By George Avalos, MERCURY NEWS
OAKLAND — PG&E said Wednesday it will defer $2 billion in planned spending next year, a move the utility warned could delay electrical connections for new homes, renewable-energy projects, data centers and other development after California lawmakers abandoned an overhaul of wildfire liability rules.
The investor-owned utility announced it will cut capital spending by $2 billion in 2027 to $11.4 billion — a 14.9% reduction from the $13.4 billion PG&E had been planning to spend on an array of projects.
PG&E will preserve critical safety programs and meet wildfire mitigation and safety plan requirements.
At issue was Senate Bill 492, which was crafted as a wildfire liability reform measure but failed to clear the state Legislature.
After Gov. Gavin Newsom and legislative leaders reached a deal last week that would have put no limits on survivor compensation or lawyer fees for individual lawsuits, stock prices for utilities, including PG&E, nosedived. The agreement also would have allowed insurance companies to still sue utilities to recover costs for claims and prevent private equity firm investments in insurance claims.
PG&E and other state utilities, such as Southern California Edison and San Diego Gas & Electric, said without reforms from state lawmakers, power companies are forced to bear too great a burden for wildfire risks.
“The current wildfire liability framework is unsustainable,” PG&E CEO Patricia Poppe said in an interview with this news organization. “It is too expensive for our customers. With this liability construct in California, our customers pay for claims any time our equipment is involved, even when we do nothing wrong.”
Oakland-based PG&E launched a wide-ranging strategic review of its businesses because of the lack of legislative solutions to address wildfire liabilities. According to PG&E, California’s current system imperils the company’s credit rating, shoves borrowing costs higher and blunts its ability to attract the capital needed for future expenditures.
Wildfire liabilities and other financial woes forced PG&E into Chapter 11 bankruptcy in January 2019. It emerged from bankruptcy in July 2020.
“California utilities act as uncompensated insurers of last resort, which is proving unsustainable,” PG&E stated in its presentation.
Consumer Watchdog, a frequent critic of PG&E, denounced the utility’s plan to cut capital spending.
“PG&E appears to be engaged in a ‘capital strike’ where it withholds paid-for services in exchange for a political result,” said Jamie Court, president of Consumer Watchdog. “The Legislature should not respond to blackmail by PG&E.”
Consumer Watchdog demanded that the state Public Utilities Commission, PG&E’s chief regulator, look into the situation. Court said the PUC has approved certain rate changes in expectation that certain capital upgrades be conducted.
“PG&E needs to make these investments or give the ratepayers their money back,” Court said.
State legislative and executive leaders have yet to craft a plan to determine how much California’s major utilities should pay when their equipment triggers a wildfire disaster. Poppe hopes the governor will call a special legislative session to address the situation.
The uncertainty in the closing days of the legislative session had a major impact on PG&E shares. The company’s stock dropped 5.2% on Wednesday and finished at $13.33, a 52-week low. The company’s shares have fallen 27.4% since Aug. 25.
PG&E now says it intends to delay or defer several categories of work: connections for new housing projects of all kinds, interconnections to new renewable energy projects, company technology upgrades, and “large loads beyond 1.8 gigawatts,” a company presentation states.
By spending less, PG&E also reduces its borrowing costs, which could help the company keep its credit rating at a reasonable benchmark. PG&E’s credit rating at present is BBB- at Fitch and Baa3 at Moody’s, which are both investment grade, but is rated by S&P Global at BB+, which is a speculative or junk rating. The company doesn’t want to slip below the BBB- level.
“Apartments, affordable homes, single-family homes, they all could be affected,” Poppe said. “There is not a bigger problem in California than housing, and this bill failure will worsen that problem.”
Data centers, advanced manufacturing projects, factories, tech hubs, and office buildings are among the types of major projects that also could be affected.
“These projects aren’t safety related,” Poppe said. “But these are projects that are needed for California’s growth and prosperity.”
Poppe said PG&E could restore the spending if lawmakers enact reforms acceptable to the company.
Poppe said PG&E has taken steps to transform itself into a more efficient and productive company while reducing customer monthly bills at the same time.
In January, residential customers who received combined electricity and gas bills from PG&E (opens in new tab) were paying approximately $285 a month. That was about $10 less than what the average customer was paying in January 2025, or a 3.4% decrease.
Starting in January, the average electric bill was $203 a month, down $10 from January 2025, or 3.8% less. The average gas bill was $82, a decline of $2 from January 2025, or down 2.4%.
“PG&E is like a great racehorse trapped in a barn,” Poppe said. “Wildfire reform would unlock massive value, job creation, housing development and tech investment”
