PG&E Earnings Brighten but Wildfire Clouds the Future

By Published On: July 29, 2021

Pacific Gas & Electric Corp’s second quarter earnings were far better than ones in 2020, rising to $397 million, or 20 cents per share, the company reported July 29. That compares to a loss of $1.97 billion in last year’s second quarter report, or loss of $3.73 per share.

PG&E executives held a call with financial analysts Thursday morning and two major topics of discussion were the Dixie Fire and the company’s plan to underground 10,000 miles of overhead lines in the most dangerous fire zones. The fire raging across Butte and Plumas counties was likely ignited by a tree leaning on a utility circuit in a remote region. It had burned 226,000 acres, destroyed 60 buildings and was less than 23% contained as of Thursday. 

Later that day, the Shasta County District Attorney’s office announced that it will file criminal charges against PG&E for igniting the Zogg Fire last year.

Earlier, analysts grilled PG&E Corp Chief Executive Officer Patti Poppe on the costs and timing of the company’s undergrounding plan announced last week, which was in response to its equipment continuing to spark serious fires. She again declined to project when the utility could finish burying 10,000 miles or reach 1,000 miles a year. Analysts pressed the CEO on this point after the company’s about face last week, stating for the first time publicly that burying huge lengths of cable is feasible thanks to ongoing engineering, trenching and other technological improvements. She did note PG&E is currently undergrounding about 70 miles a year, and that costs are nearing $2 million per mile as it works to bury a total 300 miles of cables in Butte County, which has suffered major fire damage recently.

“We’ve got absolute evidence of the $2 million a mile real time happening as we speak, and we know that that’s even before we have a full scale program,” Poppe said.

Many variables, however, affect costs, from population density, terrain and whether it is rocky and or mountainous, amount of vegetation and required protections for the disabled and the environment.

But the bottom line is that it is a “safer permanent fix,” avoids safety shutoffs and “saves the trees we love,” Poppe stressed. This year, PG&E is spending about $1.4 billion on massive tree cutting and vegetation clearance. That puts those costs on par with those of undergrounding, according to utility spokesperson Ari Vanrenen.

Undegrounding details provided early 2022

Next February, the utility will detail the costs and operations of the first two years of its undergrounding scheme in its Wildfire Mitigation annual plan update.

Poppe said PG&E likely won’t need to pursue legislation to assure 10-20 years of rate recovery for undergrounding costs as was done in Florida. She pointed to the company’s ability to raise capital for the unprecedented infrastructure project. But she told analysts, she wasn’t ruling out legislation.

The utility, as usual, provided nearly all the income for the parent company, generating $440 million in the latest quarter. That contrasts with a $473 million loss in the second quarter of 2020, which includes a share of the $58 billion in reorganization costs. Of that amount, $1.5 billion was for the parent company’s legal costs, and $110 million for the utility’s legal tab just in the second quarter.

The  company remains entangled in costly litigation over wildfire claims for the 2019 Kincaid Fire, 2020 Zogg fire, investor class action lawsuits over misrepresentations about the adequacy of its vegetation maintenance work and litigation for safety power shutoffs in 2019. Because of these and other related costs, and a large but uncertain amount not covered by insurance, PG&E is considering self-insuring to lower annual costs, according to PG&E Corp Chief Financial Officer Chris Foster.

Rate Case Seeks $3.6 B rise in revenue

PG&E will file its 2023 General Rate Case on June 30 seeking a $3.6 billion increase in its revenue requirement over the 2022 level of $11.9 billion. It projects annual capital expenditures of up to $8.5 billion this year, as much as $8.9 billion next year, and between $7.9 billion and $10.3 billion next year. The projected rate base growth of 8.5% is well in excess of the national average increase of 3.4%.

That includes investments in 700 MW of new storage.

Poppe said the company expects the California Public Utilities Commission to approve its pending Wildfire Mitigation Plan September 13. That will allow it to renew its safety certificate Dec. 21, which is required for continuing operations.

Poppe, who joined the company in January,  said she’s often asked why anyone should invest in PG&E “under such difficult circumstances.” She said the utility was better equipped and more aligned with the state regulators. While the company needs California, “California needs us.”

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