‘We are at a turning point’: PG&E Cuts $2B from 2027 Capital Plan Amid Rising California Energy Costs, Wildfire Liability Strains
Utility provider Pacific Gas and Electric Corp. (PG&E) is taking steps toward strengthening its operations to better serve California customers and attract the investment needed to meet the region’s growing energy demand.
In a video released this month, PG&E CEO Patti Poppe described the company's work over the last six years as meaningful progress, but warned that the utility is now “at a turning point.”
“We are unable to fund PG&E’s continued transformation at our current pace,” Poppe said. “Here’s the fundamental challenge: Financing our work has become increasingly difficult and expensive due to the way California law assigns the cost of wildfire to utility customers and investors, unlike in any other state.”
To address these financial pressures, PG&E, one of California’s big three utilities, announced plans to reinvent its service model and what’s ahead to help build the state’s energy future. This includes plans to defer approximately $2 billion of work in 2027 to help keep customer costs down.
The cost-cutting measure aims to reduce the company’s need for high-cost borrowing while maintaining critical safety investments and compliance obligations in the state.
The strategy includes a comprehensive review of PG&E's business units and immediate adjustments to its $11.4 billion 2027 Capital Plan, which highlights a $2 billion reduction from its previous $13.4 billion debt-financed spending outlook.
According to a company release, PG&E has identified the work of several programs that can be delayed or deferred to prioritize key utility objectives. However, the utility noted that operating in California is becoming increasingly difficult, even as it works to balance affordable energy with wildfire resiliency.
“California's wildfire liability framework continues to create financing risks that drive higher costs, affect customer affordability and limit investment in the energy system,” Poppe noted in a statement.
Moving forward, PG&E outlines its core objectives in its updated 2027 plan:
- Maintains industry-leading safety performance
- Improves customer affordability
- Strengthens energy system reliability and resiliency
While the utility aims to build a framework capable of attracting affordable, long-term capital while honoring existing labor agreements, major wildfire liabilities continue to pose looming financial hurdles.
PG&E has endured bankruptcy filings twice in the last 25 years. In 2019, the company filed Chapter 11 bankruptcy for more than $71 billion in assets, marking the largest in the utility sector linked to massive financial liabilities from wildfires that impacted the Northern California area.
California Gov. Gavin Newsom ended his opposition to a $23 billion plan in 2020 to help PG&E emerge from bankruptcy later that year through $21 billion made available from the state’s wildfire insurance fund.
PG&E previously filed for bankruptcy in 2001 after what critics have deemed the “California electricity crisis.” At the time, it was reportedly the largest utility bankruptcy in U.S. history at $36.1 billion in assets, caused by a combination of inflated wholesale power prices, illegal market manipulation by energy traders and flawed state deregulation laws, according to regulatory findings.
The utility is working to maintain momentum toward its clean energy and affordability goals, even as escalating wildfire mitigation costs loom, posing the concern of a third bankruptcy filing.
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Eric Moody