California utility PG&E announced a $73-billion capital expenditure plan covering the next five years, with investments targeting infrastructure upgrades to support growing demand for electricity in its territory, particularly from data centers.
The strategy was discussed by company executives in a Sept. 29 call with investors. The investment also includes the utility’s participation in the state’s expanded wildfire fund. PG&E serves about 5.3-million electricity customers, along with 4.6-million customers for natural gas, in 47 of California’s 58 counties.
“This is the year we show customers that rates are going down, and this is a year to focus on serving our large load customers and enabling rate-reducing load growth,” said Patricia Poppe, the utility’s chief executive. “I’m happy to report that while many have been focused on the California legislative process, my PG&E coworkers have been busy executing, making these plans a reality and leveraging our performance playbook to deliver consistent outcomes for customers and investors.”
PG&E earlier this year said its grid modernization efforts would include developing and deploying distribution planning tools such as advanced distribution management systems, and distributed energy resource management systems, to enable better grid management. The utility in a plan filed in March for the 2026-2028 period said it wants to build about 700 miles of underground power lines, and complete 500 miles of additional wildfire safety system upgrades, between this year and next.
The company also continues to invest in cleaner energy resources, including projects such as the Calistoga Resiliency Center (CRC), a hybrid microgrid project in Calistoga, California. The CRC, a project done along with Switzerland-based Energy Vault, was announced earlier this month.
Impact of Wildfires
Much of Monday’s call focused on the company’s effort to harden its infrastructure and mitigate the impacts of wildfires. A series of costly and deadly fires in 2017 and 2018, which state officials said were related to PG&E equipment and brought billions of dollars in damage claims, led the utility to file bankruptcy in January 2019. PG&E reorganized and exited bankruptcy in July 2020, and as a condition agreed to participate in a state-run fund to help utilities cover the costs of future wildfires.
State lawmakers recently passed Senate Bill 254, which reforms the wildfire liability program and the funding framework for investor-owned electric utilities. It includes creation of a wildfire fund continuation account, and requires utilities to issue new debt for fire mitigation, along with other measures to balance wildfire risk management with ratepayer protection. It also calls for a report in the next year to look at new ways to manage the risk of natural disasters.
“Our update today comes on the heels of a busy California legislative session culminating in the passage of Senate Bill 254,” said Poppe. “The bill was signed into law by Governor Newsom on September 19 and went into effect right away. The actions taken by our state this legislative session show that they appreciated the urgent need to improve upon the framework originally adopted under AB 1054 [which initially created the wildfire fund] in 2019.
“SB 254 provides important protections today and lays the foundation for a second phase as the state has acknowledged that the utilities and their customers cannot continue to carry the full burden of climate-driven catastrophic wildfires, especially when the utility has acted prudently,” said Poppe. “The important enhanced financial measures and the state’s commitment to a meaningful second phase were the critical elements of the bill, which we and our board weighed before deciding to opt into the fund extension.”
Newsom recently proposed an $18-billion plan to shore up the state’s wildfire fund, which was at risk of depletion after the Eaton and Palisades fires in January of this year. The proposal aims to channel $9 billion from electricity ratepayers through an extended wildfire charge, and $9 billion from PG&E along with other California energy groups, including Edison International and Sempra Energy. The goal is to provide a financial cushion for utilities found liable for wildfires, ensuring support for victims and preventing financial instability for the utilities. Poppe also on Monday noted that PG&E will contribute $144 million annually to the fund beginning in 2029, which the CEO said is a 25% reduction from its current contribution of $193 million.
“The devastating wildfires in January took us all by surprise, and the state took constructive action that protects victims and customers and recognizes the importance of healthy investor-owned utilities,” said Poppe. “As part of our five-year plan, we will continue important wildfire mitigation work, including undergrounding. We will prepare the grid to serve new homes, businesses and electric vehicles.”
Transmission Upgrades
Poppe said the utility is “starting to see a good uptick in our FERC-regulated transmission investments,” and added, “I want to make sure it’s clear that very little of that actually is any kind of beneficial load growth data center transmission CapEx yet. We need to continue to move that work through our cluster studies. And so what you’re really seeing in that plan is already … what I would describe as bread-and-butter transmission investments that, frankly, we’ve been working and waiting to build into the plan.”
Poppe added the utility is looking at upgrades to substations, along with “good maintenance as well as CAISO-approved transmission projects. We have a big project in Oakland that was CAISO [California Independent System Operator] awarded. So there’s a lot of certainty to that FERC investment.
“And like all of our CapEx plan, there’s always internal competition for what’s the highest value capital to be deployed at the lowest cost for customers that provides the most benefit, and we’re excited to be able to start to pull in that FERC CapEx,” said Poppe. “So much less driven by the appetite for capital from the CPUC [California Public Utilities Commission] and more driven by the needs of our customers and the needs of the system, and we’re excited to be able to pull in that transmission work. There’s lots to be done. And as we’ve said, we still have at least $5 billion of incremental CapEx that we would love to pull into the plan if we were ever able to. But we feel like this is the sweet spot of capital deployment at the lowest cost for customers and keeping in mind our balance sheet and our credit metrics.
Load Growth and Data Centers
Poppe in late July, during the utility’s second-quarter earnings call, said the company’s pipeline of load growth tied to data centers “continues to grow,” noting PG&E had a pipeline of 8.7 GW early this year. That figure rose to 10 GW after a second cluster study, which the CEO said was a “nearly 3x increase” year-over-year. “The 10 GW represent more than 50 different projects, many on the smaller side consistent with the inference market. We recently filed for approval to serve Microsoft’s planned 90-MW data center project in San Jose. This is just one of many smaller projects in our pipeline. I like to call our data center growth Goldilocks load, not so much to be a problem and yet enough to be beneficial for all of our customers. This is because our demand is differentiated by having a diverse set of projects, ensuring that our development pipeline remains robust and not reliant on a single location, counterparty, or approval.”
Poppe on Monday said PG&E is keeping load growth projections “in the 1% to 3% [range] for now. As we complete the cluster studies, both … we’ve shown 1.5 GW of applications in our final engineering in our first cluster study, where we see about 3.3 GW of moving through our second cluster study. As those projects get to interconnection requests and final signed contracts, then we’ll start to pull in that load.”
Said Poppe, “We prefer to keep investing in safety and resiliency for our customers, enabling rate-reducing load growth, which will drive the state’s leadership in the macro trend of AI [artificial intelligence] and electrification and ultimately helping our state meet its ambitious clean energy goals affordably. With the fund administrator report due next April, another rate reduction this month, our brand trust scores on the rise, customer bills projected to be flat to down in 2027 versus today and a robust data center pipeline, we’re positioned to deliver for California, our customers and you, our investors. As part of our five-year plan, we will continue important wildfire mitigation work, including undergrounding. We will prepare the grid to serve new homes, businesses and electric vehicles.”
—Darrell Proctor is a senior editor for POWER.
