PG&E Planned Capex Jumps 20% to $62 Billion Over 2024-2028, May Go Higher

Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--PG&E Corporation (NYSE:PCG) (Oakland, California), corporate parent to electric and gas utility Pacific Gas and Electric Company (PG&E) (Oakland), in late July told investors it planned to boost base capital expenditures (capex) approximately 20%, to about $62 billion, over the 2024-2028 period. In a previous capex estimate, released in 2023, the company said it planned to spend about $52 billion over the 2023-2027 period.

For more on that, see May 10, 2023, article - California Utility Reports Higher Earnings, Plans More Capital Spending.

And company leaders said capital outlays for 2024-2028 could rise by at least $5 billion beyond base capital spending, for potential investments in:

• Transportation electrification: the utility is projecting 1 million electric vehicles will be in its service area by 2028. Capital outlays to serve this anticipated new load could total $1.5 billion to $2 billion.
• Transmission upgrades to serve data centers and other system upgrades. PG&E officials estimated that data centers alone are expected to boost peak electric demand by about 1,000 megawatts (MW) at a capital cost of between $500 million and $1.6 billion.
• Incremental hookups to serve new business customers
• Hydroelectric generation and energy storage projects, and
• Information technology and automation

Click on the icon at right to see the base capital spending plan for PG&E Corp. for the 2024-2028 period.

Most of the planned $62 billion in planned "base" capex spending, about $54.8 billion, will be made in assets that are regulated by the California Public Utilities Commission (CPUC) (San Francisco, California). About $7.2 billion is slated to go to business activities regulated by the Federal Energy Regulatory Commission (FERC) (Washington, D.C.), which oversees bulk electric power sales that cross state boundaries.

The higher capex plans were discussed during the corporate parent's second-quarter earnings call, when it reported net profits rose about 28% to $520 million under generally accepted accounting principles (GAAP) on slightly under $6 billion in revenue. In the comparable year-earlier quarter, the company's GAAP earnings were $406 million on $5.3 billion of sales.

"We're delivering for our customers and hometowns today through a foundation of safe operations, wildfire risk reduction and solid financial progress. We also see a bright future where we lower average household energy costs, including from transportation, and further cut carbon emissions," PG&E Corporation Chief Executive Patti Poppe said July 25 in announcing earnings.

Industrial Info Resources (IIR) is tracking approximately 51 capital projects for the company that are scheduled to kick off between January 2024 and December 2028. Most of these outlays will be spent rebuilding or expanding its transmission & distribution (T&D) assets. The value of those capital projects is about $1.47 billion. Subscribers to Industrial Info's Global Market Intelligence (GMI) Project Database can click here for a full list of detailed project reports.

In addition, IIR is tracking two planned maintenance projects totaling $26 million over that five-year timeframe. Nearly all of that spend will be for refueling Unit 1 of its Diablo Canyon Nuclear Power Station in early 2025. Click here for the project reports.

On its July 25 earnings call, company leaders said "weather-normalized wildfire ignitions" were down 62% compared to 2017. The utility and its customers have been hard hit by wildfires in recent years, which have snapped numerous PG&E T&D lines and poles, igniting several disastrous wildfires, including one in 2018 that incinerated the city of Paradise in Northern California.

After the company's July 25 earnings call, an article in The Wall Street Journal said the utility's lines have sparked 29 fires in recent weeks, which could suggest a reversal of recent gains in the fight against wildfires.

Ensuring the integrity of PG&E's T&D system to minimize wildfire danger, particularly in the remote wooded areas of Northern and Eastern California, has been an expensive challenge for the utility. In 2021, utility leaders unveiled a "moonshot" plan to underground 10,000 miles of distribution lines, at a cost estimated at $20 billion or more. For more on that, see July 26, 2021, article - PG&E Unveils 'Moonshot' Effort to Underground 10,000 Miles of Distribution Line to Reduce Wildfire Risk. Later, the utility decided to up its investment in technologies that could be used to provide early warning of potential "red flag" conditions such as high temperatures, high winds and low humidity. For more on that, see August 17, 2023, article - PG&E Increases its Use of Technology to Minimize Wildfire Risks.

Utilities are learning that protecting assets and customers against wildfires requires a blend of undergrounding lines and investing in early-detection technologies. It is not an either/or proposition. Other Western utilities that have experienced wildfires are working to determine the optimal mix of preventative strategies. PacifiCorp (Portland, Oregon), a unit of Berkshire Hathaway Incorporated (NYSE:BRK.A) (Omaha, Nebraska), and Public Service Company of Colorado (Denver, Colorado), a subsidiary of Xcel Energy (NASDAQ:XEL) (Minneapolis, Minnesota), are two such examples.

On their July 25 call with analysts and investors, PG&E officials detailed their progress in wildfire mitigation:

• 664 miles of distribution line have been undergrounded over the 2019-2023 period, and an additional 250 miles are scheduled to be buried this year.
• 1,671 miles of T&D lines have been hardened during 2019-2023, and this year will see an additional 280 miles of line hardened. This work involves installing stronger utility poles and covered powerlines.
• 1,427 sectionalizing devices and transmission switches have been installed since 2019. This program is complete.
• 602 high-definition cameras have been installed since 2019. These cameras protect T&D assets and communities by providing increased visibility into weather patterns that could lead to wildfires, providing PG&E extra opportunity to preemptively shut down power lines to prevent damage and sparking. This work is complete.
• 1,424 weather stations have been erected since 2019. These stations give the utility an improved ability to predict and respond to severe weather threats. This program is complete.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).