Biden administration offers California's PG&E up to $15B loan to boost climate resilience

The Biden administration on Tuesday announced its conditional approval of a loan guarantee for Pacific Gas & Electric Co. (PG&E) of up to $15 billion, which would serve to decarbonize the massive utility's operations and increase its reliability.

The funds, which would come from the Department of Energy's Loan Programs Office, would serve PG&E's Project Polaris — a portfolio of initiatives to expand hydropower generation and battery storage, upgrade grid transmission capacity and enable the establishment of virtual power plants.

Such investments, according to the Energy Department, would help the company meet its forecast load growth, ensure reliable and affordable electricity and decrease costs for Californian consumers.

The offer was made via the loan office's Energy Infrastructure Reinvestment project, which uses a flexible loan facility and disbursement approach for regulated investment-grade utilities.

To gain approval, borrowers must show that the financial benefits gained from a loan guarantee would be passed on to communities served by the utility, according to the Energy Department.

As far as PG&E is concerned, the agency determined that the financing of projects within the loan would come with a lower interest rate than traditional capital market funding — meaning, the money would reduce upward pressure on electricity costs for 16 million customers.

The Wall Street Journal reported the Energy Department's loan office had planned to offer PG&E a $30 billion loan but ultimately cut that amount in half.

In response to Tuesday's conditional commitment, PG&E noted in a press release that its customers could save up to $1 billion through the receipt of this federal loan.

“Investments in a clean and resilient grid for northern and central California will have significant returns for our customers in safety, reliability and economic growth," Patti Poppe, PG&E Corp. CEO, said in a statement.

"The DOE [Department of Energy] loan program can help us accelerate the pace and impact of this work, which supports thousands of living wage jobs, at a lower cost to our customers," Poppe added.

PG&E underwent a massive reorganization after filing for bankruptcy in January 2019, emerging from this status in July 2020. The filing occurred in the aftermath of the 2018 Camp Fire — a deadly blaze that ravaged the community of Paradise and was sparked by the company’s powerlines.

Since then, and as part of a deal made with the state of California, the company committed to a long list of expensive safety overhauls and upgrades.

Bob Dean, the business manager for IBEW 1245 — a Central California branch of a global utility workers union — said in a statement that the group was "encouraged by PG&E's commitment to rebuild, retool and reinvest in energy infrastructure."

That infrastructure, he added, is vital to achieving California's goals of "electric reliability and climate resilience goals, and provide these benefits to PG&E customers at a lower cost."

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