AEP's Capex Rises, PG&E's Falls as Utilities Struggle with Profitability vs Expansion

Summary

Industrial Info Resources is tracking 1,823 AEP plants. For PG&E, IIR is tracking four cancelled 2027 projects worth $289.25 million, and seven projects at $75.76 million 2027 projects with low probability of moving forward.

New Five-Year Capex Plan of $100 billion

Nowhere is the struggle for utilities to balance profitability with expansion clearer than the difference between expansion plans announced by two major utilities in recent weeks.

Pointed upward is American Electric Power (AEP), which operates in parts of 11 states from the Virginias to parts of Texas, that last week announced a new five-year capex plan of $100 billion--30% more than the previous plan of $78 billion, which also was higher than its predecessor.

On the downhill side is California's Pacific Gas and Electric (PG&E), which recently announced plans to defer $2 billion in capex previously planned for 2027.

Industrial Info Resources is tracking 291 AEP projects with TIV of $15.28 billion with completion dates from 10/26-forward. For PG&E, IIR is tracking four cancelled 2027 projects worth $289.25 million, and seven projects at $75.76 million in 2027 projects with low probability of moving forward.

AEP Says 2026 Earnings Hit 22% YoY Growth

Along with the bulging capex muscles, AEP said that 2026 earning showed 22% year-over-year growth in Q3.

Along with that earnings growth, AEP said it had signed 15 gigawatts (GW) of load commitments during the quarter and that "AEP's incremental contracted load is expected to grow to 84 GW by 2031. Projects are only included as incremental contracted load if backed by fully executed electric service agreements or letters of agreement."

Projects funded by the $100 billion will be designed to boost reliability, modernize the grid, and meet demand growth. The company expects its rate base to grow to $162 billion by 2031. That will include $37 billion for transmission assets and $36 billion for generation resources by 2031.

PG&E Earnings Slide as Regulators Squeeze Rate of Return on Equity

Compared to AEP's 22% growth, PG&E's year-over-year Q3 earnings were down by 9% in 2026. The company attributed this decrease to a December 2025 ruling by the California Public Utilities Commission requiring PG&E to reduce its return on equity to 9.98%, from the previous 10.28%.

It's the first time in 20 years that the utility's profit return was below 10%. The PUC also voted for three other California utilities to lower returns, with the goal of reducing the state's very high utility bills.

Another issue was a state government effort to reduce the utilities' liability for damage caused when their equipment sparks wildfires. Earlier this year California Governor Gavin Newsom had introduced a plan to do that, which the investment community met with horror, sending PG&E and other stock plummeting. A negotiated update to the plan wasn't introduced to the legislature until the last day of the session, where it died a quick death without a vote.

The second plan's main features were that it would bar private equity groups from investing in wildfire claims, prohibit CEOs from receiving bonuses in years when their utility caused fires, and create a "fast pay" program for eligible survivors.

All this revolves around California's growing wildfire problems, and fights over who pays who for what, and how much. It also raises consumer electric bills and limits the company's ability to invest in improvements, as the 2027 postponements illustrate. With the failure of last summer's attempts at a solution, the problem will extend at least into 2027.

Still Taking Care of Basics

With the reduction, PG&E promises to pay for critical safety programs. It's also planning to do a review to create "a financially strong, investment-grade company." CEO Patti Poppe has begged the state to take action "so that we can better serve our customers." But, as stated, it looks like it will be next year before that could happen.

By the Numbers

• $2 billion: Amount of 2027 projects PG&G is postponing to improve profitability
• $100 billion: Amount of capital projects AEP is planning in the next few years to supply its growing contract obligations and other supply needs

Key Takeaways

All utilities are faced with growing demand, and some, like AEP, are signing takeaway contracts to help with financing. But California, more than any other state, faces increasing wildfire damage liabilities that have the effect of raising rates and delaying grid growth

About Industrial Info Resources

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) 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 250,000 current and future projects worth $30.2 Trillion (USD).