Strengthening the Grid: Rethinking Utility Pole Restoration as a Capital Investment

As utilities confront threats from wildfires, severe weather, and aging infrastructure, innovative strategies for strengthening distribution and transmission assets are gaining renewed urgency. Wooden utility poles remain vulnerable to damage from woodpeckers, storms, vehicle collisions, and heat-driven degradation. Pole programs, traditionally treated as providing limited alternatives to replacement, are now a focal point to bolstering long-term grid resilience planning. With limited capital budgets and ever vigilant regulatory scrutiny, utilities must plan and design the pole replacement and restoration programs to optimize performance and resiliency while appropriately budgeting costs by balancing between maintenance expenses and capital re-investment.

A Case Study in Action: Investor-Owned Utilities in California

To gain a better understanding of whether utility pole restoration qualifies as an operational expense or capital expenditure, Midgard Consulting conducted a review of investor-owned utilities operating in California and their expenditures of pole related monetary outlays caused by car accidents, storm and grid hardening, woodpecker damage and/or wildfire protection (including prevention measures).

In California, electric utility pole replacements are governed primarily by General Orders issued by the California Public Utilities Commission, along with utility accounting practices governed by Federal Energy Regulatory Commission accounting rules and CPUC General Rate Case decisions. Table 1 presents a breakdown of the rules and regulations governing pole replacements, with emphasis on when costs are expended versus capitalized.

Differentiating between the alternative accounting treatments comes down to the nature of the expenditure, the resulting impact the expenditure has on the condition assessment of the asset, and the precedent and accounting treatment the utility has used previously for similar work. Work planned and incorporated within a larger expenditure program with the objective of extending the economic and effective lives of the assets has high confidence of being treated as capital expenditure. Unlike operating expenses that are immediately deducted from revenue in the year in which they are incurred, capitalized investments are added to the rate base and depreciated over the useful life of the asset.

Precedent in Practice: What the CPUC Is Teaching the Sector

Recent proceedings before the California Public Utilities Commission (CPUC) show how regulatory bodies are parsing these distinctions.

In its 2023 General Rate Case, Pacific Gas & Electric (PG&E) introduced a pole asset management strategy that classified severely damaged poles as capital replacements, especially those in High Fire Threat Districts. The utility was authorized to recover costs under capital accounts for systematic upgrades, despite pushback on unit costs and timing. Notably, PG&E had faced regulatory criticism following the 2021 Brewer Fire, which was linked to a pole patched (rather than replaced) despite known woodpecker damage5.

In Southern California Edison’s 2021 GRC6, the CPUC reaffirmed the principle that preventative maintenance under structured programs may qualify as capital, while emergency or reactive work typically remains an operational expense. SCE's “Pole Loading” and “Deteriorated Pole” programs were cited as examples where capital tracking and systematic planning enable life-extending interventions to qualify for long-term recovery.

These examples point to a regulatory appetite for re-investment subject to improved resilience as part of a disciplined, documented capital expenditure program.

The Case for Grid Hardening as a Capital Measure

According to Midgard Consulting's report, utilities capitalize investments where the application increases structural integrity, extends service life, and/or reduces environmental vulnerability.

This has implications beyond one product and signals a shift in how utilities might approach alternative reinforcement strategies, such as when a short-term repair may be transformed into a strategic asset investment.

A new utility pole reinforcement technology has been developed to extend the service life of existing wooden poles while improving their resilience against wildfire, severe weather, pest damage, and natural aging. Unlike temporary measures such as patching or bracing, this solution provides both structural strengthening and fire protection in one application. It can extend the lifespan of poles by up to thirty years at a fraction of the cost of full replacement, making it a cost-effective and sustainable alternative. By combining durability, resilience, and enhanced load-bearing capacity, reinforcement solutions represent a strategic investment for utilities, supporting grid modernization and wildfire mitigation programs.  

The key litmus test for utilities’ accounting treatment of their expenditures as capital versus maintenance expense is planning and intent. When pole reinforcement is programmatic, preventative, and performance-enhancing, regulators are expected to concur to treat infrastructure investment as an increase to utility rate base.

Resilience, Reimagined

As utilities face mounting pressures from regulators, insurers, and the public to prevent outages and fire-related liabilities, asset reinforcement is no longer a marginal consideration. It’s a central piece of modern grid management.

Technologies are giving utilities a new toolkit to close the gap between full replacement and temporary repair. When used strategically, they represent not just savings, but long-term reliability and risk mitigation. More importantly, they fit into a broader rethinking of what grid hardening means in an era of climate disruption.

For asset managers, engineers, and regulatory professionals alike, the takeaway is clear: the line between expense and investment is moving—and reinforcing the grid may be one of the most capital-worthy decisions utilities can make.

For access to Midgard’s full report, please contact [email protected]