PG&E Has Restructured To Better Serve Northern California. Developers Say There's More Work To Do

A restructuring is underway at regional utility Pacific Gas & Electric that Northern California commercial property professionals hope will address some of the challenges they have experienced getting power to their new projects over the years.

Roughly two years after the installation of a new CEO, the much-criticized electric company is implementing a regionalized approach that is meant to save time and better serve the development community. Some say they’ve seen improvements, but others are still skeptical, citing PG&E’s turbulent track record.

“I don't care who the management differential is. Show me the results that are getting better. Until then, you’re the exact same institution with the exact same problem,” Transwestern National Director of Laboratory and Life Sciences Peter Conte told Bisnow. 

Nearly 15 years have passed since a deadly explosion in San Bruno caused by a ruptured PG&E gas line, and earlier this year the company agreed to a $45M settlement related to the 2021 Dixie Fire, the second largest in California history. But on a day-to-day basis, developers in Northern California have grown increasingly frustrated over the years as power to new properties has been delayed.

The regionalization plan, put in place after the arrival of new CEO Patti Poppe, is meant to turn things around, according to the organization’s documentation.

In addition, the restructuring will satisfy the California Public Utilities Commission’s new set of energy requirements for all three of California’s public utilities while supporting the state’s climate and economic development goals. 

The two other California utilities are Southern California Edison and San Diego Gas & Electric.

“Our regionalization plan, which was approved by the CPUC in June of 2022, organized our company into five specific regions. By operating with the regional model, we are able to move some of the key business decisions closer to the customer,” according to PG&E spokesperson Tamar Sarkissian.

PG&E declined to make Poppe or another executive available for comment.

Delays related to energization have taken a toll on virtually every type of new asset constructed in the Bay Area over the past five years, including research and development and industrial facilities, multifamily complexes and office buildings. 

These delays result in multimillion-dollar losses to builders and add another layer of difficulty to the already arduous process of development in Northern California, according to many in the local development community.

Earlier this year, a lack of power at San Francisco multifamily buildings elicited an investigation by the city. Mayor London Breed said 75 projects in the city experienced delays during the first quarter, according to CBS News. 

The city doesn't have new data on the number of delays at multifamily buildings, San Francisco Director of Housing Delivery Judson True told Bisnow. 

“We continue to see challenges with getting projects the power they need in a timely fashion, but we’re not going to give up, because San Francisco needs this housing,” True said.

PG&E is among the biggest challenges facing developers trying to deliver affordable housing projects, Bridge Housing Corp. Executive Vice President Smitha Seshadri said during Bisnow’s Oct. 16 Multifamily Annual Conference Northern California event.

“PG&E continues to be a black box,” Seshadri said. “For one of our projects right here in San Francisco, we just could not get a response from PG&E.”

Bridge Housing had requested the location of its tie-in point to connect its 10K SF ground-floor health clinic to its 137-unit affordable housing project above. 

“I was hearing from my contractor that it's going to be like five city blocks away,” which would be an inconvenience for residents, she said. 

Ultimately, Bridge Housing had to take the matter up with the San Francisco Board of Supervisors. 

CRE professionals generally feel that PG&E has a long way to go, and they expressed doubt about the organization's attempt to improve.

“Well, they’re not blowing cities up anymore,” Conte told Bisnow when asked if the restructuring had any impact on commercial real estate. 

The September 2010 San Bruno pipeline explosion killed eight people and damaged or destroyed nearly 50 homes in the Crestmoor neighborhood. 

“The major inflection or friction point wasn't the regionality of the management, as far as I can tell,” Conte said.  

Every development project has a power box, or enclosed transformer, that houses the electrical components powering the site. 

“PG&E custom-builds every one of their power boxes, and they only have one supplier that meets the spec,” Conte said. “So therefore, even just physically getting the parts to upgrade power has been an issue from a logistics and supply chain issue.”

PG&E hasn't created any additional capacity for power in several decades, he said.

“Changing whose phone number is at the top of the call sheet, which potentially could be somewhat helpful from a purely bureaucratic process, the endemic problems of PG&E have not changed whatsoever,” Conte said. 

At recent Bisnow events, CRE professionals have said that developers sometimes won’t build in PG&E’s service area. For instance, if a company wants to construct an asset in Silicon Valley, it will instead select viable locations served by Silicon Valley Power.

SVP’s service area includes much of Santa Clara County, including Campbell, Cupertino, Gilroy, Los Altos, Los Altos Hills, Los Gatos, Milpitas, Monte Sereno, Morgan Hill and Mountain View.

Conte said West Sacramento has emerged as an alternative location for new life sciences development because the Sacramento Power Authority serves the city.

Alameda and San Diego have also become more desirable alternative locations for new development, Conte said.

Utility companies across the state are working to upgrade their infrastructure, MGAC Senior Director Cynthia NeSmith‑Montanez told Bisnow. MGAC is a global project management firm.

“The delays are improving slightly for the engineering teams and service centers, but they remain the same in the aspect of actual connection to the grid,” NeSmith‑Montanez said.

“The infrastructure is under strain, and PG&E, Silicon Valley Power, SMUD, SoCal Edison and others are working to upgrade and secure the existing infrastructure as well as looking at ways to expand it for future needs.”