Pacific Gas & Electric needs $50 billion for rural wildfire prevention, but lacks a clear path to financing it

A PG&E crew sprayed retardant on a power pole near Big
Sur, Calif., earlier this year. (Photo by Peter Dasilva, Reuters)

Northern California's Pacific Gas and Electric needs to address the threat its electrical lines pose in sparking rural wildfires. Its prevention plan will cost billions that the company currently does not have, reports Kathrine Blunt of The Wall Street Journal.

In 2019, the company filed for Chapter 11 bankruptcy protection "to sort through an estimated $30 billion in liability costs stemming from a series of major fires. . . . The company’s lines have ignited more than 20 major fires in recent years, and it pleaded guilty to 84 counts of involuntary manslaughter for its role in sparking the 2018 Camp Fire that destroyed the town of Paradise, Calif.," Blunt notes. "Regulations require it to bolster its system."

PG&E's bankruptcy restructuring has made it difficult for the company to make about $50 billion in investments over the next four years. Its first goal is a "10-year plan to bury 10,000 miles of power lines to safeguard them from sparking on contact with trees and other objects. The company has estimated it will cost roughly $20 billion," Blunt reports. "The company’s options are limited without substantially increasing customer rates, which are among the highest in the nation." PG&E provides electricity and natural gas to about 16 million people.

To address the first goal, the utility is seeking creative financing options. Chief Financial Officer Chris Foster told Blunt, "The company is considering ways to leverage federal funding available for energy and climate investments, including some allocated through the bipartisan infrastructure bill passed late last year.  . . . A quantitative constraint in our plan is how quickly we can get back to investment grade because it will make the debt that we have much cheaper for our customers."

Blunt writes, "The company doesn’t need to raise billions of dollars immediately. In the near term, analysts and investors say, it can likely rely on revenue from operations alongside its creative financing efforts." Joe Shaver, managing partner and chief investment officer at Electron Capital, an investment adviser focused on utility and energy companies, told Blunt that he expects PG&E’s share price to keep rising as it makes the investments needed to reduce wildfire risk. Shave said, “They’re not out of the woods yet, and there’s a lot more wood to chop."