PG&E Faces Rising Scrutiny Over Wildfire Strategy and Financing Costs

PG&E Corporation is adjusting its corporate priorities as it navigates significant financing expenses, wildfire liabilities, and regulatory scrutiny. Management reported on its fiscal third-quarter 2026 call that wildfire policy reform and an ongoing strategic review announced on September 2, 2026, are top of mind. Executives noted that comprehensive wildfire reform has not yet passed and action is necessary to address tail risks. The strategic review is evaluating corporate organization and capital structures, considering options ranging from corporate ring fencing to business separations and sales in an effort to secure investment-grade credit ratings.

This strategic shift comes as the utility contends with high debt and a growing cash shortfall. Over the twelve months ending September 2026, free cash flow stood at negative $4.98 billion, compared with negative $2.77 billion in the prior-year period. Total debt reached $65.5 billion at the end of September 2026, representing 227% of the company's market value. Citing high financing costs, PG&E trimmed $2 billion from its 2027 capital plan, lowering projected capital spending for that year to $11.4 billion. Management also halted earnings-per-share guidance beyond 2027 while the review is pending, though it reaffirmed 2027 core earnings per share guidance of $1.78 to $1.82.

At the same time, PG&E is encountering friction over its spending from regulators and consumers. Consumer advocates have pushed the California Public Utilities Commission to reject a requested $456 million interim rate increase and examine the utility's choice to delay $2 billion in grid investments. Regulators are also assessing whether to scale back PG&E's 10-year undergrounding program from a proposed 5,000 miles to roughly 1,100 miles. Although the company announced it has surpassed 1,500 miles of underground lines in high fire threat districts since 2021, a tighter cap from regulators could alter rate base growth and shift capital spending toward alternative safeguards.

Amid these operational hurdles, exchange-traded funds recorded net selling of $12.5 million in PG&E shares on Tuesday, led by a $14.3 million position reduction from the State Street Utilities Select Sector SPDR ETF. Over a five-day period, funds were net buyers on three days and net sellers on two. Management plans to announce the results of its strategic review by summer 2027, with updated capital spending guidance expected alongside its next financial report in February 2027.