PG&E says it may spin off, sell or otherwise separate its natural gas business if California lawmakers do not overhaul the state's wildfire liability rules, a move that would pull PG&E's gas customers out from under a utility holding company still carrying wildfire risk. Chief Executive Officer Patti Poppe told investors on an October call that those gas customers already bear higher borrowing costs tied to PG&E's sub-investment-grade credit rating, simply because the gas business sits inside a corporate structure exposed to wildfire liability.
Everything On the Table, CEO Says
The gas-separation idea is part of a broader strategic review PG&E Corp. first flagged weeks earlier, when Poppe said the company would consider separating some of its assets entirely, according to Bloomberg. On PG&E's third-quarter earnings call, the company laid out just how wide the range of options is, saying choices run from corporate ring-fencing to outright sales and separations, according to a transcript published by Benzinga. A committee of four independent directors is overseeing the review of how PG&E should be organized and financed going forward, per Insurance Journal.
PG&E has given itself a deadline: the company expects to share the outcome of the review and its planned path forward no later than next summer, per the same earnings call transcript. Until then, the review remains ongoing, and PG&E has not identified a preferred alternative.
A $2 Billion Cut to Next Year's Spending
The uncertainty is already reshaping PG&E's near-term plans. The company trimmed its 2027 capital budget by $2 billion, down to $11.4 billion from a previously planned $13.4 billion, because financing costs have become too expensive to justify the original figure, according to Reuters. That reduced spending plan also lowers PG&E's debt-financing needs by $2 billion, though the outlet reports it may delay projects tied to new housing connections, renewable generation and technology upgrades. PG&E told customers it began notifying those potentially affected by delays in October.
PG&E frames the underlying problem as a direct consequence of California's current wildfire liability framework. The company says that framework creates financial uncertainty for infrastructure investors and drives up its own borrowing costs, according to a statement posted on pge.com. Wildfire-related risk alone has added more than $4 billion in extra interest expense since 2017, costs PG&E says customers will ultimately pay over the life of the company's debt.
Below Investment Grade, Acting as Insurer of Last Resort
PG&E currently holds credit ratings below investment grade, and the company describes itself as effectively an insurer of last resort in California because of how state law spreads wildfire costs across the system, per the pge.com statement. On the earnings call, the company reiterated that comprehensive wildfire liability reform still has not been enacted and said further action is needed to address what it calls the remaining tail risk.
The stakes extend beyond PG&E's balance sheet. Wildfire costs embedded in electric rates for PG&E, Southern California Edison and San Diego Gas & Electric jumped from about $500 million in 2019 to as much as $9 billion in 2024, according to The Sacramento Bee. Those three investor-owned utilities together serve roughly three-quarters of the state, per CalMatters, which also reports that fire costs have helped push California to the second-highest electricity rates in the country.
Lawmakers Shelved a Deal, and Stocks Took a Hit
A proposed legislative overhaul of how California responds to utility-caused wildfires ultimately failed despite a push from Gov. Gavin Newsom, the Sacramento Bee reports. The bill's provisions rattled investors: shares of PG&E and Edison International plunged 20% or more on Monday, then closed up at least 6% on Tuesday after it became clear the bill would not be voted on, according to CNBC. Consumer advocacy groups, including those representing wildfire victims, have separately criticized efforts to shield utilities from liability for fires caused by their own equipment, the same outlet reports.
Assembly members have since begun hearings examining both utility wildfire-prevention efforts and the liability those companies face, according to the Sacramento Bee's reporting. Poppe has warned that without faster reform, Californians could see slower housing growth and delayed clean-energy and AI-power development, alongside higher long-term costs, according to Bloomberg's earlier report on the strategic review.
PG&E Points to Falling Ignition Rates
PG&E has tried to pair its financial warnings with evidence of improved safety performance. The company has pointed to about four years without a major wildfire incident. Even so, wildfire conditions remain a live operational concern. Recent winds prompted Southern California Edison and PG&E to shut off power to more than 150,000 combined customers as a precaution against major fires, the Sacramento Bee reports. Financially, PG&E posted core earnings per share of $0.41 for the third quarter and $1.24 for the first nine months of the year, according to the Benzinga transcript, as the company continues weighing whether separating its gas business is the clearest path out from under its wildfire-driven debt costs.
Even so, wildfire conditions remain a live operational concern. Recent winds prompted Southern California Edison and PG&E to shut off power to more than 150,000 combined customers as a precaution against major fires, the Sacramento Bee reports. Financially, PG&E posted core earnings per share of $0.41 for the third quarter and $1.24 for the first nine months of the year, according to the Benzinga transcript, as the company continues weighing whether separating its gas business is the clearest path out from under its wildfire-driven debt costs.
