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The CEO Forum: The Ultimate CEOs: Peter A. Darbee

Chairman, President, and CEO, PG&E Corp.

Fortnightly Magazine - June 2006

achieving your targets is greater. So, distance does make accomplishment of these goals more difficult. But our strategy, M&A, will not be based on contiguity. Proximity will be helpful based on what I described.

Basically, we are developing a model with what we are doing with PG&E. And the idea would be to duplicate that model. We are transforming PG&E to dramatically improve service, and to reduce expenses and enhance efficiency and improve culture. The idea would be to replicate that process.

Fortnightly: Given the recent trend of outsourcing in the utilities industry, do you have a view of what you believe is the core of the utility and what others can do better than the utility can?

Darbee: I certainly see the core of the business being electric and gas distribution and transmission. Generation is the stabilizer that ensures new power plants are built if the competitive market doesn’t want to build them. By contrast, tree trimming is something we have outsourced for years, and local tree trimming guys can do that very well.

Some utilities have looked at systems and said, should [we] outsource? We have looked at them thus far and concluded no. We hired a very good systems person, Pat Lawicki, our chief information officer. She is making dramatic changes and she seems to be very, very good. So, systems I think, as with telecommunications, is a pretty fundamental part of our business. We’re inclined to keep that in-house unless we find some reason that it won’t work, and that we can’t do it well and do it cost-effectively.

We also have no intention of outsourcing energy risk management. We don’t think that makes sense. Because if you outsource it to an investment bank, for example, experience has shown it is hard to make sure that they are managing things with your best interest in mind, in contrast to their best interests.

We’re building an enterprise wide risk-management process now, and I’m happy with the way it is going. So, the questions we look at are, do we do it, and do we do it well? Call centers have been something some people have been inclined to outsource. For the foreseeable future our conclusion is that is a vital point of connection with our customers. We can make improvements on cost, but that is a proprietary point of connection with our customers and we’re not currently inclined to give that to a third party.

Fortnightly: What is your definition of leadership? What makes you effective as a leader in your company?

Darbee: I have put an immense amount of time in to what good leadership looks like. It resulted from my movement from Wall Street to the CFO of Pac Bell in 1994. When I was on Wall Street, I didn’t have a job that required great leadership because [I was] managing a small group of people. But when I left—and my first role was managing 2,500 people—I realized this was not an area that I had a great track record in. Therefore, in order to address that