PG&E to lay off employees and executives as it tightens its belt

PG&E is cutting 390 employees as it tightens its belt. PG&E is cutting 390 employees as it tightens its belt. Photo: PAUL CHINN, SFC Photo: PAUL CHINN, SFC Image 1 of / 17 Caption Close PG&E to lay off employees and executives as it tightens its belt 1 / 17 Back to Gallery

After years of adding staff to improve the safety of its sprawling operations, Pacific Gas and Electric Co. announced a series of belt-tightening measures Wednesday that will trim its 23,000-member workforce and save roughly $300 million each year.

The utility and its holding company, PG&E Corp., will get rid of eight corporate officers, 390 staff members and 800 contractors. PG&E, based in San Francisco, also will not fill 500 open positions that it has deemed to be noncritical.

In addition, the company plans to cut costs by renegotiating contracts with some of its vendors and reducing discretionary spending.

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The changes come as PG&E prepares to operate under Geisha Williams, who will take the reins as CEO March 1. Some of the cuts are designed to streamline PG&E’s decision-making structure, with the elimination of the positions of three senior vice presidents and five vice presidents.

But most of the cuts are intended to keep down costs at a time when California’s electrical grid is undergoing significant changes.

Under orders from the state, utilities are dramatically scaling up their use of renewable power and investing in large-scale energy storage, while trying to manage a grid on which the flow of power from different sources constantly shifts.

Those changes prompted PG&E to raise rates for its more than 5 million electricity customers. Electric bills for PG&E’s residential customers are expected to rise an average of 1.4 percent this month.

“None of these decisions were made lightly,” Williams said in a press release Wednesday.

“We greatly value the contributions of all of our employees,” she said. “We understand that these decisions create personal hardships. At the same time, we recognize our responsibility to invest in the future in order to create value for our customers, our communities and our state.”

The move represents a switch for California’s largest utility, which added roughly 3,000 employees over the last four years. The deadly 2010 explosion of a PG&E natural gas pipeline in San Bruno forced the company to beef up its gas and safety operations.

In addition to cutting some positions, PG&E will also reorganize its management.

Senior executives covering finance, legal and regulatory affairs, human resources, ethics and environmental matters will report directly to Williams. Executives in charge of electricity and gas operations, nuclear power, information technology and customer care will report to Nick Stavropoulos, the head of gas operations who will become chief operating officer on March 1.

The company has chosen one of its other top natural gas executives, John Higgins, to be vice president of safety and health for the entire utility, reporting to Stavropoulos.

Travis Miller, a utilities analyst for the Morningstar research firm, said PG&E’s staff size, while large, is not unusual by industry standards. For the first three quarters of 2016, the company brought in almost $13 billion in revenue while spending $11.8 billion on operating expenses.

“I think most of PG&E’s costs were in line, but utilities everywhere are trying to optimize their cost structure and produce earnings growth,” Miller said. “PG&E has put a lot of investment into system safety and modernization, so as they get through that investment phase, we would expect that costs would come down.”

David R. Baker is a San Francisco Chronicle staff writer. Email: dbaker@sfchronicle.com Twitter: @DavidBakerSF