Economy

PG&E Secures $15 Billion Loan, But Customers May Face Rising Bills

Published December 17, 2024

OAKLAND — Pacific Gas and Electric Company (PG&E) is claiming that a substantial $15 billion federal loan guarantee will lead to savings for its customers through various important projects. However, several consumer advocacy groups are cautioning that this may result in increased monthly bills for ratepayers.

The U.S. Department of Energy (DOE) has announced its decision to provide this historic loan guarantee to PG&E, which will fund essential upgrades to power infrastructure, inclusive of power lines and hydroelectric systems.

This loan guarantee by the outgoing Biden Administration marks the most significant financial commitment issued by the DOE’s Loan Program Office in its history. This information was first revealed by the Wall Street Journal.

According to the DOE Loan Program Office, “These infrastructure investments will help PG&E meet forecasted load growth, increase electric reliability, and reduce costs for its consumers across California.” The Office described its decision as a “conditional commitment.”

In response, PG&E made a statement assuring customers that the loan could generate savings amounting to “up to $1 billion” in net present value over the loan's life. This message was shared in a blog post authored by the utility.

Patricia Poppe, PG&E’s CEO, emphasized that investing in a clean and resilient power grid for northern and central California will yield meaningful benefits for customers concerning safety, reliability, and economic growth. She claimed that the DOE loan program would enable PG&E to enhance the scale and effectiveness of this trabajo.

Nevertheless, consumer groups expressed concerns about the long-term implications of repaying the loan, warning it could lead to elevated monthly bills down the line. Ken Cook, president of the Environment Working Group, voiced worries regarding the financial burden that could potentially fall on ratepayers, stating, “The long-term consequences for ratepayers could mean higher bills, more financial strain, and an ever-growing reliance on taxpayer funds to prop up this struggling monopoly utility.”

Further, David Weisman, Executive Director of the Alliance for Nuclear Responsibility Legal Fund, noted that while the immediate benefits of the loan may be apparent, the financial impacts of loan repayments would emerge later. He highlighted the possibility of increased bills due to the financing, asserting, “Santa is coming early to stuff PG&E’s stocking with the public’s money.”

In defense, PG&E argued that the loan will primarily be allocated toward projects that have already received approval. A spokesperson for PG&E noted that by leveraging the federal loan guarantee, the utility could access lower financing costs than those typically offered through commercial markets.

“These projects are not new work,” stated Lynsey Paulo. “Utilizing lower-cost financing from the DOE Loan Program Office allows us to advance approved grid projects at a reduced expense for our customers compared to conventional borrowing.”

If successful, the DOE loan guarantee could enable PG&E to secure a more favorable interest rate than what is usually available in the finance market. However, consumer advocates are still warning that customers should prepare for potential impacts on their bills in the coming years.

Cook further asserted, “This loan is less a solution for California’s energy future and more a bailout for PG&E. Somebody must repay it, and it certainly won’t be the company’s shareholders or executives.”

Mark Toney, executive director of The Utility Reform Network (TURN), acknowledged that the reduced financing costs might favor consumers. However, he conveyed that the effectiveness of the DOE loan guarantee will largely depend on how PG&E allocates the funds and how consumer groups can advocate for responsible spending. “We have to ensure PG&E doesn’t just spend the money on their pet projects but channels resources into initiatives that the PUC has determined will yield the greatest benefits for the ratepayers,” he stated. “The customers are the ones who are going to have to pay this back.”

PG&E, Loan, Consumers