Businessmodel of PG&E

Customer Segments

PG&E provides electric and gas utility services to a broad spectrum of customers. The Company principally divides its electricity customers into five segments:

• Residential, comprising general consumers living in homes and residential buildings;
• Commercial, primarily comprising small and medium-sized businesses, as well as some larger enterprises;
• Industrial, comprising various engineering, manufacturing, and other industrial operators;
• Agricultural, comprising farming and agricultural operations; and
• Public street and highway lighting, comprising various government-sponsored public lighting projects. PG&E divides its natural gas transportation customers into Core Customers – comprising small commercial and residential customers – and Non-Core Customers, comprising, industrial, large commercial, and natural gas-fired electric generation facilities.

PG&E is a regional utility company. It provides electricity and natural gas utility services to a network of customers across northern and central California. The Company does not have any international operations, and does not appear to have imminent plans to expand its service to customers across the US.

Value Propositions

PG&E provides value to its customers in the following ways:

• Its reputation and track record, with the Company established as a reliable provider of utilities across large parts of California, with a positive track record for good service dating back a number of years;
• Its extensive distribution infrastructure, with the Company operating around 42,000 circuit miles of electricity distribution lines and approximately 42,800 miles of distribution pipelines, enabling to distribute gas and electricity efficiently and effectively;
• Its diverse portfolio of energy sources, with the Company distributing electricity from a range of renewable – including solar and hydroelectric, nuclear, and fossil fuel power plants;
• Its accessibility, with the Company operating an online customer portal that enables its customers to pay bills and access resources online on a self-service basis; and
• Its specialist industry expertise and experience, with the Company employing highly-trained specialist personnel across its various operating divisions and units, as well as a team of experienced industry executives. ### Channels

PG&E operates a website at www.PG&E.com, through which it provides information on its various services, rate plans, coverage areas, and facilities. The Company also operates an online customer portal, which allows customers to view and pay bills, check account balances, and set-up recurring payments.

While customers are able to sign up for the Company’s services online, PG&E’s are completed through its direct retail and wholesale sales teams, who operate out of the Company’s network of offices across California. Core Customers can purchase natural gas procurement service from PG&E directly, or via various non-utility third party gas procurement service providers. When customers purchase gas supply from third-party providers, the Company continues to provide gas delivery, metering and billing services to customers. In most cases, however, PG&E provides bundled services, whereby it provides both transportation and procurement services.

PG&E operates an extensive electric distribution network, including approximately 142,000 circuit miles of electric distribution lines – of which around 20% are underground and around 80% are overhead, 58 transmission switching substations, and 603 distribution substations. The Company also distributes gas through a proprietary network comprising approximately 42,800 miles of gas distribution pipelines, more than 6,700 miles of transmission pipelines, and various storage facilities.

Customer Relationships

PG&E provides a range of tools and services to customers on a self-service basis through its online customer portal. Via this channel, the Company enables customers to manage their accounts, view their billing and transaction history, set up regular payments, and set up account alerts without interacting with members of the Company’s sales and support personnel.

With PG&E’s sales routed through its direct sales force, the Company is able to provide personalised assistance to customers, advising them on the most relevant rates and service options for their individual circumstances. The Company provides utility services primarily under fixed-term contracts.

PG&E provides a range of information and support resources to customers on its website, including energy saving tips, payment guides, and rate plans. Alternatively, customers can receive personalised responses to queries and complaints by contacting the Company’s support staff directly, either over the phone or via an online contact form.

Customers are also able to stay up-to-date with PG&E’s operations and interact with the Company directly through its social media accounts, including with Facebook, Twitter, LinkedIn, YouTube, and Instagram.

Key Activities

PG&E is a holding company. Its principal operating subsidiary is Pacific Gas and Electric Company, which is engaged in the sale and delivery of electricity and natural gas to a broad range of customers across areas of northern and central California. The Company generates electricity and provides electricity transmission and distribution services throughout its service territory, serving residential, commercial, industrial and agricultural customers.

PG&E controls an extensive distribution network, including thousands of circuit miles of interconnected transmission lines operating at varying voltages, as well as thousands of circuit miles of gas distribution pipelines. The Company also operates a portfolio of electric transmission substations and storage facilities. PG&E’s operations are conducted primarily under the regulatory authority of the California Public Utilities Commission.

Key Partners

PG&E works closely with a broad network of partners that support its various generation and distribution activities. These partners can be categorised broadly as:

• Supplier and Vendor Partners, comprising suppliers of raw materials and equipment used as part of the Company’s energy generation and distribution activities, as well as suppliers of services and technology that are utilised across the enterprise more broadly;
• Channel and Distribution Partners, comprising distributors and contractors that provide services on the Company’s behalf, as well as non-utility third-party providers that extend the Company’s own in-house sales and marketing capability;
• Trade Partners, comprising trade professionals that provide services relating to refrigeration, lighting, heating and air conditioning, and agriculture that work closely with the Company on various projects;
• Energy Efficiency Partners, comprising local contractors and trade professionals to which the Company provides assistance in implementing energy-efficiency measures; and
• Strategic and Alliance Partners, comprising a range of companies form various sectors with which the Company shares certain resources and collaborates on joint projects. PG&E lists a number of its local trade partners on its website, comprising local and regional operators such as Lumenature, FXR Construction, Green Generation Solutions, Jerico Mechanical, and Ecogreen Solutions. The Company has also launched partnerships with larger organisations, including a tie-up with NASA to test drones for the inspection of gas infrastructure, and a deal with the Hilton Union Square to provide an energy efficiency system to the hotel.

Key Resources

PG&E’s key resources are its energy production and distribution infrastructure, its natural gas pipeline network, its raw materials and supply chain, its online platform, its IT and communications infrastructure, its sales and marketing channels, its partnerships, and its personnel.

Among PG&E’s most important assets are its electric and natural gas distribution infrastructure, comprising electricity and natural gas distribution facilities, natural gas gathering facilities and generation facilities, and natural gas and electricity transmission facilities. The Company distributes its gas and electricity through a proprietary network of 142,000 circuit miles of underground and overhead electric distribution lines and 42,800 miles of gas distribution pipelines.

The Company also owns and operates eight natural gas compressor stations, 58 transmission switching substations, 603 distribution substations, and various storage facilities.

Cost Structure

PG&E incurs costs in relation to the procurement of energy and supplies – including natural gas, the operation and maintenance of its generation and distribution infrastructure, the development of its online platform, the maintenance of its IT and communications infrastructure, the operation of its sales and marketing channels – including advertising expenses, the management of its partnerships, and the retention of its personnel.

In 2015 PG&E recorded total operating costs in the amount of $15.32 billion. This included electricity costs of $5.10 billion, natural gas costs of $663 million, and operating and maintenance costs totalling $6.95 billion.

Revenue Streams

PG&E generates revenue primarily through the retail and wholesale sale and delivery of electricity and natural gas to residential, commercial, industrial, and agricultural customers across its service areas in California. The Company also derives a small portion of its revenue from the provision of various related services, such as training and consulting.

In 2015 PG&E generated total annual operating revenue of $16.83 billion, down on the $17.09 billion recorded by the Company the previous year. The vast majority of this revenue was generated by the Company’s electricity operations, which alone recorded revenue for the year of $13.66 billion. More than $10 billion in annual revenue was attributed to the Company’s electricity sales to residential and commercial customers. PG&E’s natural gas operations accounted for $3.18 billion in revenue.