PG&E CEO on Data Centers, Rates, Stock

PG&E, a major power provider for both large and small tech companies, currently faces 12 gigawatts of applications for new load.

The influx of new data center demand presents a unique opportunity, as these customers are willing to pay premium prices, which can contribute to lowering rates for other customers across the service area, according to CEO Patti Poppe.

The utility provides power to approximately 16 million people across two-thirds of California, driving its revenue growth through both customer demand and strategic infrastructure investments.

Key investments include the replacement of aging infrastructure, equipment upgrades, and comprehensive wildfire prevention measures. Poppe noted that the company has consistently achieved over 10% EPS growth for the last five years and projects continued growth of 9% or more.

California remains the number one state for manufacturing and manufacturing jobs as the grid within PG&E's service territory experiences growth driven by AI, data centers, EV adoption, and building electrification.

California continues to be the leading state for manufacturing and associated job creation, with significant infrastructure development underway to support new housing initiatives and meet the state's growing energy demands.

PG&E has successfully lowered rates five times over the past two years, with a 23% reduction for its most vulnerable customers and a 13% reduction for others, according to CEO Poppe.

These improvements are attributed to the implementation of a 'lean operating system,' inspired by the automotive industry, which has also led to a 30% increase in reliability over the same period. Poppe further stated that each gigawatt of new, properly priced large demand has the potential to reduce customer rates by 1%.

PG&E reinstated its dividend following the 2020 wildfire-related bankruptcy, marking a significant shift in its financial strategy.

The company is transitioning from reinvesting all retained earnings back into the grid to prioritizing dividend growth, which CEO Poppe identified as a crucial element of PG&E's future narrative and investor appeal.

Patti Poppe assumed the role of CEO at PG&E in January 2021, following her tenure as CEO of CMS Energy, driven by a profound sense of obligation to the energy industry and the nation.

She recounted the board chair's remark that the challenging position could be her "professional final exam" and expressed pride in the team's substantial progress in enhancing community safety and mitigating wildfire risks.

PG&E's stock price continues to experience volatility due to its exposure to wildfire liability, including its association with Southern California fires such as the Eaton fire, as a result of a shared liability pool with other entities.

Both Governor Gavin Newsom and the state legislature have acknowledged the unacceptability of the current 'status quo' regarding utility wildfire risk, yet legislative inaction persists.

The failure of the state legislature to pass necessary reforms by the end of August resulted in a negative market reaction for the company's stock.

PG&E announced a strategic review and a capital pullback, pending legislative action, with the aim of addressing the perception that investor-owned utilities are 'uninvestable' due to wildfire liability.

Options under consideration include adjusting capital allocation strategies and potentially isolating the natural gas business. CEO Poppe noted that the gas business currently incurs higher debt costs because its financial standing is consolidated with the wildfire risk under the overarching holding company.

PG&E possesses an 8-gigawatt portfolio of hydro, nuclear, and gas power plants, which CEO Patti Poppe emphasized have never been more valuable, yet currently trade at a 56% discount.

Potential strategies to unlock value include spin-offs or segregating these assets to enable independent investment. The overarching goal is to achieve investment-grade credit status for the company's infrastructure, enhancing its financial stability and market appeal.

CEO Patti Poppe urges finishing the liability policy shift this year, as shifting it to a new governor would cause delays despite Governor Gavin Newsom's view that the change could occur in 2026.

Governor Gavin Newsom has publicly maintained his conviction that policy changes regarding utility liability are achievable in 2026. Poppe urged lawmakers to finalize these reforms this year to avoid potential delays that could arise if the issue were passed to a new governor.

The CEO characterized the core liability issue as a straightforward paragraph of text that merely needs to be brought to a vote, emphasizing its simplicity and urgency.

PG&E's operational transformation plans were unexpectedly halted by the LA fires in early 2025, leading to significant adjustments in its financial outlook.

The utility was forced to reduce its 2027 capital plan from $13.4 billion to $11.4 billion. CEO Poppe highlighted that PG&E's sub-investment grade status compels it to borrow at higher costs, directly impacting customers.

This stagnation in infrastructure development not only raises borrowing costs but also impedes new housing starts and the integration of clean energy into California's grid, underscoring broad economic consequences.

This approach also eliminates the annual $2 billion expenditure on vegetation clearing. PG&E aims to have 2,000 miles of power lines undergrounded by the end of 2027 and has proposed an additional 5,000 miles over the next decade.

PG&E manages a vast network of 125,000 total miles of power lines across its service area.

Within this extensive network, 25,000 to 35,000 miles are specifically identified as high-risk areas for wildfires, and undergrounding initiatives are strictly prioritized for these critical zones to maximize safety and efficiency.

PG&E, previously impacted by wildfire risks leading to bankruptcy, has conducted a comprehensive reassessment of all its assets to evaluate their exposure to climate risks, including flooding, wildfires, and other extreme weather events.

The company is proactively modifying its infrastructure standards to build systems capable of withstanding not just current climate challenges but also the more extreme weather conditions projected for the future.

PG&E's stock currently trades at a 56% discount compared to the average valuation of the US utility sector, a disparity primarily attributed to a single unresolved gating issue concerning the liability structure.

CEO Poppe views the current stock prices as a significant investment opportunity, anticipating a substantial rerating as soon as the legislative resolution to the liability issue is achieved.

The company is fundamentally positioned as a premium utility with robust business fundamentals, making its current valuation an anomaly driven by external policy risks rather than operational performance.

Patti Poppe initially aspired to a career in broadcast journalism, but her father, an engineer at CMS Energy, encouraged her to pursue studies in math and science. As the youngest of seven daughters, she ultimately chose to attend engineering school, leading her to her current role as a utility CEO.