PG&E Corp Annual Report: An Investor's Guide to Performance and Strategy

This summary offers a clear, detailed look into PG&E Corporation's performance and strategic direction, drawn directly from its latest annual report. It provides crucial insights for making informed investment decisions.

Business Overview and Operational Performance

PG&E Corp operates as a regulated utility, primarily delivering electricity and natural gas across California. In fiscal year 2025, the company achieved modest operational growth:

• Electricity Sales: PG&E delivered approximately 83.4 million MWh of electricity in 2025. This marked a slight increase of 0.83% from 82.7 million MWh in 2024, continuing a steady upward trend from 81.8 million MWh in 2023. This demonstrates consistent, albeit modest, growth in electricity demand within its service territory.
• Natural Gas Sales: Natural gas deliveries reached approximately 271 million MMBTU in 2025. This represents a small increase of 0.74% from 2024, which remained flat compared to 2023. Natural gas sales volumes held steady with minor growth.

Management Discussion and Analysis (MD&A) Highlights

Management's discussion for the year highlighted significant operational achievements and strategic responses to key challenges:

• Wildfire Risk Management: Mitigating wildfire risks remains a paramount focus. In 2025, PG&E contributed $1 billion to the AB 1054 Wildfire Fund, consistent with contributions in 2024 and 2023. This state-mandated fund mutualizes and covers potential wildfire liabilities across California's utilities, providing a crucial layer of financial stability.

  The company also maintains a substantial Wildfire Fund Asset of $7.55 billion (as of 2024). This further underscores its commitment to managing this significant risk through both preventative measures and financial safeguards. Despite these efforts, wildfire liability remains a substantial, ongoing risk factor requiring continuous investment and vigilance.

• Diablo Canyon Power Plant (DCPP) Extension: The company successfully secured continued operation of the Diablo Canyon Power Plant, its nuclear facility. This facility is vital for California's grid reliability and clean energy goals.

  In 2025, PG&E incurred $100 million in fuel costs and another $100 million in maintenance and operations expenses related to the Civil Nuclear Credit Program. This program, alongside California's Senate Bill 846, provides essential regulatory and financial support to operate DCPP, ensuring a stable base of carbon-free electricity generation for the state. This extension represents a significant achievement in maintaining generation capacity and supporting California's energy transition.

Financial Health and Capital Structure

PG&E's financial structure demonstrates stability in key long-term debt instruments.

• Debt Structure: The company's debt profile includes several large, stable instruments. Recovery Bonds remained at $18.34 billion in both 2025 and 2024. Similarly, SB 901 Securitization debt stood at $13.54 billion in both years, and the Department of Water Resources (DWR) Loan was consistent at $3.5 billion from 2023 through 2025. This consistency suggests a stable, long-term financing structure for specific past events or investments.
• Regulatory Assets: Non-current regulatory assets were stable at $4.31 billion in both 2025 and 2024. Regulators approved these costs for future recovery from customers through rates. This mechanism allows utilities to recover prudently incurred expenses.

Key Risks

While PG&E has made strides in managing its primary risks, investors should be aware of several factors:

• Wildfire Liabilities: Despite significant contributions to the AB 1054 Wildfire Fund and the Wildfire Fund Asset, the inherent risk of catastrophic wildfires in California remains. Any major event could still impact the company's financial performance, reputation, and operational stability, even with existing protections.
• Regulatory Environment: As a regulated utility, state regulators heavily influence PG&E's operations, rates, and investment recovery. Changes in regulatory policy, rate case outcomes, or public pressure could impact profitability and operational flexibility.
• Operational Risks: The company faces ongoing challenges related to aging infrastructure, the need for continuous grid modernization, and the increasing impacts of climate change on its service territory.
• Financial Risks: Factors such as interest rate fluctuations, access to capital markets for significant infrastructure investments, and maintaining favorable credit ratings always remain relevant for a capital-intensive utility.

Future Outlook

PG&E's future strategy centers on maintaining grid reliability, enhancing safety, and supporting California's clean energy transition:

• Grid Resilience and Decarbonization: The continued operation of the Diablo Canyon Power Plant, backed by regulatory support, highlights its commitment to maintaining nuclear power as a key component of California's energy mix, which provides stable, carbon-free generation. This aligns with broader decarbonization goals.
• Enhanced Safety and Wildfire Mitigation: Ongoing significant investments in wildfire prevention, grid hardening, and contributions to the Wildfire Fund will remain a core strategic priority to protect communities and ensure operational continuity.
• Regulatory Engagement: The company will continue to navigate a complex regulatory landscape, leveraging programs like the Civil Nuclear Credit Program and frameworks like the AB 1054 Wildfire Fund to support its operations and strategic objectives.
• Infrastructure Investment: A regulated utility like PG&E will invariably focus on continuous investment in its transmission and distribution infrastructure to enhance reliability, integrate renewable energy, and meet growing customer demand.

Competitive Position

As a regulated utility, PG&E operates within an exclusive service territory in California, which the California Public Utilities Commission (CPUC) grants. This regulatory framework defines its competitive landscape and limits direct competition for electricity and natural gas delivery to end-use customers within its service area. However, the company faces indirect competition and evolving market dynamics from several sources:

• Distributed Generation: The increasing adoption of rooftop solar and other forms of distributed generation allows customers to generate their own power, potentially reducing demand for electricity delivered by PG&E.
• Energy Efficiency: State-mandated and customer-driven energy efficiency measures can reduce overall energy consumption, impacting sales volumes.
• Community Choice Aggregators (CCAs): CCAs procure electricity on behalf of their customers within PG&E's service territory. PG&E continues to deliver the power and maintain the grid. This shifts the power procurement function and associated revenues away from PG&E, though it retains the regulated transmission and distribution business.
• Alternative Energy Providers: While PG&E maintains its monopoly on transmission and distribution, large industrial or commercial customers may explore options for direct access to energy suppliers or self-generation, bypassing some of PG&E's services.
• Regulatory Environment: The regulatory environment itself, particularly CPUC decisions regarding rates, allowed returns, and investment recovery, significantly influences PG&E's ability to compete for capital and maintain its financial health.

In conclusion, PG&E Corp demonstrated stable operational volumes and made significant progress in managing its critical wildfire and generation challenges in 2025. Investors should weigh the company's strategic advancements in wildfire mitigation and nuclear power against the inherent risks of its operating environment and regulatory landscape.