PG&E Corporation and Utility Report Strong Financial Performance in 2025

Overview PG&E Corporation and its subsidiary, the Utility, have reported solid financial results for the year 2025. This combined report covers the financial performance and key developments for both entities.

The Utility’s revenues fluctuate based on the outcomes of ratemaking proceedings and the amount of pass-through costs incurred, such as the cost of purchased power and fuel. Factors like weather, wildfire-related costs, and interest expense also impact the financial results. The discussion of 2024 results is incorporated by reference from the previous year’s report.

Key Factors Affecting Financial Results Several key factors could materially impact PG&E Corporation’s and the Utility’s finances, including:

Wildfire Risks and Mitigation Costs: The companies’ financial condition is heavily influenced by the costs and effectiveness of the Utility’s wildfire mitigation initiatives, the damages from future wildfires, and their ability to recover these costs through insurance, the Wildfire Fund, the Continuation Account, and regulatory proceedings. Liabilities from past wildfires have been significant, totaling over $3.8 billion.

Ratemaking and Regulatory Proceedings: The timing and outcomes of ratemaking cases, as well as other regulatory and legislative actions, can greatly affect the companies’ business profile and financial results. Increased state activity on energy affordability and wildfire-related issues could also impact operations.

Cost Control and Financing: Earnings depend on the Utility’s ability to manage operating and capital costs within authorized amounts. Volatile capital markets and higher interest rates may also impact financing costs.

Tax Matters PG&E Corporation has substantial net operating loss carryforwards that could be limited by an “ownership change” under IRS rules. Ownership restrictions in the company’s articles of incorporation are intended to prevent such a change.

Results of Operations PG&E Corporation’s consolidated results are primarily driven by the Utility’s performance. The Utility saw a 14% increase in net income in 2025 compared to 2024, reaching $3.065 billion.

Utility Performance: The Utility’s operating revenues grew 2% in 2025, driven by increased recovery of costs associated with extended Diablo Canyon operations, interim rate relief, and higher electricity procurement costs. These were partially offset by decreases in other authorized revenue collections.

Cost of electricity increased 15% due to higher procurement costs, while natural gas costs decreased 7%. Operating and maintenance expenses declined 4%, mainly from reductions in previously deferred costs. Depreciation, amortization, and decommissioning rose 11% with growth in the asset base.

Interest income fell 14% due to lower interest rates and account balances. The Utility’s income tax benefit increased 85%, primarily from a higher tax repairs deduction and additional generation-related deductions.

Liquidity and Financial Resources PG&E Corporation and the Utility expect to generate adequate cash to meet their financing needs through a combination of operating cash flows, debt, and equity markets. As of the end of 2025, they had $4.5 billion in total liquidity.

The companies rely on CPUC-authorized capital structures, debt issuances, and short-term borrowings to fund operations and investments. PG&E Corporation does not plan any equity issuances through 2030. The Utility continues to issue first mortgage bonds and secured debt for long-term funding.

Dividends PG&E Corporation has announced a dividend policy targeting a payout ratio of approximately 20% of core earnings by 2028, subject to Board approval.

Regulatory Matters The Utility is involved in various ratemaking and other regulatory proceedings that could significantly impact its financial condition, including:

Wildfire Mitigation and Cost Recovery: The Utility has filed applications seeking recovery of $1.36 billion in 2022 costs, $2.18 billion in 2023 costs, and $596 million in 2024 costs related to wildfire mitigation and catastrophic events. Decisions have been issued approving substantial portions of these requests.

The Utility also filed an application seeking review and recovery of $1.9 billion in costs associated with the 2019 Kincade and 2021 Dixie fires, including amounts drawn from the Wildfire Fund.

Forward-Looking Rate Cases: The Utility has filed its 2027 General Rate Case, requesting a revenue requirement of $16.64 billion by 2030 to support safety, resiliency, and clean energy investments. It has also received a final decision on its 2026 Cost of Capital, which set the authorized ROE at 9.98%.

Other Proceedings: The Utility received approval for its 2026-2028 Wildfire Mitigation Plan and is working to extend operations at the Diablo Canyon nuclear plant. It is also participating in proceedings related to the SB 884 undergrounding program.

Legislative and Regulatory Initiatives Key developments include the enactment of SB 254, which establishes the Continuation Account to provide additional liquidity for catastrophic wildfire claims if the Wildfire Fund is depleted. The law also places restrictions on the Utility’s equity rate base for certain fire risk mitigation investments.

Litigation and Other Matters PG&E Corporation and the Utility face various contingencies, including wildfire-related claims and environmental remediation costs, which could materially impact their finances. The companies use a range of risk management activities to mitigate commodity price, interest rate, and counterparty credit risks.

Analysis PG&E Corporation and the Utility have demonstrated solid financial performance in 2025, with the Utility driving the majority of the consolidated results. The key factors that will continue to shape the companies’ future include their ability to effectively manage wildfire risks and costs, navigate the regulatory landscape, and control operating and financing expenses.

The Utility’s revenue growth in 2025 was driven by a mix of authorized cost recoveries, with increases in some areas offset by decreases in others. This highlights the importance of the ratemaking process in determining the Utility’s financial outcomes. The companies’ focus on cost control, as evidenced by the decline in operating and maintenance expenses, is also a positive sign.

The significant liabilities from past wildfires and the ongoing uncertainty around future wildfire risks remain a major concern. The companies’ reliance on the Wildfire Fund, Continuation Account, and regulatory cost recovery mechanisms to mitigate these financial impacts is critical. Continued monitoring of the Wildfire Fund’s longevity and the outcomes of related regulatory proceedings will be essential.

PG&E Corporation’s strong liquidity position and access to capital markets provide financial flexibility to fund operations and investments. The lack of planned equity issuances through 2030 suggests confidence in the company’s ability to manage its capital structure. However, the potential impact of rising interest rates on financing costs is a risk factor to monitor.

The regulatory landscape remains complex, with a mix of cost recovery proceedings, forward-looking rate cases, and other initiatives. The Utility’s ability to navigate this environment and secure timely and favorable outcomes will be a key determinant of its financial performance. The companies’ proactive engagement in these proceedings is a positive sign.

Overall, PG&E Corporation and the Utility have demonstrated resilience in the face of significant challenges and have positioned themselves for continued success. Prudent financial management, effective risk mitigation strategies, and constructive regulatory relationships will be crucial as the companies navigate the evolving energy landscape in California.