PG&E believes that investing in infrastructure will help it supply the forecasted load growth, increase electric reliability and reduce costs for its consumers across California.
The Department of Energy’s Loan Programs Office (LPO) announced a conditional commitment for a loan guarantee of up to $15 billion to Pacific Gas & Electric Company (PG&E) to expand hydropower and battery storage, upgrade transmission and enable virtual power plants (VPPs).
PG&E is an investor-owned utility in California that provides natural gas and electricity to 5.2 million households. Overseen by the California Public Utilities Commission, PG&E was said to have a market capitalization of $41.98 billion.
The utility submitted a loan application to LPO in June 2023, with the expectation that the financing will support not only hydropower and battery storage, as well as upgrade transmission capacity through reconductoring and grid enhancing technologies, and enable virtual power plants throughout PG&E’s service area.
Researchers at the University of California, Berkeley, noted in a recent paper that reconductoring transmission lines with advanced conductors could double U.S. transmission capacity, said that “combining a focus on renewables, surplus interconnection, and reconductoring can pave the way for low-cost, clean energy abundance.”
Grid-enhancing technologies (GETs) were cited by an RMI study as having the potential to save project developers collectively hundreds of millions of dollars in interconnection costs compared to default network upgrades, which could potentially be passed on to rate payers, which is important because of the rapidly rising electric rates in the state.
“SB 1006 will unlock the cheapest generation for Californians and help the grid adapt to climate change,” said Julia Selker, executive director of the WATT Coalition. “WATT applauds Governor Newsom for signing this bill to ensure that Californians get the full value out of grid investments and that utilities are using the most cost-effective tools to manage the energy transition.”
Recently California Governor Gavin Newsom signed SB 1006 into law, requiring utilities to evaluate GETs at least every two years in transmission planning.
PG&E believes that investing in infrastructure will help it supply the forecasted load growth, increase electric reliability and reduce costs for its consumers across California.
In an article on California’s electric rates, Ahmad Faruqui noted that the rates that the three investor-owned utilities in California charge residential customers for electricity have been rising steadily for the past several years. The chart below shows the trend in PG&E’s rates charged to its 5.5 million residential customers in northern California.
The California Solar and Storage Association (CALSSA) warned, however, that such investment may not lead to lower rates. CALSSA argued that the fundamental structure of private utilities in the state has created a “perverse incentive” to spend inefficiently. The association says the more capital utilities spend on infrastructure, the more they can get electricity rate increases approved. The more rates are increased, the larger the profits.
This is the second Energy Infrastructure Reinvestment (EIR) project under LPO’s flexible loan facility and disbursement approach tailored for regulated, investment-grade utilities. The LPO stated that electric utility borrowers such as PG&E must demonstrate that the financial benefits received from the DOE loan guarantee will be passed on to the customers of, or communities served by, that utility.
LPO’s financing of the individual projects within the loan facility comes at a lower interest rate than traditional capital market financing, helping reduce upward pressure on electricity costs for PG&E’s 16 million customers.
LPO said it believes that the utility verified its ability to execute the projects because one or more of the anchor projects meet program eligibility and environmental review requirements for inclusion in the guaranteed loan facility.
A requirement of all LPO borrowers is that they have and implement a Community Benefits Plan (CBP), which ensures borrowers to engage with the local community, provide good paying jobs and improve the area residents’ well-being.
PG&E reported that it will partner with the International Brotherhood of Electrical Workers (IBEW) Local 1245 to train and employ members of underserved groups who are interested in operational roles through its existing PowerPathway program. PG&E said approximately two-thirds of its employees are currently covered by collective-bargaining agreements with unions. Furthermore, the utility says that, at full deployment, its investments are expected to support thousands of on-going construction and operations jobs.
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