is through executive compensation policies?
-: Absolutely.
-: And one component of executive compensation,
is incentive compensation, is that right?
-: That is correct.
-: As opposed to foundational or based pay, right?
-: That's correct.
-: Okay.
Now for the incentive compensation portion, excuse me,
would you agree that where the achievement milestones,
to qualify for the incentive compensation,
where they are set is very important?
-: Absolutely.
-: And what would happen if those achievement miles,
milestones were too easy to achieve?
-: I think the board would not be fulfilling
it's responsibility to hold management accountable.
-: And it would not be a good situation
if the milestones were set
such that they could be so easily achieved,
that effectively the incentive compensation
becomes guaranteed conversation?
That would not be a good thing, is that right?
-: It's not incentive compensation under those circumstances.
-: And then finally, I'd like to direct you to
page four-32 of your testimony, lines 21 and 22.
-: Yes.
-: There you're referring to PG&E's execution of
the PSPS events in October 2019,
as, the word you use is "imperfect",
now earlier in your testimony, you say that
the board is responsible for setting the tone at the top,
you're the board chair, is that the
right word to capture what went wrong with
PG&E's shut offs last October?
-: I think there is no word to actually describe
the impact of the things that went wrong,
during that period of time.
I was in the EOC, I was working with the teams
to find quick solutions, it's why we've spent
the time since then, with a number of work streams
to address those issues, it's among the reasons,
but there were many, that the compensation committee
and John Lowe can testify that the details
has readjusted the compensation to focus on safety,
to focus on including a sub-metric on PSPS.
-: I'm just curious, why you couldn't have chosen
a phrase like, poorly executed, instead of
a word like imperfect?
-: I accept your recommendation, poorly executed would be
absolutely a good term.
-: That's all my questions, thank you.
-: Thank you.
Judge: All right, thank you Mr. Long.
Mr. Strauss.
Mr. Strauss: Thank you your honor.
-: Hi.
-: Ms. Brownell, my name is Ariel Strauss,
I represent Small Business Utility Advocates,
a non-profit, representing the interests
of small businesses and other small commercial customers.
A few moments ago, you said something to the effect
that you could not imagine
a serious conflict between safety
and financial performance, is that roughly correct?
-: That's correct.
-: And yet we're all here today,
because there is some sort of serious oversight
and safety, that resulted in bankruptcy.
-: I agree with that. -: Right?
Okay.
And in the transition to increase focus on safety,
is there a heightened risk that certain core competencies
may be overlooked, in that transition?
-: Could you clarify
what core competencies you might?
-: Sure, other essential services,
and other essential areas of business that
PG&E must ensure are adequately addressed.
-: No I don't, I don't think, it's not our intention,
nor do I think it's necessary to improve our safety record,
to improve our operational performance,
while ignoring certain other constituencies
or obligations that we have, if that answers your question?
Mr. Strauss: Not exactly. -: Okay.
Mr. Strauss: What I'm asking is,
there's a finite amount of resources available,
there's a finite number of people on the board,
they're very busy people, I understand that you are saying
that they spend more time in the field,
they'll will be transitioning more responsibilities
to the SnO committee, in that environment,
is there a heightened risk,
that certain other responsibilities could be overlooked?
-: I don't believe so, and we can talk about specifics,
if you want to talk about
our commitment to the small business community,
we've had a good relationship, we have--
Mr. Strauss: That's all right, I think, thank you,
I think that answers the question.
-: Okay.
-: And then, I'd guess it'd to be fair to say,
have you had any meetings then?
That address managing risk of other areas been overlooked
that are not safety?
-: I've had several meetings with our customer group,
about a number of different constituencies,
and how we might, not only continue to serve them,
but to serve them better.
I've also had a number of visits with customers,
in the field, particularly those
who were impacted by PSPS, to get a better understanding of
how we could accommodate their needs,
and will continue to do that,
I think that's an important part of the boards role.
-: Okay, and then can I draw your attention
to the skills matrix on four 11, four 12?
Let me know when you're ready. -: I'm there.
-: Thank you.
The skills matrix includes a long list of important skills,
one of them I see, for instance,
is large-scale customer experience, but I don't see anything
to do with small business customer experience,
is that correct?
-: That is correct, but let me suggest this,
by large-scale customer experience,
and we may have been inarticulate,
this is a work in progress, I think we meant
was a customer, major customer facing experience,
could be small business,
could be the big industrials
that are also represented here.
We have customers of all sizes,
I was a small business lender, we were number one SBA
lenders in our region for the 10 years I was at the bank,
I'm a small business owner,
so I can appreciate the perspective of how important,
and often neglected, the small business community is.
-: So with that perspective, I have heard that the change in
the board constituency may have been between 70
to 80% over last few years, would you know if the board
leveled experience, with respect small businesses,
has increased, or decreased, or stay the same?
-: I'd be happy to get back to you with that,
I don't have the answer, I haven't really looked at the
skills matrix, or the experiences of the previous board.
Mr. Strauss: Okay, I'm going to turn now to a question
that was asked by Mr. Abrams, to Mr. Johnson,
and I'll read it from the transcript,
my question isn't about you're familiar with the transcript,
but I think it'll help set the right tone.
-: Okay.
-: And the question is, "Are there skills that you feel",
this the question from Mr. Abrams,
"Are there skills that you feel, are not as well"
"represented on the board, that you think should be there",
and Mr. Johnsons answer was "That's a good question,"
"I'm not going to answer it, my answer is"
"that chair, nor Brownell will be available",
now would you like answer that question?
-: Sure.
I think we've added several,
we've added wildfire experience mitigation,
we actually added in the past, the customer experience,
we've added network experience,
which is how we got Bill Smith from former AT&T executive,
I think customer experience, as I said, and we've also
added experience with labor relations.
Mr. Strauss: So in the interest of time however,
the question though is, are there skills that are not
well represented on the board?
-: Yes I actually think that, well we have some
restructuring experts who've made a huge contribution,
we're moving when we emerge, into a period
where we need someone who's lead a major,
major transformational experience, whether it was in
industry changed by technology,
whether it was an IT turn around, I really think we're gonna
need that experience going forward.
-: Well, I appreciate that response,
but leads me to my next question, which is about
the change and responsibility of shift responsibility,
from the public policy committee, to the SnO committee.
Now I see that a lot of added
responsibilities being shifted,
wildfire and PSPS events in particular,
how is that being managed with the
load of responsibility already existed in the SnO committee?
-: Is your question, are they resourced?
Are they well enough resourced to handle this?
-: For instance.
-: Yes.
We'll certainly make sure first of all,
CPP, Snow, and Audit actually, have all worked very closely
together, all of the committees have,
but those three particularly, so the transition
will be orderly, with the identification
now that CPP has had some experience of
the kinds of resources they need,
the kinds of focus they need to have,
any additional support they may need,
either internally or externally.
Judge: what does CPP stand for?
-: Compliance and Public Policy, thank you,
think I'm gonna get that right.
Who've also began a really important initiative,
I can talk about later.
-: And then, along those same lines,
we heard from Mr. Vize about the importance,
with respect to safety, of certain types of
compliance reporting, and certain types of recordkeeping,
how do you disentangle the roles,
and keep those clear between the compliance side,
which I actually still understand is still on
the Compliance and Public Policy Committee
and the SnO committees responsibilities?
-: I think we're in this, I hope it's responsive
to your question, we're developing a matrix,
the beginning of which, it's just in its infancy,
is in, under 33 of the exhibits,
and that is to keep a running tab
on all of the commitments that we have either,
made through settlements, through regulatory changes,
through judicial orders, to make sure that we're
tracking those, and there may be overlap with safety,
and other kinds of compliance.
So again, we wanna make sure that everyone,
the Commission, intervenors, employees,
everyone understands the commitments we've made,
so we can hold ourselves accountable,
but also, and I think this is very important
when you're making rules and commitments,
are those rules and commitments
achieving the desired outcome?
I've been involved in transformations and rule making
for a long time, and I know that at the FERC
we made a lot of market rules that we realized,
we're not as effective as we wanted them to be
in changing behaviors in the marketplace.
So I think this will be a course of
cross-functional information and tracking,
again those committees work very closely together,
and will continue to do so for the foreseeable future.
Mr. Strauss: And then to avoid
the risk of anything falling between the cracks,
what process or procedure do you expect to have in place,
to do that?
-: Again, we're collectively working within the company,
to gather in one place,
everything that we have committed to.
So I met for the other day, with the compliance folks
from a number of different parts of the company,
to get this project, let's say, moving a little faster
than it has been, and we'll do a regular review at that,
at the board meetings, to make sure we're keeping track,
we'll also build a database that will be able to be updated
and corrected, if any, it should've been needed.
Mr. Strauss: Okay, I just have a couple more questions.
-: Sure.
-: One of them is to do with, I think something that also
Mr. Long raised, which is that,
while the shareholders can move on, the customers,
given it's a utility monopoly, are here for the long run.
Is there anything in place that ensures
that the safety commitments are being made now,
won't be changed in the future?
-: Well, I think once you've committed,
been ordered by a judge, or a regulator,
or committed in a settlement, and there will now be
a public document that we can all agree on, and track,
it would be very difficult without giving some justification
to either change, which you couldn't arbitrary do,
nor would you want to, you might in collaboration
with others, like the Commission,
say we think this would be a better way to go about that.
-: But in terms of mechanisms, and not any mechanism
proposed to be in place,
to give a priority to these changes?
-: I don't know what mechanism might be better
than having an ongoing living document,
that is reviewed by the board, and the management.
I'm not sure what--
Mr. Strauss: I'm sorry what is that document?
-: It's a document, it's in tab 23, we've just,
we're just developing it, because I said
"I'd like a list of all the commitments"
"that we have either made voluntarily in a settlement,"
"have been ordered by the Commission,"
"have been legislated, or have been ordered"
"as part of a judicial proceeding, I want them all"
"in one place, I want to understand who owns"
"that particular obligation",
so that's a tool of accountability
that we've imposed in a number of areas,
including some audit issues, so we have an owner,
we have the cost, we have the obligation,
and we'll begin to track about
what problem that is beginning to serve.
It is not a document that is
by any stretch of the imagination complete,
but that will be, allow everyone, and we'll certainly
make that public, when we're confident that it's accurate,
and it will be updated in public,
and I think that there's no better way
to hold people accountable than a little sunshine
on what you've committed to.
-: And so then you envisioned that
this process will develop actual specific commitments?
-: This is a list of commitments we have made.
-: And the commitments will be in what form?
And what document for instance?
Will the commitments be located--
Judge: Can I interject here,
it looks to me like what the tab 23, that Ms. Brownell
is referring to is in PG&E-six, and it's 4-EXH.23-1,
and till the end of that section.
So it's in PG&E six.
-: But I would--
Judge: It's tab 23rd, sixth of the 25th.
-: Tab 23, you're a better woman than I.
-: Thank you your honor. -: I wouldn't of found it.
But I wanna say it's-- -: But if--
-: In its infancy, so I don't want to give this out,
as a finished and complete document,
this is the beginning of our desire
to have a tracking mechanism, so that we can hold
ourselves accountable, but we can also measure outcomes,
we've talked a lot about outcomes in various hearings here
at the Commission, and I think that's important.
Mr. Strauss: And what I'd like to point out is,
that this process doesn't inherently establish
any document, that will identify what the
commitment is, it makes a determination,
as I understand it, the Commission make the
determination that PG&E is in compliance,
but what it sounds like you're saying, is that it's
going to be in a document that'll identify those
responsibilities it's undertaking to maintain compliance,
and to maintain organizational structure,
that priorities safety.
-: That is correct.
Attorney: I object to form of the question,
at least I'm getting very confused about
what kinds of commitments we're talking about.
Judge: I think we should move on from this
line of questioning.
I think she has described the document
as an infant document, and you can ask a more
specific question, it's a little bit vague as well.
-: Okay, and then my last question's respect to Ms. Cain
and her role, and what processes are in place to ensure
that the person in that role has, is independent,
there's not interference with the reporting processes?
-: I think she's established as reporting regularly,
to both the board, and she's in our board meetings,
and the committee's.
Her job description in and of itself, I suspect,
will describe the need for independence.
The fact that she is a regular part of discussions,
and the head of CPP particularly, and Snow meet with her
regular, without any interference from anybody,
I think suggest that, that process is already in place.
-: And so my last thing, fault is mine,
my actual last question now.
For follow-up, and so that the deputy general
counsel designation, what is reporting role in that fashion?
-: I'm honestly not sure I understand the question.
-: So the term, I see that the title here, chief ethics
and compliance officer, and the deputy general counsel.
I think I understand what chief ethics and compliance
officer means, I assume,
I'm sure there's a general counsel.
-: There is a general counsel. -: What does it mean
that this person is also the deputy general counsel?
-: It means that she has the authority of compliance
and ethics, and reports in the law department,
because this is a legal issue, in a legal position.
-: And would she then report to the general counsel?
-: She would report to the general counsel.
-: Okay, thank you.
That is all.
-: Thank you.
Let's be off the record.
Okay, at this time we'll take a five minute break,
and then we'll come back and go into cross examination
by Mr. Abrams.
Okay so, on your smarts phones, please be back at 3:12.
(laughing)
It's 3:12, and Mr. Abrams is not back yet,
but we can actually dispose of a few things.
Are you going to have any redirect for the things
that have occurred already?
Man: Not so far.
-: Not so far, okay.
Great.
Then let's go to
the matter of order for when Ms. Hogle is up
We have...
Be back on the record.
At this time we'll turn to cross examination
by Mr. Abrams.
-: Good afternoon.
I wanna start with picking up where some
of the other questions left off.
Specifically around
where the interests of shareholders
and the interest of customers diverge.
I am a wildfire survivor,
as they call in bankruptcy, a victim.
Would you agree that victims interest as customers,
have largely diverged from the interests of shareholders?
-: First of all, let me say
I know what you survived and it's been horrific,
and I can't imagine.
But no I don't actually see where they've diverged.
Maybe you could be more specific in an example?
-: Sure.
Yeah and I'll move on and I think
I'll try to illustrate that in question
as I go through here.
Do you see tying investor return, more specifically
to safety, as a goal of the board?
-: As I've said I think there are a number of underlying
factors in the financial success of a company,
and its ability, to pay shareholders,
and safety is first and foremost among them
for a utility, frankly should be for any company,
but specifically for utility.
So I think they are tied together,
because an unsafe company,
and as this company has experienced,
is unable to pay shareholders.
-: So since the bankruptcy occurred in 2000,
have you provided payments to shareholders?
-: We have at the low end of the utility spectrum.
I looked at a couple weeks ago.
-: Do you not agree that the deferred maintenance
across your infrastructure,
has not occurred?
-: I believe there's-- Attorney: I'm sorry.
I object to the form of the question,
I got lost in the negatives.
Judge: I did to, to be honest.
(laughing) -: Okay.
I'll rephrase the question, I apologize.
Deferred maintenance, do you believe
that deferred maintenance across the infrastructure
has occurred?
-: I think there a number of issues that have affected
the safety performance of this company,
it is certainly been found
that deferred maintenance, vegetation management,
as well as dramatically different climate conditions,
have affected the performance.
-: Okay.
With all due respect I'm asking your opinion,
I know that, that's what's been found.
I'm asking do you agree that differed maintenance,
across the infrastructure, has occurred?
-: I agree that it has in some instances occurred.
-: Okay.
Do you not see that as evidence,
that investor interests in short-term yield
has been provided, without putting those investments
into the infrastructure?
-: I actually can't say that conclusively.
I think among the issues that I see
are inadequate inspections,
for example we now know, and are using
more extensively, technology to inspect our infrastructure,
some of the visual inspections simply were not adequate
to determine the actual condition.
So we're making changes in response to that--
-: I appreciate that, I'm not asking about
inspections right now, if I can,
I'm just asking about a very specific thing.
You've got, let me rephrase,
'cause I know-- -: okay.
A part of it may be how I'm asking the question,
and I'm not an attorney, I'm not used to this.
-: Neither am I, and nor am I.
-: All right.
So basically what I'm asking is,
there is a million dollars that the company, PG&E,
can do with, they can either choose to put all or some
as a return to their investors, or they can put all or some
into replacing sea hooks, or putting in more covered
conductors, and you not see that sometimes
those trade-offs could be compromised?
And do you not see that, that was part of
the contributing factors to the current state of things?
-: We're gonna try and answer your question,
because it's more complicated than that.
I have not seen evidence that trade-offs,
as you suggest, to pay investors,
over investing in infrastructure, or safety have occurred.
But let's consider that the utility model,
in this country, and others, was developed to attract
long-term inexpensive capital.
In order to continue to do that, companies pay dividends,
as I said this company, relative to its utility peers,
has paid for quite some time,
at the low end of the spectrum, now is not paying at all.
What I see is not merely deferred maintenance,
but inadequate maintenance, that is not necessarily driven
by a willingness to invest, or not invest,
it's driven by a number of factors in...
I'll let, go ahead.
-: I'm sorry, I appreciate that,
I know there's lots of factors,
again I'm just trying to focus on this one factor,
which is clearly, I think, and you have stated,
that deferred maintenance, is at least part of the equation.
I'm not looking, I'm not saying it solves everything,
'cause there are lots of other issues, what I'm asking is,
is that not part of the issue?
Is that, in some cases, investor interests,
and as you said, attracting those investors,
and keeping those investors, has been more of a priority
than replacing the sea hooks that have failed,
or jumpers that have failed, or all of the infrastructure
that is related to failures, and fires, and loss of life,
and loss of structures, that, that is not part of
the problem of PG&E?
Attorney: Objection, asked and answered.
Judge: Agreed.
Please move on to the next question.
-: I think it was...
(sigh)
So part of what you stated earlier was that,
the reason why shareholder interests,
and the interests of customers are aligned,
are because when there's a big fire
those interests come together, do you not agree,
and I appreciate that I'm also asking a double negative,
do not agree that waiting for fires and penalties,
has been ineffectual, in terms of creating change for PG&E?
-: I don't think PG&E, nor its employees,
are waiting for fires.
I don't think, I think one could argue,
and it has been argued, that PG&E was
not as fast in responding to, what clearly were,
the impacts of climate change.
So I think they were slow to follow
San Diego Gas and Electrics example,
which is a really good one, and we've,
I visited them, our employees have visited them,
I think, but I think to suggest that anyone was
waiting for a fire to change behavior,
doesn't represent what I've seen.
-: So when you describe that investor interests,
and customer interests are aligned,
because fires, are something that is to the detriment
of both investors, and customers, are there things
that are more leading activities, that are aligned
with those interests?
Rather than the fires or the penalties?
Attorney: Object to the form of the question.
-: I don't understand the question.
Judge: I don't think
I understand the question as well.
Mr. Abrams: All right, I will rephrase.
Judge: Thank you.
-: My understanding, and you can correct me if I am wrong,
was that you described the interests of shareholders,
and the interests of customers, as aligned,
because both of them, of course,
don't want to have fires occur.
And what I'm asking are, what are the other ways,
prior to those fires occurring, when you're coming to
the dollars and cents of things,
are those interests aligned through
the actions of the corporation?
-: I'm gonna give it a shot Mr. Abrams.
-: Thank you. -: But I'm still not sure
I understand. -: All right.
-: Well managed companies,
have a greater
likelihood of attracting financial investment,
that only, that's certainly in this case,
one of the things investors look at is our safety record,
but well-managed companies also have
strong performance in many ways,
have clear transparent financials, have strong data,
have good customer ratings, there are a lot of measures,
all of which are important, and many of which concern
customers, so I don't think, if I'm grasping your question,
wildfires or safety issues are certainly the most paramount,
and certainly the biggest commitment that we have,
there are many things that can go wrong in a company.
Mr. Abrams: So, thank you.
-: Does that--
Mr. Abrams: Yes.
-: Get there?
Mr. Abrams: I appreciate that.
Let me do a follow up.
-: Okay.
-: So companies where there's is a competitive environment,
drives success, 'cause you wanna beat out your competition,
in PG&E, a monopoly, you can call it a natural monopoly,
those competitive pressures don't exist, to that extent.
How do you create the incentives for a company
that doesn't have to innovate their sea hook,
because if they don't do it their customer
will beat them out, how do you provide incentives that,
that becomes a priority, as opposed to
what the incentives are in the competitive space?
-: Well first of all, I'm a big believe in markets and,
but this is a natural monopoly, and the origin of
the regulatory system in our country,
is to superimpose that, would be competitive pressure,
it's a challenge, having been a regulator,
I can tell you, but the fact of the matter is,
when you have natural monopolies that are so critical
to communities, it's really important to have that
regulatory compact, and that regulatory structure,
but there are lots of ways, there are lots of ways
that companies are incented to do the right thing,
again I've spent time with our employees,
and the pride that they take, in doing the job that they do,
I think is commendable, particularly under the circumstances
in which they've been operating,
but I think it'd be who's the company
to give adequate tools,
adequate training, pay people for performance,
make sure the metrics are clear, but also make sure
the metrics are reasonable, if you have a
limited amount of time to do an inspection,
you might be a little more casual than you wanted to,
any company, however has to allocate capital
according to, what they determine, is its needs.
One of the things we're working on is
a better asset management understanding and better data,
so we can manage those assets more carefully,
and with a greater positive outcome
for our safety record.
Mr. Abrams: So, the allocation of capital to its needs,
and regulatory proxies for the competitive marketplace.
-: Among others. Mr. Abrams: Among others.
-: Yep, I listed a lot.
-: But do you not see the part of what
could be done in this plan of reorganization,
and the regulatory structure that could come out of it,
is to tie more specific regulatory controls
over the allocation of capital,
so that the public can understand,
and trust, that PG&E is going to spend
that allocated capital towards the things
that are around our safety, as opposed to other areas
that the business might want to put those resources towards?
-: Well first of all, again, having been a regulator,
it puts the regulator in a tough position,
you're asking them to effectively manage a company,
and I'm not sure that's a role they would choose to,
well I'm not sure that's a role that's appropriate,
nor one that they would choose to play.
A company can be held accountable for how it manages,
and I think the Commission has done that,
and continues to do that, as do others.
So I think deciding how a company allocates its capital,
is probably not the right answer, the right answer,
is to have a management team in place,
with well trained employees, who are incented
to do the right thing, and I have never seen a decision
in this company, where people purposely make a choice
to put safety as a secondary commitment, I just,
I haven't seen it.
We may not have been artfully,
we may not have been efficient, we may not have
done as many things right as we would like,
but the reality is, it is and will remain a priority.
And our capital is allocated according to need,
and there are asset management structures,
again which we're trying to improve,
to look at the fundamental components of our assets.
Mr. Abrams: So are you not aware of the
falsification of documents that has occurred within PG&E?
-: I am aware of the falsification of documents.
-: So-- -: Do I--
-: So was that intentional?
-: I wasn't, I can't, I cannot speak to what employees
choose to do or not to do.
-: I thought you just?
Sorry, but I thought you just stated, for the record,
that you are not aware of employees
doing intentional things to the detriment
of the company and safety?
-: You're asking me to assign a motive.
I am aware that companies, that employees
have falsified records, I'm absolutely aware of that.
I cannot tell you what motivated them to do that.
I thought you were suggesting motivation.
-: So, through the investigations into those incidences,
as the chair of the board, what have you found
as the motivations of those employees?
-: I'm trying to...
There have been one incident since I've been there,
and I can't tell you what the motivation was,
I can't tell you.
I think they were terminated, because we can
only have zero tolerance
for people who intentionally falsify records.
Why they falsify records?
I can't tell you.
-: Do you not think it's the boards
responsibility to understand what might have motivated
staff to falsify records, so it does not happen again?
-: Absolutely, and I can answer that question.
So there are a variety of things that can motivate people
to make the wrong choice, they felt under pressure,
you had the wrong metrics, you didn't have the right tools,
people didn't understand, it's a paper driven system,
and people actually make mistakes--
Mr. Abrams: I understand, sorry--
-: But I'm not a psychiatrist, so I can't tell you why
individuals choose to make the wrong choices.
I just can't tell you that.
-: Yeah, I know there's a whole host of reasons why that
could occur, but I also have worked for a lot of companies,
and when there's a transgression like that,
typically there's an investigation,
and part of that investigation would should say,
what motivated this so it doesn't happen again?
And are you saying that nothing like that has occurred,
or that the board thought to investigate?
Not in general all the plethora of things,
or become a psychiatrist, and try to understand
what was in people's heads,
but clearly there is some evidence that you could look to,
to understand what drove that activity,
so you could ensure that it doesn't happen again,
doesn't that make sense and fit within
the purview of the board?
-: It does and perhaps I was not clear.
In every instance, there is an investigation,
in absolutely every incident.
In every investigation, there is an attempt to determine
why people did what they did,
and I've given you the various reasons,
that people do those things. -: But in this case
(mumbles) general. Attorney: Can you--
Judge: You can't talk over one another.
-: I apologize.
Judge: Okay.
Please continue Ms. Brownell.
-: So there have been a variety of investigations,
if you're asking about a specific investigation,
I don't know which one it is, nor might I
have all of the details at hand.
I'm giving you a picture of the results,
of a number of investigations, about which
I as a board member, and others have been made aware.
And the board has taken steps to
address some of those issues, for example,
we found metrics that gave too limited a time
to inspect, as I said earlier, transmission towers,
so we've said that's not really good metric,
the number that you do a day is perhaps not a good metric,
may suggest to people that they need to
ignore certain things, not file reports on certain things.
Another very common thing that we've found,
is when people are using paper,
they not only make mistakes,
they make choices in filling out that are not adequate
to determine, to create an appropriate record.
So we are deploying more and more tablets,
and I've asked them to escalate that deployment,
so that you'll have templates, where you have to
fill out a form accurately, or
you have to answer each question within a certain
range of answers, you can't say NA, or you can't go on.
So I'm just giving you some samples.
Are there people who--
Mr. Abrams: Sorry, sorry if I can--
-: Sorry go ahead.
-: I appreciate that, I'm not really looking for samples,
and if this is the answer to my question that's fine,
but what I'm asking is for these,
I mean it's been clearly reported out, right?
That there were falsifications of documents,
so for those specific instance,
not in general sample what could possibly happen.
Was it time for those incidences?
Time pressures, and the fact that it was on paper
that caused them to be motivated to falsify documents?
-: It was- Attorney: Wait, wait!
I'm going to admonish you
not to divulge privileged information.
-: Okay.
Judge: In the example that you gave Ms. Brownell,
just a moment ago, were those examples
from a particular proceeding
that the Commission has before it?
Or has recently resolved?
-: I honestly, I can't tell you.
Judge: Okay.
-: But they are personal issues, so there are
specific issues.
Judge: Okay.
I think that each set of specific violations,
or charges in particular enforcement proceedings,
are part of the enforcement proceeding itself.
What here we're focused on is the governance role
for purposes of emerging from bankruptcy.
So can you, one more shot
at getting the answer that you're looking for Mr Abraham's--
-: Sure.
Judge: Related to this topic,
and then let's move onto the next question.
-: Sure.
-: We'll get there.
-: One more question.
I'm not sure we will, given the response from council.
But,
we're here to discuss how we PG&E will resolve bankruptcy
and come out with the safety oriented culture.
Any corporation that I've been associated with,
part of a safety culture is transparency,
part of a safety culture is investigating,
a proper investigation,
before you are legally obligated to do so,
to find these answers and provide transparency,
so that the public can have more trust
in the corporation,
that you're not gonna burn our houses down anymore.
So this goes to that central point,
for these specific instances, are you able to tell us
the investigation, and the motivations,
associated with those personnel
that you have been able to find out?
And ascertain?
-: Mr. Abrams, we always do an investigation.
So let me just be very clear about that.
The results of those investigations are reported
to various committees of the board,
and the board itself.
We examine the causes of what drove people to do,
to the extent that they have acknowledged,
and by the way people don't always acknowledge,
to the extent that we, they have acknowledged and,
we have examined.
I've given you the range of reasons that people give us,
I can't say that anyone has ever said
"I've purposefully set out to lie to you".
-: Okay.
So what did you take away from those investigations,
in terms of a changed culture?
What did you do as an action to ensure that PG&E
wouldn't have any more falsification documents?
-: The board has worked with management,
to do a variety of things,
including, as I've mentioned,
setting more appropriate metrics,
giving people technology that will make it easier for them
to do their jobs, and easier for them
to report accurate data--
-: Okay.
-: Holding people, I'm not finished.
-: Okay.
-: Holding people accountable,
even though traditionally,
when people are terminated,
we might be grieved, we just have to have zero tolerance,
and the fourth thing I would say,
and there are a lots,
is better training, having people understand
the import of their behaviors.
-: Okay thank you.
You mention that there's wildfire mitigation experience
that has been added to the board,
can you describe that wildfire mitigation experience?
-: It's been recently added to the matrix,
which has been a work in progress.
We're working with, two search firms,
one of which is giving job descriptions
for the NOM GOV committee and the board to review.
So I don't have a fulsome definition of that
at this moment in time, but we will have a job description.
Could be. Mr. Abrams: Okay so,
currently that does not exist on the board?
-: It does not exist on the board.
It does exist on our safety advisory committee,
that's headed by Chris Hart.
We have a former Cal fire, I think he's a
battalion chief, who's been added to that,
and they are advising both management,
and the board.
-: And I know your new to your position,
so do you think it was not a failure prior to your arrival,
that they didn't recognize,
due to the many fires, that they needed to ensure
that someone who had that experience was on the board prior?
-: I really don't feel comfortable
passing judgment on people when I wasn't there.
-: No problem, thank you.
You mentioned that you were looking to bring someone on
who would be able to provide
major transformational experience.
Given that Mr. Johnson stated in his
hearing, in this hearing room,
that his role was not to inspire,
but just provide purpose?
How do you expect, with him in that role,
that you're gonna get transformation
and inspiring leadership in PG&E?
Attorney: Object, that's
mischaracterizes Mr. Johnson testimony.
Mr. Abrams: I believe it's
directly quoted from Mr. Johnson,
he stated "It's not my role"
"to inspire, I can give purpose"
Attorney: And he went on to
quite a lot more testimony on that topic.
Judge: The witness can answer to the best of
her ability.
-: I'm not gonna comment on what Mr. Johnson said,
I wasn't there and I haven't read the transcript.
Although I have seen the leadership he has provided
in employee meetings, and I would call it transformation,
even if he would not, or inspirational.
What I'm talking about is attracting someone to the board,
who has been through a major transformation
of an industry.
So I came from banking,
to the Pennsylvania state Commission,
and I was recruited specifically because,
I had been through the transformation
of the banking industry, and they were going through
restructuring in Pennsylvania.
So I think it would be helpful,
and by the way this is me,
we're still working on the matrix,
I may get out voted, but I don't think so ,
that I think it would be hugely helpful
to get somebody who's been through,
for example, a major IT transformation.
Major transformation because of technology changes,
not that's happened, for example in the Healthcare industry.
-: Are there examples, because I appreciate that,
are there examples of corporations that you can point
to that have been through bankruptcy,
and arose, that you feel like are examples for PG&E
on how you can overcome these obstacles?
-: Yanno, that's a good question.
And off the top of my head,
I am...
I'm actually not able to come up with that,
but it would be a conversation I'd be happy to have.
I have looked a lot at what it takes
to be a transformational leader,
and I've looked at industries where,
in fact you see it happening right now actually at GE,
as they restructured themselves,
not having been through bankruptcy,
but I'd have to really think about that,
but it's a thoughtful question, thank you.
-: Thank you.
If there is a, as you stated, "a mass failure in safety",
do you feel like that, that is a
wagging indicator of performance?
Attorney: Object to the form of the question,
I don't remember her using the term
"mass failing of safety".
Judge: Can you point us to where your...
Where that term comes from Mr. Abrams?
Was from her test-- -: It was stated in
earlier testimony.
Attorney: Objection.
-: Okay. Judge: Can you
rephrase your question Mr. Abrams?
-: I'll just skip the question,
I made note of it when she said it, but I will move on.
So as a victim, I am soon to become,
if this plan of reorganization comes through,
part of a major shareholder class
of Pacific Gas and Electric.
I described this issue with Mr. Wells,
and asked his opinion on it,
and I'll ask you the same.
If shareholders are now,
these major shareholders, are now also customers,
rates when they change, increased rates,
given the wide price elasticity
associated with the natural monopoly,
increases in rates, benefit shareholders,
when, but they do not benefit customers
to have increased rates, 'cause it affects affordability.
So how do you see that playing out with
the next fire, or the next need for capital?
How do you see that playing out in terms of the
terror for a wildfire victim,
who wants to see return on their investment,
while at the same time,
looking to make sure your rates are low?
Attorney: Object to the form of the question.
Judge: The question
got a little long for me. (laughing)
-: Okay. Judge: My coffee
has worn off.
Could you--
-: Yeah I know. Judge: Try to
shorten it a little bit?
-: Absolutely. -: Thank you.
-: And it was long winded, so I fully admit.
Raising rates, I'm now a shareholder victim customer,
I have interest as my share, as a shareholder,
for increasing rates, so that I get a greater return
on my investment, as a customer I want lower rates.
and my neighbors want lower rates.
How is that gonna be treated, now that you have this new
21% shareholder class within PG&E?
-: I'm not sure I entirely understand,
but understand inherently that you feel perhaps a conflict.
First of all, we do not go in for rate increases,
in order to give greater returns to shareholder.
We go in for rate increases,
and the Commission is pretty disciplined about this,
to be able to fund needed expenditures,
to serve customers, reliably, safely, and affordably,
and certainly I know that they take all of those
into consideration.
So the premise of your question, I think it's one
which we're probably just not on the same page,
and yet as a shareholder you may, or may not
choose to continue to own that stock,
that's a possibility, those were settlement to which
I was not, with which I was not involved.
So the outcome I think, would best be discussed
with the people who negotiated them.
-: Okay.
So you're aware that in the year 2000,
PG&E also was in bankruptcy?
-: I am aware of that.
-: Okay.
Are you aware upon the exit of bankruptcy,
Commissioner Loretta Lynch at the time stated,
"I think we are moving, we are in a more,"
"we are more vulnerable than ever",
does this give you the sense that
we've been here before?
Attorney: Objection.
Lacks foundation.
We don't know the context of that remark.
Judge: I agree, it does lack foundation,
but I think the question can be answered
to the best of the witnesses ability.
-: I knew Commissioner Lynch, and we work together
to resolve many of the market issues
that we're facing, California,
along with the infrastructure issues,
but I honestly don't know why she said that.
So it is hard to answer.
At the circumstances of that bankruptcy,
were entirely different than this.
Mr. Abrams: Thank you.
-: So it may not be apples to apples.
I don't feel giving the bankruptcy process
in the rigor with which, bankruptcy judges manage those,
they would have emerged from bankruptcy,
with the concept that they were weaker.
So I think,
I don't know why she thought that.
-: Okay.
Are you aware that after that bankruptcy,
the chairman at the time, Robert Glynn Jr,
was awarded 17 million,
and Gordon Smith received 10 million dollars.
Are you aware that?
Attorney: Objection.
Foundation and relevance.
-: The relevance, or, sorry.
Judge: You can explain what you think
the relevance is, and then I will...
-: The relevance is, I am trying to understand
if those types of things will be done with this bankruptcy.
Judge: The objection is sustained.
You can ask that question.
-: Okay.
Will those types of awards be provided post bankruptcy,
this time around?
-: We've recently redone our compensation plan,
which is part of our plan of reorganization,
which I believe has both short-term,
and long-term metrics, that are clearly
associated with safety, and I can assure you,
the both, the compensation committee, and the board,
have the authority to reduce anything
that they see fit, based on a catastrophic safety event,
or any kind of major event, that would
lead one to conclude they had not behaved appropriately,
or responsibly, and I actually have been involved
in a situation, on a board, where we reduced compensation
because of a safety incident.
So I wouldn't hesitate to do so.
I don't envision that.
-: Okay.
Are you aware that through this bankruptcy,
the victim class,
was the only one being compensated with shares?
-: Again as I said, I did not negotiate that settlement,
so I think that question, I am aware of it,
but I think though, how it came to be,
and why it came to be, is best left to those
who were at the negotiating table,
and I know that there were legal representative.
So I would encourage you to have that conversation.
-: I understand you're aware.
As the chair of the board,
do you think that it is fair
that the entrenched investors,
were not compensated with shares, but that victims
are given stake in a company that
burned their homes down and decimated their lives?
-: As I acknowledged to you earlier,
I can understand your discomfort,
perhaps distaste, certainly can understand that.
I did not negotiate that arrangement,
and I think the answer to your question,
I think while I'll acknowledge, kind of maybe some of the
ethical dilemma, or discomfort you may feel,
I didn't negotiate it, so I can't really comment.
-: Okay.
Have you been familiar at all
with the letters that have been coming in from victims,
into the bankruptcy court docket?
-: I've read about them, yes.
-: Okay.
Have you understood from those letters,
that they go well beyond discomfort
with that agreement?
-: I understand this is a very emotional topic.
I understand the inherent conflicts that people feel.
And I recognize, that the feelings are raw here.
This is a...
People have been through horrible things.
So I'm certainly aware of what they've said,
and I'm sure the judge will consider it,
but I again, I have to tell you Mr. Abrams,
I was not involved in that settlement,
and I think you would really be better served
to have this conversation with the people who were.
Mr. Abrams: And I'm not having a conversation about it,
and I'm asking you, your opinion as the chair of the board.
Do you think it is fair?
Is the question.
Attorney: Objection.
Asked and answered.
Mr. Abrams: It was not answered.
Judge: It was answered to the best of her ability.
Next question please.
-: Okay.
(sigh)
You indicated in your testimony
that you are an independent board chair,
I know you described this a bit earlier,
but is there anything you would like to elaborate on
regarding how the board is independent?
-: I could wax eloquent I'm sure for a long time,
but I'm not sure on a Friday afternoon
people want to hear that.
Mr. Abrams: Okay.
I am very comfortable, let me say this
with absolute certainty, that the board individually
and collectively, is acting in the best interests
of what they call the estate in bankruptcy,
which includes a lot of things.
So I am very comfortable with the behavior,
and commitment to the board.
Mr. Abrams: Okay.
-: Of the board, excuse me.
-: And let me state that,
in case it wasn't an apparent,
I'm not looking for a job through this question,
(laughing)
but I will ask it anyway.
It's been recommended, by some, that you consider
having a wildfire victim, represented on the board.
Is that under consideration?
-: Not at this moment.
-: On page four-four, line 19 of your testimony,
you state "Holding the CEO and management accountable"
"for results, is a primary objective",
can you describe, the degree to which,
the board has had success with this,
over the past few years?
-: I can't speak to the board for the past few years,
because I've been here, what seems like a lot of years,
but it's been almost less than a year.
Have we had success?
I think we have a good working relationship
with the CEO and management.
I think we are
agreed that we want to drive change.
I think the board has been very clear
about certain things, like the pace of change,
which we would like to see increase,
about the need to focus on certain
specific business practices,
which we feel need to be improved,
particularly to support better safety operations,
like the data issue, and I'm not talking merely about
the data that you were referencing earlier
in terms of recordkeeping,
I'm talking about our overall ability to integrate
and manage disparate data systems,
because we're not getting the full picture of what we want,
which is why we're about to engage a well-known firm
that's solved this asset management problem
in a large way, by the Airlines industry,
who also do a lot of work for government,
and have worked for some big telecom companies,
with whom we've spoken.
-: Okay.
On page four-six, and see your council
checking the time, so I'm going to try to move quickly.
On page four-six, line one through four,
you indicate that diversity is important,
and then you talk about gender diversity.
How are you looking to get other diversity,
economic, racial, and other types
of diversity on the board?
-: Certainly that's part of our refreshment process.
So we have, in fact, made a commitment
to increasing the number of Californians,
but I'm always committed.
We have five women now, we wanna increase that,
we have some demographic diversity,
that ethnic diversity, that I think we
certainly want to maintain, if not enhance.
When you read the too many board attachments
that I have from experts,
from, and investors,
from best corporate practices,
the issue of diversity, of experience,
diversity of background, is critically important,
and I myself have had the benefit of that,
with people coming from different business experiences,
having different skills.
I think we've all been enhanced by this process,
and I certainly would want to maintain that for the future.
-: Okay so,
let me ask this.
So it is currently not a goal,
of the board recruitment process,
to have economic diversity, folks who have
a low income background, or racial diversity,
having more black representatives on the board?
-: It is the goal of the board refreshment process,
to focus on the skills that have been identified
in that matrix, 'cause first and foremost,
that's important-- -: Yes.
-: For the appropriate oversight,
but certainly we want as much diversity
as we can, and that bring those skills,
it's how we got five women,
and the current ethnic diversity,
and will, that will continue to be a focus.
-: Okay.
At the bottom of page four-17,
you indicate that "a board must be agile",
what do you mean by "agile"?
-: Agile in, there's a couple of different ways.
First of all, agile in the terms of this board,
is that you need to have adequate time,
you really need to be prepared to spend a lot of time,
and that may not seem like agile,
but I think it is.
Secondly, you need to be able to prioritize,
and re-prioritize, as conditions change,
as rules change, as regulations change,
as technology changes, I mean that's one of the things,
I think that the utility industry has been challenged by,
just in my experience,
that isn't maybe a view universal changed,
shared, but I think we need to be quicker to adapt
new ways of doing business, I think we need to look at,
for example, other businesses, not every utility
is a leader in every business practice,
and so I think you need to look outside the normal
course of business.
So there's a lot of different ways.
-: Thank you.
You mentioned in earlier testimony that,
you've changed some of your procurement practices,
and then now you're expecting to have an RFP,
before you sign the contract.
Part of what I understand through this process,
that occurring right now, is a LOTO,
in a lot of ways, similar to that?
My question is this,
is asking the Commission, parties in this room,
and victims who are currently being solicited
for their vote, prior to a plan and even being inked,
premature?
And like you have asked,
to change your procurement processes,
to have the RFP's first,
should we not be looking at having a solid,
finished plan, before we're having this type of proceeding?
-: I think we're working very hard.
A, to provide a comprehensive robust plan.
People may differ on how robust,
or certain elements of that plan,
but I think we're all striving to get
emerged from bankruptcy, as soon as possible,
because we wanna pay the victims,
I think that's driving,
I think that's why everyone is focused
on that June 30th date.
So in a perfect world, or in many bankruptcies,
this bankruptcy would go on for years,
but no one believes that's in the best interest
of the victims, of the state of California,
of the customers, and of the company itself.
Mr. Abrams: You don't think there are people
that feel like this is a rushed process?
-: I'm sure there are people
who feel that this is a rush process.
Everyone's entitled to their opinion Mr Abrams.
-: Thank you. -: I'm simply telling
you that, first and foremost,
while transforming a company,
we also wanna make sure that victims get paid.
-: Would you not expect that like an RFP,
we should be looking at measurable things,
that might be like an SLA,
a service level type of agreement,
baked into this plan of reorganization,
so that we aren't reliant upon
subjective measures, that we actually have
specific metrics tied to investor return,
tied to executive compensation,
so that we no longer have to trust this time around
that PG&E will do the right thing?
Attorney: Object to form of the question.
Judge: The witness can to answer
to the best of her ability.
-: I think you've already seen a
compensation plan that has very clear objective metrics,
according to, and very specifically,
actually we started to do that before 10:54,
and the Commissions proceeding,
but we are trying to have verifiable objective metrics
that are tied to safety, and all the metrics under safety.
There are a lot of things that we can all ask for,
but we need to remember that this is a business,
and if there are too many limitations,
and too many rules, particularly rules that are
a challenge to enforce, or that are not well understood,
we really won't attract, I mean the goal
is ultimately to attract the long-term investors
that you had before, the Kelpers, the Kelstors,
the Vanguards, nobody seems to like the hedge funds,
well we need to attract those long-term investors.
So if you put too many restrictions that
are not understood, or do not lead to
a company that is held accountable,
but is run like a business,
I think you limit the opportunities,
but again, reasonable people can disagree
on what they wanna see in the plan.
Mr. Abrams: Thank you.
Judge: Just as a time check,
you have just under five minutes.
-: Okay, I will make sure I adhere to that, thank you.
Do you understand the difference between
activity metrics and performance-based metrics?
-: I do, I think I do, I should.
-: All right.
Do you feel that the board should be making sure
that throughout the company,
there are performance-based metrics,
and that ties to compensation, and not
activity-based metrics on the whole?
-: Couldn't agree with you more.
-: Thank you.
I'll leave it there, thank you.
Judge: Thank you.
Commissioner Rechtschaffen, you had a few questions?
Rechtschaffen: I do thank you.
Thank you Ms. Brownell
for your testimony. -: Nice to be back.
Rechtschaffen: Nice to see you again.
Do you have a view about how regionalization
of PG's operations could improve safety?
-: Commissioner, I think we're in the
early stages of planning.
I have been on the board of National Grid,
which has a regional structure, it's done state-by-state,
and I...
I think if you have the,
If you build in the right structure,
if you build in the right metrics,
it can, and should,
but overall I don't,
I think the stated goal of regionalization,
is to get closer to the customer,
admirable, you know, all those things.
I think changing safety
has to be an enterprise-level initiative.
I'm really pleased that we're finally getting
a chief safety officer, who brings
vast industrial experience, so that we can
operationalize and really, really drive down metrics
that change safety.
So regionalization can, I can't say
my current understanding of the plan,
which is very early stages, that it necessarily will.
I'm not being vague, I'm saying,
I think it's a desirable goal,
I think it depends on how you structure it,
and how it's executed,
but I also think this enterprise-wide.
We can't have pockets of different metrics,
and different perceptions,
in the same way we've changed our
operating risk management system,
instead of at a very granular business based
bureau by bureau director,
it's event based, and it's much more broadly understood,
and able to be measured.
So I don't want to lose side of that,
there are benefits to regionalization,
there are challenges.
-: Just a follow up.
When you said their pockets,
you just referred to pockets of the company
that don't follow the same metrics,
I'm not sure I totally understand what you were saying.
-: I was actually talking about risk.
So I was probably confusing apples and oranges.
So we've moved to a better system
of risk management, previously it was done at
bureau level, different businesses viewed risk,
and measured risk differently,
in order to effectively measure risk,
have to have an agreement
enterprise-wide on with those risks are.
So the same thing is true of safety,
I think you have to have a company-wide
commitment and understanding of safety,
and to do that you have to have a changed leader at the top,
now there are different safety metrics
in gas and electric, I'm not getting that specific,
but I think in order to effect change,
you have to have a sustained commitment
at a very senior level, with an experienced person,
and I think our incoming chief safety officer has that,
to really drive a dynamic in the company
that just hasn't been there.
-: I wanted to ask you a follow-up question or two
about your view, that you need
transformational elements on the board,
and Mr. Abrams asked you about that as well,
just so I understand what you're suggesting,
is it that transformational experience
should be, or restructuring experience should be,
one of the factors that are considered
for all board members, or some board members,
or there should be one or two people
with that expertise?
-: Sure and let me distinguish between
what I see as restructuring experts,
and we have restructuring experts who made
a terrific contribution, they are familiar
with bankruptcy, they're are familiar
with different financial aspects of bankruptcy,
but a transformational leader, I'm thinking of someone
who has been in an industry
where seismic changes has occurred,
you could even say somebody from Amazon,
I'm not suggesting we talking anybody from Amazon,
the early stages, but somebody who's seen
a different way of serving customers,
who knows what it takes.
Having a monopoly, Mr. Abrams is right,
we tend to lose sight of the customer,
we talked a lot about customers,
but we tend to lose sight and not touch customers
in the way that a competitive business might.
So I'm talking about, we're somebody who has been through
IT transformations, that's a really, really complicated
thing to accomplish, but we have to do that.
Somebody who's been through a technology
changes, industry this being changed by technology.
I think a person who has that, a couple,
but that would be the only skill.
Does that help?
-: Yes you answered my first question,
so now I have a follow-up for the
second question-- -: Okay.
-: Which you have been discussing,
but is it, you review that it should be someone
who's been in an industry
that's gone through transformation,
because the utility industry
is certainly going through transformation,
or someone who has transformed a company
from one point to another, in other words,
what do you think the biggest need is
for PG&E?
-: Well the utility industry has been
undergoing a transformation for as long as I've been in it,
and when I look at other transformation
it's taking kind of a long time.
So I wouldn't necessarily say
someone who's transformed the energy industry,
I'm thinking of maybe banking,
of maybe IT, of maybe retail,
who also bring that customer experience,
not etched in stone, we're developing job descriptions
as I said, but I think it would add value and bring a
different perspective.
-: You said that the board has authority
to reduce compensation, based on
a catastrophic event, and you've exercised that
on another board--
-: I have. -: You've been on.
Do you happen to know if
the compensation of any PG&E executives was
reduced as a result of the 2017, or 2018, wildfires?
-: I don't know, I'm sorry.
-: I have one last question for you,
this relates to the independent safety oversight counsel,
I'm trying to figure out where it fits in with
everything else, so we have a chief risk officer,
a chief safety officer,
the safety and nuclear oversight committee,
a soon to be independent safety officer,
and an independent safety oversight counsel,
is that correct?
-: That's correct.
-: And are you sure that--
-: Can't get it right one way or the other.
-: Well,
I'm trying to figure out one...
Are some of those functions duplicative?
-: No, I actually don't think they are,
I think the ISOC,
who's reporting to the corporation's CEO,
also producing reports that will be used throughout
the organization, gives just that outside perspective,
the chief safety operator
is gonna be responsible for identifying the rules,
identifying the needs, identifying the technologies,
and operationalizing those,
making those part of the system.
Chief risk officer, has the responsibility
for enterprise risk, safety being one of them,
but a massive asset failure, being another a massive IT,
so they're different kinds,
so they identify the risks at an enterprise level,
they create the risk register
we're using, currently what is commonly accepted
at most companies, is a
bowtie analysis,
if there were safety issues
recognized on that risk register,
that would inform, both the safety committee,
as well as the chief safety officer,
and let me give one good example of kind of how
that information goes back and forth.
On our open audits list, when we got there,
there were too many, actual safety related,
open operating audits, that had gone on too long,
and had no owner identified, the audit committee,
which is typically populated by financial folk,
said "We're not full able to kind of understand these,"
"rationalize these to drive change.",
Snow and the audit committee,
who ultimately has responsibility,
but Snow and the audit committee
worked very carefully together to make sure,
number one, they fully understood the risk
that those open audits presented,
drove closure to those, while also assigning accountability,
so there is no audit now
that doesn't have an owner assigned,
accountability is about identifying the owner.
So I think those are actually,
kind of integrated, and but one is, several or Snow's
oversight, the other have specific responsibilities.
-: And the relationship between the independent safety
counsel, and Snow is what exactly?
They're both external to the operating part of the company?
-: Right well the ISOC is
an advisory board that advises management,
but also whose reports will go to Snow,
to see if there's anything, for example,
that they recommend, and there's a remarkable similarity
by the way, between what the ISOC has recommended
in its recent report, and what North Star has recommended,
so some of these things are already underway.
Snow drive that though.
-: Okay, thank you.
So has the ISOC prepared any reports so far?
Ms. Brownell: They have just completed,
I think it's relatively recent, yes.
-: Okay, thank you.
Judge: All right, thank you.
Mr. Weissman is there any redirect?
Mr. Weissman: If I could just a moment please.
Judge: Let's be off the record.
While we're off the record,
and you're taking care of things,
Ms. Hogle should start getting ready.
-: While we're off,
could I also just maybe offer a statement of counsel,
responsive to your question Commissioner?
The board did make the decision in 2018
not to pay the short-term incentive in 2019.
Woman: I'll ask him.
-: I can introduce that as a statement of counsel
or a (mumbles) exhibit or some.
Judge: Okay.
Woman: Yes, as an employee, ISOC.
(chatter)
Got it.
Yes okay.
No, no, I just wanna...
Yeah.
-: All right okay, okay.
-: Thank you your honor.
Judge: All right.
-: Good to have an adult supervisor, thank you Henry.
-: Let's be back on the record.
Mr. Weissman did you have any redirect?
Mr. Weissman: Thank you your honor.
You were asked some questions
about the reporting relationship of the chief ethics
and compliance officer,
do you wish to clarify the testimony on that topic?
-: I do.
Julie Cain reports to Bill Johnson, our CEO,
and she does, while she does have a legal function
for purposes of investigations and all of those things,
she reports to the CEO, which is an important distinction,
I'm sorry I missed that.
-: But you made some comments about
the extent of the Commissions role
in deciding how to allocate
capital,
can you elaborate on your understanding
of the Commissions role on that regard,
with respect to capital
to be spent under the wildfire mitigation plan?
-: Yes, that's not fundable.
So I did not mean to suggest the Commission
has no role that they've
very specifically directed allocation,
and we would absolutely respect that.
-: Okay you were asked some questions about
the use of activity based metrics
and incentive compensation,
are you aware of whether the long-term incentive plan,
as proposed by the company, includes activity-based metrics?
-: It does, with apologies to Mr. Abrams,
it does but I think the primary focus in the
direction that the compensation committee is taking
is more outcome based metrics.
Mr. Weissman: It's all I have here.
Judge: All right thank you.
Mr. Abrams do you have any re-cross
as a result of these redirect question?
Mr. Abrams: No I do not your honor.
Judge: All right thank you.
-: Your honor.
I believe, if I may, I believe that one of the
redirect was in response to my question.
Judge: My apologies, I thought we had done that already.
Go ahead.
-: Thank you.
Ms. Brownell, with respect to the responsibility
of Ms. Cain, are you saying that
her reporting authority differs
based on the role that she is playing in the organization?
-: No, I'm not.
I was referring to the fact that her title,
deputy counsel, general counsel,
suggests she does have legal responsibilities,
but that she reports for all purposes,
to the CEO of the corporation, Bill Johnson.
-: And for the purpose of clarity,
she does not report to general counsel?
-: She does not, no.
-: Thank you. -: That was my correction.
Sorry.
Judge: All right, thank you.
Any redirect Mr. Weissman?
Mr. Weissman: No.
Judge: All right, thank you.
Thank you for your testimony
Ms. Brownell: Thank you. -: Ms. Brownell you're excused.
Let's be off the record.
While Ms. Brownell gets off the stand,
Ms. Hogle get ready to come on up.
For Ms. Hogle we're having SBUA go first,
and then Mr. Abrams.
Mr. Abrams: Sorry your honor,
I'm gonna need to leave.
-: Oh okay.
Mr. Abrams: So I was hoping to be able to address
my procedural questions on the record,
before I left.
-: Okay.
So you don't have questions for Ms. Hogle?
Mr. Abrams: I do but I have to,
I need to leave, I'm sorry.
-: Okay and what is your procedural issue?
-: So I have two procedural
issues to bring up,
one is given the fact that the TCC has been
unengaged in the proceeding,
I'm concerned that,
and I was not expecting to be representing
broad wildfire survivor, victim interest,
and I think it requires a need for
public participation hearings,
so that the words and the voice of victims
can be articulated in the proceeding,
I would ask, I've already submitted,
a motion for public participation,
that has not been ruled upon,
that, that be considered, especially given
that the TCC has not been active in this proceeding.
Judge: Okay I will allow you to
renew your request for a ruling on that motion.
But very briefly when back on the record.
And what is your second item?
-: My second item is because there has been a number of
comments regarding issues with the plan,
that are still in works, that we have,
at least a day, if not two days,
at the conclusion of the plan,
when it is fully completed, for evidentiary hearings,
so that a completed plan can be,
we can provide cross-examination regarding a completed
plan, because I understand that it's in PG&E's interests
to rush this process through,
I don't wanna short circuit and have us pre-judge
a plan that is incompleted.
-: Okay so that one, Mr. Abrams,
is more appropriately done through a written motion,
for that activity.
Mr. Abrams: Okay. -: Yet so I'd ask you to
prepare it as a written motion, rather than
doing it orally today.
-: Okay.
Judge: Okay.
-: Thank you your honor. -: All right.
And do you agree to see your time
related to Ms. Hogle, or would you like to go first,
and stay for a few minutes, and get a few questions
in for her?
-: If someone would like my time?
Man: There's only one other party.
Judge: Yeah. Man: I think.
Mr. Strauss: You're welcome--
Judge: You can go first if you want.
Mr. Strauss: To take a few moments.
A few minutes if you wish.
-: Yeah that's okay.
Judge: Okay.
-: I'll ask of the other (mumbles).
Judge: Ms. Hogle come on up.
And we'll do the...
Requesting, you're requesting a prompt ruling
on your motion for public participation hearing?
You can be seated-- -: Yes.
Judge: While we're doing this.
-: Yes.
Judge: All right let's be on the record.
Mr. Abrams has asked to renew his request for a ruling
on a motion, go ahead and please renew that request.
-: Thank you your honor.
I'd like to renew my request
for public participation hearing,
given that the TCC has not engaged in this proceeding,
and the voices of victims have been largely absent
from the proceeding, I think it's important
that we hold public participation hearings
and we actively seek the engagement of victims,
and the question they have around this plan
of reorganization.
Judge: And it's my understanding that you have filed
a written motion along these lines?
-: Yes I have your honor.
Judge: Okay, thank you,
and I will bring it back to the attention
of the Administrative Law Judge,
and the assigned Commissioner,
and await their ruling on that motion.
-: Thank you your honor.
Judge: All right thank you.
At this time we will begin with cross-examine,
we will call to the stand Ms. Hogle,
on behalf of Pacific Gas and Electric company.
Ms. Hogle please stand.
And raise your right hand,
do you solemnly swear or affirm,
that the testimony you're about to give,
shall be the truth, the whole truth,
and nothing but the truth?
-: Yes.
Judge: Thank you.
Please be seated, and state your name
and place of business for the record.
-: My name is Jessica Hogle,
my place of business is PG&E corporation.
Judge: Okay, thank you.
Mr. Weissman?
Mr. Weissman: Actually my colleague, Teresa Reed Dippo
will examine.
Judge: Let's be off the record.
Can you give a spelling of your name?
'Cause you're not Mr. Rutten.
Ms. Dippo: No I'm Not.
T-E-R-E-S-A R-E-E-D D-I-P-P-O.
Judge: D-I-P.
Ms. Dippo: P-O.
Judge: O, okay thank you.
Let's be back on the record.
Please proceed.
-: Ms. Hogle, do you have in front of you PG&E
prepared testimony, volume one, which has been marked as
PG&E one?
-: Yes.
-: And can you turn to chapter nine of that testimony please?
Let me ask you, yeah. Judge: Let be off
the record.
I think you're in the wrong document.
That's the plan of reorganization.
(laughing)
Okay. -: I'm sorry.
Judge: Let's be back on the record.
-: Are you sponsoring chapter nine of that testimony,
page one, line one, through page 16, line 12?
-: Yes.
-: Was that chapter prepared by you or under your direction?
-: Yes.
-: Have there been any updates or corrections
to that chapter?
-: No.
-: Is your testimony true and correct
to the best of your knowledge?
-: Yes.
-: Ms. Hogle is available for cross-examination.
Judge: All right, thank you.
Mr. Strauss?
-: Thank you your honor.
Ms. Hogle my name is Ariel Strauss,
I'm counsel to Small Business Utility Advocates,
advocates on behalf, interests of small business,
and small load commercial customers.
I'm sorry for bring you here just for this one question,
but my question is,
in light of the wildfires,
and the release of greenhouse gases
from those fires, and the diminishment of vegetation
by those fires, has PG&E adjusted
it's greenhouse gas emissions, mitigation programs
to account for that.
-: So right, I think I'll say that the best way
to address greenhouse gas emissions from wildfires
is to prevent wildfires form occurring,
there's a chapter, chapter six,
that describes all the actions that we're
taking for that.
Beyond that, as it related to meeting climate goals,
California has very stringent climate goals in place,
PG&E is committed to beating those goals,
this plan puts us on good footing
to be able to continue to do that.
So we will meet the 80% reductions,
below 1990 levels by 2050,
and the related renewable portfolio standard
requirements of that, those goals.
-: Thank you, I will note that as a no,
to respond to my question.
-: I am not aware of any specific activities
to account for wildfire emissions.
Mr. Strauss: Thank you. -: I am of what
we're doing going forward.
Mr. Strauss: That is all your honor.
Judge: Okay, is there any redirect Mr. Weissman?
I'm sorry Ms. Reed Dippo?
Ms. Dippo: No.
Judge: All right thank you.
All right well that was quick.
Thank you for your testimony today Ms. Hogle,
you're excused. Ms. Hogle: Thank you.
Judge: Let's be off the record.
-: Sorry.
Judge: Go ahead.
-: I was just wondering, just to follow-up
on that (mumbles) we've had, didn't want to state
the record or?
Judge: Yes I think we'll do that.
So, before I would like to let the court reporters go,
I think that the primary thing
is that we need to get on the record,
before the end of today is,
and then we will continue talking
about some of the scheduling related things,
but it is, what time
we're starting on Monday?
(laughing)
and who the witness is on Monday,
that is the first witness,
that I'd like to get on the record,
and then everything else we will try
to plan out more of next week.
Mr. Weissman: Sure.
Judge: After I excuse the court reporter.
Mr. Weissman: Okay.
-: Is there anything else besides that.
-: Sorry, I had, I think there were four outstanding
statements of counsel that (mumbles) to make,
there was a (mumbles) request,
for (mumbles).
-: Okay, but is there any other
things, besides those statements of counsel?
Mr. Long: The only other question your honor,
was when you want us to move in exhibits
for cross-examination?
-: Okay.
-: We have not done that for any witness yet.
-: Right my understanding is there's only been one
exhibit that was moved in to evidence.
Mr. Long: Yeah.
-: I know it's my personal practice
to wait until the end of the proceeding,
and do the moving then,
I think I'd rather leave that to L.J.Alan
to take care of that.
If there's no objection to that approach.
Mr. Long: That's fine,
from TURNS perspective, I just wanted to make sure
weren't missing a boat on that.
-: Right I don't think you,
I don't think anybody's missing the boat on that one.
Mr. Long: Okay.
-: Okay so,
we'll do the statements of counsel,
we'll also do a start time from Monday,
and the first witness.
So, start time?
Man: 8:30?
-: 8:30?
Is that what people want?
Mr. Weissman: I'm just worried about having (mumbles).
-: But look, you didn't think we we're
gonna get through this today.
Mr. Long: That's true. (laughing)
Mr. Weissman: You were right, I was wrong.
(laughing)
Judge: Okay.
So does everybody want 8:30?
So I will just pause it. Man: I would vote for nine.
-: I will pause it for the record,
that if we start at 8:30,
it's gonna be me starting.
'Cause I don't know yet whether Bale J Alan
is gonna be sufficient, available on Monday,
he will let me know on Sunday how he's feeling.
But in any event I suspect if it's the earlier time,
I will start out and if he is available on Monday,
he will come in and then take back over.
If we do nine o'clock, there's more likely that
it'll be him starting, so,
pick your poison. (laughing)
Man: (mumbles) half hour (mumbles) big a difference.
(mumbles)
(laughing)
-: As much as we
have enjoyed your
presiding over proceedings. (laughing)
I would suggest 9:00 AM
-: All right so 9:00 AM okay?
I'm not guaranteeing it will be him,
but if he's not feeling well it'll still be me,
but I think it's more likely that way.
Okay so let's do nine o'clock.
And then, who is our first victim on Monday?
Oh sorry. Mr. Weissman: Do you wanna
do this after the reporters leave?
-: Well I would like to get who the first witness is--
Mr. Weissman: Put it on the record.
-: On the record. Mr. Weissman: Got it.
Man: I know that (mumbles) Monday.
-: Yeah, I know Ms. Yapp isn't only available
on Monday is my understanding,
if we would like to have that be the thing,
I will--
(mumbles)
Mr. Weissman: So we were, our plan
has been to call Ms. Cain, Julie Cain,
as our first witness on Monday,
and then from there we would go to,
what we're referring to as, the wildfire
chapter six panel.
There's three witness who're sponsoring
different parts of chapter six,
and the discussed Bale J Alan (mumbles).
-: Okay and then-- -: Then Cathy Yapp after that.
-: And then we can do Ms. Yapp after that.
So, the proposal then from PG&E is to do Cain,
chapter six panel, and then Ms. Yapp.
Mr. Weissman: Right.
Panel it's Powell, (mumbles) and (mumbles).
-: Okay is that an agreeable preliminary order for everybody?
(mumbles)
Well she, I mean, as long as Ms. Yapp is done.
-: Monday yeah. -: I think on Monday,
that, that is fine.
-: Those, I mean if we
run short, if we have time, we could talk about
Mr. Spansky (mumbles).
-: Well let's-- -: Monday.
I think this is far enough for
purposes of getting it on the record.
-: Okay sure. -: And we'll do a little bit
discussion after that.
Okay.
Let's be back on the record.
While we were off the record,
we had a brief discussion,
we will reconvene on Monday at 9:00 AM
The preliminary set of witnesses,
and we will have further discussion on that,
is that the first witness that will be up,
is witness Cain, followed by
a panel, of three people, that are sponsoring chapter six,
of volume, of exhibit PG&E one,
Powell, Pender and Mark Tuckalom,
and then Ms. Yapp who has a date certain for CLECA,
will be completed on Monday.
We'll add some people to it just to know
the order for the, starting on the order for
rest of the week.
We also have a few statements of counsel,
that are follow ups that I had requested
over the course of the last day or so.
Mr. Weissman?
-: Thank you your honor.
First a question was raised about
the various capital structure adjustment,
that PG&E is proposing,
and those appear in PG&E seven,
on pages two-22, and two-22 A, so this is
just to explain, this is the amendment to
Mr. Wells testimony,
that addresses the three adjustments
to the capital structure that are being requested.
Second, a request, a question was raised as to whether the
bridge bone commitment, who are PG&E corporation is
in the record,
we had a discussion about the utility (mumbles),
the answer is no, the PG&E corporation
bridge is not in the record because they're not seeking
approval for it, it's not a utility obligation,
it is however a public document that is
been filed with the bankruptcy (mumbles).
Third of all, a question was raised,
I believe by Commissioner Rechtschaffen,
as to, or maybe it was you, sorry,
as to the list of the 2017 and 2018,
fires that appears in the plan of reorganization,
as exhibit A,
and plan of reorganization has been filed in the docket.
Fourth, Commissioner Rechtschaffen asked a question about
whether there had been any
deduction in incentive compensation as a result
of the 2017 and 2018 fires,
and I would report that in 2018,
the board decided not to pay anything on the short-term
incentive (mumbles).
-: All right thank you.
Let's be off the record.
Okay before we send the reporters home,
anything else that we need to get on the record today?
Okay don't leave right away when I go off the record okay?
Let's be back on the record.
All right this concludes our business for today,
thank you everybody,
it's been a very long day,
and I appreciate people being as concise as they could be
in their questioning and answers,
with that, today's evidentiary hearing is adjourned,
and we will reconvene on Monday at 9:00 AM
Off the record.