PG&E CEO Patti Poppe on how to mitigate fire risks

Key Concepts

• Simple Affordable Model: PG&E's strategy to balance infrastructure investment with operational cost reductions to lower customer rates.
• Rate-Reducing Load Growth: The concept that increased demand, particularly from data centers, can lower rates if priced appropriately and utilized to optimize grid assets.
• Hardening the System: PG&E's proactive measures to make the electrical grid more resilient, especially against wildfire risks.
• Goldilocks Load: Refers to data center loads that are significant enough to benefit all customers but not so large as to cause operational problems.
• Diablo Canyon Nuclear Plant: California's only nuclear power plant, providing baseload, greenhouse gas-free energy.

PG&E's Strategy for Balancing Demand, Safety, and Affordability

Patty Poppy, CEO of PG&E, discussed the complex challenges facing utilities, particularly PG&E, which include managing increasing demand from data centers, ensuring grid safety, and keeping electric rates affordable, all while dealing with the aftermath of a significant 2018 fire.

The "Simple Affordable Model"

PG&E's approach to navigating these challenges is termed the "simple affordable model." This model integrates several key components:

• Infrastructure Investment: Significant investments are made in upgrading and modernizing the grid.
• Operating Maintenance Cost Reductions: These infrastructure investments are designed to be offset by reductions in operational and maintenance costs. PG&E has achieved substantial cost savings in this area over recent years.
• Load Growth Utilization: Increased demand, particularly from data centers, helps to more fully utilize existing grid assets.
• Improving Credit Metrics: Enhanced financial health leads to lower financing costs.

This integrated strategy has enabled PG&E to lower rates for customers, a trend that contrasts with national patterns. Poppy stated, "Our rates are down. We've lowered our rates three times in the last 15 months and they're going down again in 2026 while we are growing our earnings uh at over 9% a year."

Mitigating Wildfire Risk

Addressing the significant wildfire risk in California, especially given the presence of old-growth trees and extensive power lines, is a top priority. PG&E employs a multi-layered protection strategy:

• System Hardening: This includes proactive measures to make the grid more robust.
• Undergrounding Power Lines: PG&E has buried its 1,000th mile of power lines. Notably, the cost of this process has decreased by $1 million per mile since its inception, indicating improved efficiency and scale.
• Technology Integration: PG&E leverages advanced technology to enhance situational awareness and responsiveness to ignitions.

These efforts have shown positive results, with ignitions down 35% year-over-year, even with similar fire conditions. Poppy emphasized, "Our layers of protection are working. That makes customers safer. And that's that's the most important thing."

Accommodating Data Center Growth and AI Demand

The San Francisco Bay Area, a hub for AI companies, presents a unique opportunity and challenge for PG&E. The company is focused on growing production capacity to support data centers while maintaining affordability.

• Rate-Reducing Load Growth: Poppy explained that the growth in demand from data centers can be "rate-reducing" if priced correctly.
• Fair Pricing: PG&E ensures that large loads, such as those from data centers, do not subsidize residential customers. These large customers "pay its full freight."
• Grid Utilization and Revenue: Increased demand from data centers leads to better utilization of the grid and generates new revenue streams, which Poppy noted PG&E has not experienced in decades due to previous low growth.
• Distributed Data Centers: The demand is not solely for massive hyperscale facilities but also for distributed compute data centers supporting companies like PayPal, Zoom, and Netflix, which use AI in their daily operations.
• Latency and Proximity: The need for compute power to be located near headquarters and technical talent is driven by latency requirements in AI inference models.
• "Goldilocks Load": PG&E defines ideal data center loads as "Goldilocks load" – large enough to provide benefits to all customers but not so large as to create operational problems. Poppy mentioned a site in Woodland, near Sacramento, equipped for up to a gigawatt, but most applications are for 100 megawatts.

The Status of Diablo Canyon Nuclear Plant

The Diablo Canyon nuclear plant, California's sole nuclear facility and a significant source of baseload, greenhouse gas-free energy (providing approximately 1/8th to 1/10th of daily power production), is a critical asset.

• State Extension: PG&E has a 5-year extension from the state of California.
• Federal Approval: The Nuclear Regulatory Commission (NRC) has granted a 20-year permission to operate, contingent on final state permits.
• Legislative Action Needed: Poppy highlighted that further legislative action by the state will be necessary to extend the plant's operation beyond the current state-granted extension.
• Performance: Poppy expressed pride in the plant's performance, stating, "We are one of the top performing nuclear plants in the world."

Poppy expressed surprise at the previous discussions about shutting down the plant, especially given its contribution to clean energy. She acknowledged Governor Gavin Newsom's role in pushing for the initial 5-year extension but reiterated the need for future legislative action.

Conclusion

Patty Poppy outlined PG&E's multifaceted strategy to address the complex demands of modern utility operations. By implementing a "simple affordable model" that integrates infrastructure investment with cost reductions, leveraging "rate-reducing load growth" from data centers, and prioritizing system hardening to mitigate wildfire risks, PG&E aims to deliver safer, more reliable, and increasingly affordable power to its customers. The continued operation of Diablo Canyon is also seen as crucial for providing baseload, carbon-free energy.