Pacific Gas & Electric Launches Strategic Review, Cuts 2027 Capital Plan by $2B

Key Points

• PG&E launched a 12- to 18-month strategic review covering its regulatory environment, financing, corporate structure and capital allocation, with achieving investment-grade credit ratings as a key goal after California lawmakers failed to pass wildfire liability reform.
• The company cut its 2027 capital plan by $2 billion to $11.4 billion, expected to reduce utility and parent-company debt needs by roughly $1 billion each. Some renewable interconnections, large-load projects and housing connections may be delayed, but PG&E said safety and wildfire-mitigation work will be protected.
• PG&E reaffirmed 2026 core EPS guidance of $1.64-$1.66 and issued 2027 guidance of $1.78-$1.82, but withdrew five-year capital-expenditure, rate-base and longer-term earnings-growth outlooks while the review proceeds.

Pacific Gas & Electric NYSE: PCG said its board has authorized a strategic review of regulatory, financial, operational and strategic alternatives after California’s legislative session ended without wildfire liability reform.

Chief Executive Officer Patti Poppe said the review will examine how the company is organized and financed, with achieving investment-grade credit ratings identified as a foundational objective. PG&E plans to seek input from California regulators, policymakers, investors and other stakeholders as it evaluates potential options.

The company also announced plans to reduce its 2027 capital investment plan by $2 billion, to $11.4 billion from $13.4 billion. Poppe said the reduction would lower projected utility debt needs by about $1 billion and parent-company debt needs by about $1 billion, reducing financing costs that ultimately affect customers.

Wildfire liability reform remains central

Poppe said PG&E has improved its operating performance, citing a fourth consecutive year without a major wildfire associated with company equipment and a reliability improvement of more than 30% over the past two years. She also said the company has lowered electricity rates five times since January 2024 and has exceeded its annual target for a 2% reduction in operations and maintenance costs.

However, Poppe said operational improvements alone cannot resolve the effects of California’s existing wildfire liability framework on the company’s financing costs. She said a policy environment capable of supporting investment-grade credit ratings is needed to attract long-term capital at an affordable cost.

According to Poppe, two unresolved issues are particularly important: a permanent liquidity source beyond the current Wildfire Fund to pay future claims if needed, and a maximum disallowance independent of the funding source that would establish a known downside risk for investors.

“We have concluded that PG&E cannot simply wait for the policy framework to change,” Poppe said. “We must take action now to sustainably serve our customers.”

Poppe said the company would continue advocating for liability reform and would participate if lawmakers take up the issue again, including through a possible special legislative session. Still, she said PG&E would move ahead with its strategic review rather than rely solely on future legislative action.

Capital reduction will delay some work

PG&E said its lower 2027 capital plan will defer or delay some work, though Poppe said the company would not compromise on safety. The company intends to select affected projects carefully so it can maintain compliance with its Wildfire Mitigation Plan and safety certificate requirements.

Poppe said the company had not finalized the specific projects that would be delayed. She acknowledged that portions of the affected spending relate to areas such as renewable-energy interconnection, large-load projects and new housing connections. The reduction is intended as a one-year slowdown rather than a cancellation of the work, she said.

Carla Peterman, president of PG&E Corporation, said the company believes its proposed four-year general rate case includes the appropriate work plan and represents the lowest general rate case increase in a decade. She said the near-term capital reduction, including forecast expenditures, should not affect the overall rate case.

2026 guidance reaffirmed; 2027 outlook initiated

PG&E reaffirmed 2026 core earnings-per-share guidance of $1.64 to $1.66 and initiated 2027 core EPS guidance of $1.78 to $1.82. At the midpoint, the 2027 forecast represents 9% growth from 2026, according to the company.

Although the lower capital plan will reduce PG&E’s 2027 rate-base forecast, the company expects lower unrecoverable net interest expense to offset the earnings effect, Poppe said.

In light of the strategic review, PG&E is no longer providing five-year capital-expenditure or rate-base guidance, nor is it offering an earnings growth rate beyond 2027. The company said it expects to provide a new long-term outlook when it is further along in the review process.

Review could extend 12 to 18 months

Poppe said the review could consider policy and regulatory actions, corporate structure, capital allocation and legal structure. She said the holding-company structure may not fully reflect the value of PG&E’s different businesses and that the company is exploring ways to make that value more visible to investment capital.

The CEO did not identify a preferred outcome or rule out categories of alternatives. She said proposals would require regulatory approval and would be assessed against their ability to improve customer value, financial results and the company’s path toward investment-grade status.

Poppe said comparable strategic reviews have commonly taken 12 to 18 months, though timing will depend on discussions in California and any potential regulatory filings. PG&E expects to provide updates during its regular quarterly calls, while noting that some aspects of the review may remain undisclosed until the company is ready to announce developments.

Carolyn Burke, executive vice president and chief financial officer, said ratings agencies were disappointed California had not completed what she described as the second phase of SB 254. Burke said S&P had indicated PG&E’s ratings would remain unchanged, while ratings agencies have indicated that an upgrade is unlikely and that the absence of legislation creates a risk of multi-notch downgrades for PG&E and other utilities.

Burke also said that any decision regarding the company’s dividend remains a board decision. She clarified that the company’s normal annual process for setting the following year’s dividend occurs at year-end and said PG&E would have disclosed any intended change for 2026 during the update if it had one to announce.

About Pacific Gas & Electric (NYSE:PCG)

Pacific Gas & Electric NYSE: PCG is an investor-owned utility holding company whose principal operating subsidiary, Pacific Gas and Electric Company, provides electricity and natural gas service in northern and central California. The company's core activities include the generation, procurement, transmission and distribution of electric power, as well as the transmission and distribution of natural gas. PG&E serves a broad mix of residential, commercial, and industrial customers across urban and rural communities within its California service territory.

PG&E's operations encompass utility infrastructure planning and construction, grid operations, customer service and energy procurement.

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