PG&E needs wildfire policy reform to manage tail risk, CEO says

Pacific Gas & Electric Corp.’s foundational operations are “strong and improving every day,” but the company wants to see state wildfire policy reform that would help it achieve better credit ratings and protect against tail risk, CEO Patti Poppe said during a third-quarter earnings call on Thursday.

Fitch Ratings last month revised its rating outlook for both PG&E Corp. and its subsidiary utility, PG&E Co., to negative from stable while maintaining its credit rating at BBB-‌. 

“The California legislative session ended with no meaningful progress towards a more durable solution to socialize wildfire liabilities and ease financial pressure on investor-owned utilities from continued high wildfire risk,” Fitch said in a Sept. 16 note about the outlook downgrade. 

PG&E’s stock price fell 20% after California lawmakers advanced Senate Bill 492 without language shielding state utilities from wildfire liability. Negotiations over the legislation continued into a special session, but the bill did not receive a final vote before the California legislature ended its session in September. 

Poppe said during the call that the company’s credit rating “is a major issue that must be solved, and when Fitch put us on negative outlook, I think that really reiterated that inaction will continue to get increasingly expensive for our customers.”

“In fact, all of the debt that we've issued as sub-investment grade since 2017 will cost our customers an incremental $4 billion in interest expense over the life of that financing,” she said. “That is a cost that can be immediately remediated with good long-term policy.” At another point in the call, she said, “It's very realistic that this business be investment-grade.”

Some of the policies PG&E is looking for from California lawmakers include a permanent source of liquidity beyond the Wildfire Fund plus a maximum disallowance independent of funding source, according to the company’s earnings presentation.

On the call, Poppe said that in the absence of legislation, “insurance still needs to join in discussions about what is going to occur to make sure that claims are limited and our customers are not the infinite backstop for insured properties.”

“Conversations have been productive, they’ve continued,” she said. A joint hearing of the California legislature on Oct. 29 about utilities, energy and insurance “is intended to discuss subrogation … so, given that, I think we'll hear continued discussions with insurance as well as all of the stakeholders,” she said.

PG&E announced Sept. 2 that it is launching a strategic review and cutting $2 billion from its 2027 capital plan, reducing spending from $13.4B to $11.4B. In a release announcing the change, Poppe said, “California's wildfire liability framework continues to create financing risks that drive higher costs, affect customer affordability, and limit investment in the energy system.”

Delayed or deferred work includes connecting new housing projects, interconnecting new renewable generation projects, technology upgrades and large load beyond the utility’s initial 1.8-GW tranche.

However, Poppe said during the earnings call that this decrease should not impact the company’s data center pipeline. “[It’s] specifically for 2027 — we see that our 1.8 GW of projects that we have previously signaled would be online by 2030 remain in that plan,” she said. 

“We're still spending $11.4 billion of capital next year,” she added. “So there's still obviously capital to deploy to our critical safety issues, our critical compliance issues and projects that are well on their way to reducing rates for customers.”

PG&E has connected 174 MW of data centers to the grid since 2024, according to PG&E’s presentation, and it has a total data center pipeline of more than 12.8 GW.