Pacific Gas & Electric Q3 Earnings Call Highlights

Key Points

• PG&E reaffirmed its earnings outlook, forecasting 2026 core EPS of $1.64–$1.66 and 2027 core EPS of $1.78–$1.82. The company said equity financing needs are covered through 2030 under the alternatives being considered.
• Wildfire liability and credit quality remain central challenges. PG&E is conducting a strategic review focused on achieving investment-grade ratings, lowering financing costs and potentially changing its corporate structure, with an outcome expected by summer 2027.
• PG&E reduced its 2027 capital plan by $2 billion to $11.4 billion because of financing constraints, although it remains committed to safety investments and its data-center growth pipeline. The company also proposed a $16.6 billion, 10-year plan to underground 5,000 additional miles of power lines.

Pacific Gas & Electric NYSE: PCG reaffirmed its 2026 and 2027 core earnings guidance while advancing a strategic review aimed at improving its credit profile and addressing the effects of California’s wildfire-liability framework.

The utility reported third-quarter core earnings per share of $0.41 and core EPS of $1.24 for the first nine months of 2026, compared with $1.14 in the prior-year period. CEO Patti Poppe said the company continues to expect 2026 core EPS of $1.64 to $1.66, representing 10% growth at the midpoint from 2025, and 2027 core EPS of $1.78 to $1.82, or 9% midpoint growth.

PG&E is not providing guidance beyond 2027 while it conducts its strategic review. However, Poppe said the company has already addressed anticipated equity-financing needs through 2030. CFO Carolyn Burke said the company’s equity plan supports its previously outlined $73 billion capital program, and management does not expect to need new equity through 2030 under the alternatives it is considering.

Wildfire policy remains central issue

Poppe said comprehensive wildfire-policy reform has not yet been enacted in California and that action is needed to address the “tail risk” under the state’s existing framework. She pointed to protections that have been established through legislation, including up to $1 billion of self-insurance, the Wildfire Fund and Continuation Account, updated prudency standards and precedent for securitizing claims beyond fund capacity.

Still, Poppe said the current structure has left the company with high financing costs and has constrained its ability to invest. PG&E previously announced a $2 billion reduction to its 2027 capital plan and has begun notifying customers about projects that could be delayed. The affected work includes connections for new clean-energy resources, system expansion for demand growth, and customer projects such as those associated with housing.

“Sustaining this level of investment requires a wildfire liability framework that supports affordable access to capital,” Poppe said.

The company expects a California Public Utilities Commission report requested by Gov. Gavin Newsom on Nov. 1 to further assess the impacts of the current system on the state and utility customers. During the question-and-answer session, Poppe said the report should make another substantive case that the status quo is “unacceptable.”

PG&E also cited the impact of its sub-investment-grade status on customers. Poppe said debt issued while the company has been below investment grade since 2017 will result in an incremental $4 billion of interest expense over the life of the financing.

Strategic review targets investment-grade profile

The company’s strategic review is examining the range of options for how PG&E is organized and financed, with achieving investment-grade credit ratings as a foundational objective. Potential approaches include regulatory reforms, capital-allocation changes, corporate ring-fencing, sales and separations, according to management.

Poppe said wildfire risk currently imposes a valuation discount across PG&E’s businesses, including operations that have little or no exposure to that risk. The company is assessing whether a different corporate structure could better reflect the value and risk profiles of those businesses and reduce customer financing costs.

Management expects to announce the review’s outcome and its planned path forward no later than summer 2027, though Poppe said the company could provide updates or pursue opportunities earlier if material developments occur. Policy reform remains PG&E’s preferred and fastest route to unlock value, she said.

Burke said the company is using mid-teens funds-from-operations-to-debt as its target when assessing investment-grade alternatives. Fitch revised PG&E’s outlook to negative during the quarter, while S&P highlighted heightened risks facing California investor-owned utilities, she said.

On the dividend, management said it generally sets the annual rate for the coming year in December. PG&E said its recommended 2027 increase should remain consistent with its previously stated trajectory, though management noted that all aspects of capital allocation remain under review.

Capital plan, operations and growth projects

PG&E’s revised 2027 capital guidance is $11.4 billion following the $2 billion reduction. Burke said 2027 rate-base guidance remains unchanged because many deferred projects have longer development and construction timelines and were not expected to enter service until after 2027.

The company expects to finance 2027 capital investments with operating cash flow and $4 billion to $5 billion of utility debt financing, including about $1 billion of maturities. Management said it remains committed to its wildfire-mitigation plan, annual safety certification and day-to-day system safety work.

For the first nine months, customer capital expenditures contributed $0.12 per share to earnings growth, while operations-and-maintenance savings added $0.04 per share. PG&E is targeting annual non-fuel O&M reductions of 2% to 4%.

Poppe said PG&E is in its fourth year without a major wildfire associated with its equipment. Its weather-normalized ignition rate has fallen 74% since 2017 to its lowest level since the company began tracking the measure. The company has deployed more than 700 AI-enabled cameras and 1,600 weather stations through its Hazard Awareness and Warning Center.

PG&E also said it has connected about 174 megawatts of data-center projects since 2024. Poppe said the company’s previously identified 1.8-gigawatt pipeline expected online by 2030 remains in its plan despite the 2027 capital reduction.

Regulatory proceedings and undergrounding plan

In its 2027 general rate case, PG&E received a favorable proposed decision that would authorize $456 million of interim rate recovery over 12 months beginning in January. Burke said the proposal, if approved, would help stabilize customer bills, align cash flow with costs and reduce financing expense.

The company also filed a 10-year electric undergrounding plan proposing 5,000 additional miles of undergrounding from 2028 through 2037, following an expected 1,900 miles completed by the end of 2027. The proposal contemplates $16.6 billion of investment, which PG&E estimates would produce about $117 billion of long-term customer benefits and avoid $6 billion in future vegetation-management and O&M costs.

Management expects the approval process for the undergrounding plan to conclude in the second quarter of 2028. PG&E said it is evaluating a separate proposed CPUC decision on the benefit-cost methodology for undergrounding and is concerned that the methodology could limit projects in high-risk communities.

About Pacific Gas & Electric (NYSE:PCG)

PG&E Corporation NYSE: PCG is the holding company for Pacific Gas and Electric Company, a regulated utility that provides electricity and natural gas delivery services in Northern and Central California. Its operations include maintaining and operating electric transmission and distribution networks, natural gas pipelines, substations, and other infrastructure used to serve residential, commercial, industrial, and agricultural customers.

Pacific Gas and Electric Company serves a broad portion of California, including the San Francisco Bay Area, the Central Valley, and parts of the northern and central regions of the state.

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