PG&E Unveils $20 Billion-Plus Capital Spending Plans for 2016-2019

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Pacific Gas & Electric Company (PG&E) (San Francisco, California), the electric and gas utility unit of PGE Corporation (NYSE:PCG) (San Francisco), plans to spend about $5.6 billion this year on capital projects, the utility told investors last month. The utility also outlined annual capital spending plans of between $5.4 billion and $6.5 billion for 2017-2019. It all adds up to one of the largest utility capital spending budgets in the U.S., between $21.8 billion and $25.1 billion over the 2016-2019 period, the utility said May 4 on a first-quarter earnings call with investors.

One of the largest utilities in the U.S., PG&E provides electric and gas service to nearly 16 million people in a 70,000-square-mile service area in Central and Northern California. The company owns and operates about 160,000 circuit-miles of electric lines and another 50,000 miles of gas pipelines.

For 2016, the utility told investors it planned to invest a little over $2 billion in its electric distribution system. Another $1.2 billion will be invested in the company's electric transmission segment. The utility plans to invest about $700 million in its electric generation business this year. On the gas side, PG&E expects to invest between $500 million and $700 million this year in its gas transmission system while another $1 billion is earmarked for its gas distribution network.

Looking farther into the future, PG&E told investors it plans to invest about $1 billion over the 2016-2019 period on various infrastructure projects it calls the "Grid of Things." Investments there range from transmission and distribution expansions and upgrades to electric vehicle charging stations and advanced monitoring and control systems.

Click on the icon at right to see PG&E's depiction of the "Grid of Things."

"We continue to invest in strengthening our operations, achieving industry-leading safety performance and building a smarter energy grid," PG&E Chief Executive Anthony Earley told investors May 4. "We remain focused on delivering safe, reliable, affordable and clean energy to our customers and positioning PG&E for the future."

Industrial Info is tracking 21 active PG&E capital projects totaling just over $1 billion in value. The largest projects are:

• Finishing the dismantling of the Humboldt Bay Unit 3 nuclear plant. Chicago Bridge & Iron Company (Chicago, Illinois) is the engineering, procurement & construction (EPC) firm for the project, which is valued at $288 million. That work is expected to conclude by the end of 2018.
• Potrero Substation Upgrade, a $200 million project that is nearing completion.
• Gates-to-Gregg Transmission Line, a $157 million proposed project to run about 70 miles of 230 kilovolt (kV) line from the utility's Gates to Gregg substations in Fresno, California. That project is scheduled to begin construction in early 2018.
• Midway-to-Gregg Transmission Line, a $140-million high-voltage transmission project to improve electric reliability in and around Fresno. The project calls for about 140 miles of double-circuit, 500-kV line. Construction is slated to begin in mid-2018 and be complete by yearend 2019.
• Midway-to-Andrew Transmission Line, a $70 million, 230-kV upgrade project. This project is an upgrade of 65 miles of an idled 115-kV transmission line running from the Midway Substation to the Santa Maria substation in the Bakersfield area. This project will ensure grid stability and accommodate any future load growth. The project is scheduled to begin turning dirt in mid-2017 and be done by the end of 2019.

PG&E told investors it continued to face significant legal and financial uncertainties stemming from a gas pipeline explosion in San Bruno in 2010 and a fire from last September. PG&E is a defendant in a federal criminal trial over its role in the San Bruno gas pipeline explosion, which killed eight people, destroyed 38 homes and damaged many more. If convicted, the utility may face fines of over $500 million. The company also told investors its insurance might not cover its exposure to the Butte Fire of last September, in which two people died, hundreds of homes were destroyed and over 70,000 square acres were burned. The fire, one of the worst in California's history, started when a tree came into contact with a PG&E power line.

"Like several electric utilities around the country, PG&E is making investments to turn its electric network from a one-way delivery system for electricity to a two-way electric superhighway, where buyers and sellers interact and prices will vary throughout the day," commented Britt Burt, Industrial Info's vice president of research for the global Power Industry. "Some call this vision Smart Grid 2.0. At the same time, PG&E, like other California investor-owned electric utilities, will need to increase its reliance on renewable energy. California has mandated that investor-owned utilities must get 50% of their electricity from renewable sources by 2030. That's the toughest renewable portfolio standard in the country."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.