Policymaker Recognition of PG&E's Improvements and Plan B for Capital Allocation in 2026 Q2

Policymaker recognition of PG&E’s operational/rate improvements—and PG&E’s “plan B” capital allocation if wildfire liability reform stalls

1) Do policymakers recognize the improvements in rates and operations?

PG&E management says policymakers are beginning to see the improvements, but that “perceptions lag actual performance.” ¹ In the earnings call Q&A, management explicitly addressed the idea that legislators should be recognizing progress on affordability and operations. ²

• Management view: communications/awareness are improving. PG&E’s CEO said she believes communications are “breaking through the fog,” citing an example where a legislator acknowledged PG&E had reduced rates “5 times.” ¹
• Management view: lawmakers are seeing the need for affordability alongside operational progress. She said legislators still face customer pressure and higher expectations, and PG&E believes it can meet them “best with our current plan.” ¹
• Evidence PG&E points to when arguing policymakers should take notice:
  • Safety/reliability performance improvements: PG&E reported “zero structures destroyed” in its 4th year of no major fires linked to PG&E equipment. ³
  • Operational performance improvement: PG&E reported “improved 23% year to date” reliability, attributed to fewer outages and faster restoration times. ³
  • O&M and reliability/affordability linkage: PG&E also referenced progress toward 2% to 4% annual reductions in nonfuel O&M while continuing safety/reliability improvements. ⁴

Credit-market and rating-agency recognition is also part of the “recognition” argument PG&E makes to policymakers.
PG&E said S&P’s upgrade (bringing it to “just 1 notch below investment grade”) cited progress reducing wildfire risk via mitigation and operational execution. ⁵ It further stated S&P and Moody’s highlight a durable legislative solution as the catalyst for additional upgrades. ⁴ This implies PG&E is presenting operational improvements as necessary but not sufficient without legislation. ⁵⁴

2) What is PG&E’s “plan B” for capital allocation if wildfire liability legislation is not enacted or is unfavorable?

PG&E’s executives repeatedly frame legislation as the premise for their capital plan; if legislation is unfavorable or unresolved, they say they will reevaluate and reallocate capital priorities—but they also refuse to provide specifics on what that reallocation would be. ³⁶⁷

A. PG&E’s position: the current capital plan depends on a constructive legislative outcome

• Management said PG&E’s “5 year plan assumes that California will follow through” on SB 254 to strengthen the wildfire liability framework. ³
• They describe the intended legislative outcome as a “durable and financeable framework” that provides predictability and supports access to low-cost utility capital to protect customer affordability. ³
• CFO commentary stresses their financing/dividend/capital structure strategy is premised on a legislative outcome: the plan is “premised on achieving a constructive legislative outcome,” and they would need to reevaluate capital allocation priorities if the framework is unresolved or insufficient. ⁷

B. Explicit “plan B” language: they will take action via capital reallocation

• CEO: “There will be action in the event of inaction on the part of the legislature.” ⁸
• CFO/CEO response to a direct question about pivot timing: management said they have been clear that if legislation does not solve the problem, PG&E will have to take action and reallocate our capital plan, and they again indicated they will not provide detailed reallocation specifics on the call. ⁶
• CEO also stated: if policymakers/regulators do not achieve a sufficient framework, PG&E would “need to reevaluate our capital allocation priorities” and long-term investment plans, while keeping key objectives the same. ⁷

C. What objectives would remain unchanged (i.e., constraints on “plan B”)

Even as they would revise capital priorities, management says the objectives remain unchanged:

• Safely serve customers
• Preserve affordability
• Attract/maintain access to low-cost capital necessary for a regulated utility ⁷

This means the “plan B” is not presented as “stop investing,” but rather as reordering/adjusting the capital allocation approach to maintain the same top-level mission under a worse legal/regulatory capital-cost environment. ⁷

D. “Plan B” would likely be tied to affordability/financeability and credit access

PG&E argues that legislation affects its ability to obtain investment-grade financing (and thus affordability). ³⁵⁴ The logic is:

• Their case for legislative action includes the cost of inaction: wildfire-related charges accounting for approximately $20 to $40 per month, and up to 14% to 19% of monthly bills, per the referenced CEA study. ¹
• They also state policymakers are working toward a path that “works for customers” and that PG&E is “prepared in the event that [a good outcome] does not occur.” ¹
• Inaction is framed as something that would slow progress to investment grade and make the system more expensive to finance, which would then drive the need to reallocate capital. ¹⁷

E. Timing/pivot sensitivity

PG&E indicates they are looking toward the legislative timeline (“tail end of this process” and “end of August” were discussed), and CFO said they would pivot/reallocate if the outcome is inadequate, while again declining to detail how that pivot would work on the call. ⁶

Bottom line

• Policymaker recognition: PG&E believes policymakers are increasingly aware of operational and rate-affordability improvements, though management emphasizes that “perceptions lag actual performance” and that communication is improving. ²¹ PG&E also cites credit-agency recognition of wildfire-risk mitigation as an indirect “recognition” channel, while noting that legislators must deliver durable reform for further upgrades. ⁵⁴
• Plan B capital allocation: PG&E’s stated plan B is to reevaluate and reallocate capital priorities and long-term investment plans if wildfire liability legislation is not enacted or is insufficient/unresolved—but PG&E does not disclose the specific reallocation mechanics. ⁸⁶⁷ The company says the reallocation would still be governed by unchanged objectives: safety, affordability, and access to low-cost capital. ⁷