How PG&E Makes Money

We don't make higher profits by selling extra energy. The amount of profit our regulators allow us to earn is largely separated from the amount of gas and electricity we sell. This process is called Decoupling.

Our profits come primarily from "rates of return" that are authorized by our regulators on the investments we make in PG&E's energy infrastructure and from incentives earned by achieving energy efficiency targets. If energy usage and revenues turn out to be higher than needed to recover authorized costs plus the allowed return on investments, nearly all of that "extra" revenue will be used to reduce rates in the following year.

Since PG&E's profits do not generally depend on how much energy we sell, we have no reason to encourage customers to use more. In fact, the California Public Utilities Commission rewards us with financial incentives for implementing programs that succeed in encouraging our customers to use less energy.

Learn more about decoupling, and how energy efficiency and conservation benefit PG&E and our customers.

How Revenues Are Set

The total amounts of revenue that we are allowed to collect in rates can be divided into three general categories:

• Base revenues generally recover operating costs that do not vary with the amount of energy sold. This category also includes our authorized return on investments, together with many of the other fixed costs that we incur to provide reliable gas and electric service.
• Variable revenues recover those portions of PG&E’s operating costs that change the most when energy usage increases or decreases. This category includes most of our costs of procuring gas and electric energy for our customers. When energy usage is higher or lower than expected, we decouple sales and profits by keeping track of the resulting differences in our revenues and in this category of our costs.
• Other revenues include the costs of complying with numerous regulatory mandates. (We also include balancing account revenue in this category. These are the revenue adjustments used to decouple sales and profits.)

The following charts show what components make up PG&E's current electric and gas revenues.