Climate-change legislation

Of course, this will work only if the grid knows where your car is, what time you're plugged in, and what rate to charge or to credit you with. The grid, in other words, needs to be intelligent.

That's where PG&E's SmartMeter comes in. This electronic device monitors a home's energy consumption in real time, allowing the utility to charge different rates as electricity demand rises and falls during the day. The meters move PG&E's model closer to Darbee's vision of "the smart energy web."

"In the future," says Roland Risser, the utility's efficiency czar, "we might send you a message and say, Do you realize your pool pump is coming on at 3 p.m.? Or that the compressor on your air conditioner is about to go out?" Such a system would create new opportunities for companies that make devices smart enough to communicate with the grid- everything from your Toyota to your toaster.

Even as PG&E goes green, it continues to make investments in less benign technologies, like liquefied gas and gas-fired power plants. Executives characterize that spending as a "bridging strategy." Darbee has also been putting out the word that more nuclear power could be a good thing for a warming world, California's 30-year-old moratorium on new nuclear plants notwithstanding.

Positions like these have alienated San Francisco's liberal board of supervisors, who think they can move faster on fighting climate change than a profit-motivated utility can. Mayor Gavin Newsom has quietly supported efforts to seek independent sources of green energy, and now several other California cities and counties are preparing similar plans.

That, however, doesn't seem to have hurt PG&E's bottom line. Its financial prospects, in fact, would make any respectable utility manager green - with envy. PG&E Corp.'s stock price jumped 27.5 percent last year and hit an all-time high closing price of $52.11 in April. Counting dividends, PG&E shareholders earned a 31.6 percent return for 2006.

Darbee is confident that his company is now more prepared than just about any U.S. utility to weather a predicted new storm of climate-change legislation. "There's going to be mandatory carbon regulation within the next two to three years," Darbee says, "and the probability reaches 100 percent in four years. We're going to be ready for it. There's a saying I learned during my days on Wall Street: You don't fight the tape."

Katherine Ellison is coauthor of "The New Economy of Nature: The Quest to Make Conservation Profitable." 

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