Pacific Gas and Electric Company PFD 1ST 5%

What they do

PG&E Corporation operates through its subsidiary Pacific Gas and Electric Company, a regulated utility that sells and delivers electricity and natural gas to customers in Northern and Central California. The Utility's operations include electric and natural gas distribution, transmission, and generation, with a focus on wildfire mitigation and grid modernization.

Revenue drivers

• Electric revenues — Electric revenues were $4.388 billion for Q2 2026, up slightly year-over-year, and $9.355 billion for the six months ended June 30, 2026, a 9% increase. These revenues are driven by rate recovery for delivery and pass-through costs.
• Natural gas revenues — Natural gas revenues were $1.514 billion for Q2 2026 and $3.428 billion for the first half of 2026, roughly flat year-over-year. Revenues include pass-through costs for gas procurement and distribution.
• Regulatory rate relief — Interim rate relief from the 2023 WMCE proceeding contributed $180 million less in Q2 2026 than the prior year, but a $620 million final decision revenue increment boosted first-half revenues.
• Cost recovery pass-throughs — Revenues to recover electricity costs increased by $201 million in Q2 2026 and $363 million in the six-month period, though these pass-through amounts do not affect net income.

Recent performance

In Q2 2026, PG&E Corporation reported income available for common shareholders of $733 million, or $0.33 per diluted share, compared to $521 million and $0.24 per share in Q2 2025. For the six months ended June 30, 2026, EPS was $0.72 versus $0.51 in the prior year. The Utility's operating income rose 15% in Q2 and 18% in the first half, driven by lower operating and maintenance expenses and revenue increases. Management reaffirmed full-year 2026 non-GAAP core EPS guidance of $1.64 to $1.66 per share.

Strategy

PG&E is investing heavily in wildfire mitigation, including undergrounding powerlines, strengthening poles, and installing covered powerlines. The company is focusing on cost control, targeting a 2-4% reduction in non-fuel operating and maintenance expenses. It is expanding continuous monitoring capabilities to detect risks early and has plans to connect large data center loads, with a pipeline of over 12 GWs. Management is also advocating for California wildfire liability reform to provide a durable solution for customers and investors.

Risks

• Wildfire liability and costs — PG&E faces significant liabilities from past wildfires, including $1.325 billion for the 2019 Kincade fire, $2.15 billion for the 2021 Dixie fire, and $350 million for the 2022 Mosquito fire, and future fires could exceed available recoveries.
• Regulatory recovery uncertainty — The company may not be able to fully recover wildfire mitigation expenditures, and fines or penalties for noncompliance are possible.
• Wildfire Fund and Continuation Account risks — Recoveries are subject to fund sufficiency, administrator decisions, and CPUC actions; liabilities could exceed available amounts.
• Climate-driven hazards and operational risks — Extreme weather and vegetation conditions increase the risk of wildfires, and the company faces ongoing environmental violations and legal proceedings.

Outlook

Management expects to deliver solid 2026 results, reaffirming non-GAAP core EPS guidance of $1.64 to $1.66 per share. The company anticipates continued capital investment in grid hardening and wildfire safety, with completion of over 1,900 miles of undergrounding and 2,000 miles of strengthened poles by end of 2027. Data center load growth is seen as a potential margin and customer benefit, though it is contingent on appropriate pricing.