PG&E Seeks $1.2 Billion Revenue Hike to Support Wildfire Safety Enhancements

Pacific Gas and Electric Company requested a 16 percent rate of return on equity for 2020, up from the current 10.25 percent, to attract the new investment needed to upgrade and modernize its infrastructure in the face of wildfire risks, according to the company’s cost of capital proposal filed with the California Public Utilities Commission on April 23. The request amounts to a $1.2 billion hike in the utility’s revenue requirement. PG&E plans to invest up to $28 billion in energy infrastructure upgrades over the next four years, with about 75 percent of the amount earmarked for safety, reliability, and system hardening.

The company said that the ROE request is based on an analysis for a California utility with a normal risk profile of about 11 percent, “plus a premium for catastrophic wildfire exposure.” If approved, the proposal will raise monthly residential electric bills by about 7 percent and gas rates by 7.7 percent, effective Jan. 1, 2020, according to the utility.

The utility noted the financial and regulatory uncertainty it is facing, having recorded wildfire-related liabilities totaling $14 billion in 2018. The potential liability for the 2017 and 2018 Northern California wildfires, estimated to exceed $30 billion, prompted PG&E in January to file for reorganization under Chapter 11 of the U.S. bankruptcy code.

Southern California Edison asked the commission to authorize an ROE of 16.6 percent, including 10.6 percent for 2020 for non-wildfire related risks, and an additional 6 percent for wildfire risks.