PG&E's Cost of Capital Application and What it Means for Customers

On Nov. 14, the California Public Utilities Commission issued a proposed decision on PG&E’s 2026 Cost of Capital Application. 

PG&E is reviewing this proposed decision from its regulator and is focused on an outcome that will ensure the company can continue stabilizing its prices and funding critical energy system improvements for customers. 

Although the proposed decision fails to acknowledge current elevated risks to help attract the needed investment for California's energy systems, PG&E will keep working with regulators and state leaders to ensure adequate funding needs and reasonable long-term rates for customers.

California's investor-owned utilities are required to submit Cost of Capital applications every three years. 

PG&E, Southern California Edison, SoCal Gas and San Diego Gas & Electric submitted their 2026 Cost of Capital applications in March 2025.

These applications set the utilities’ financial return expected by people who provide money to utilities for upfront funding (capital) for essential energy system improvements, such as wildfire mitigation, and gas and electric safety and reliability projects.  

Infrastructure improvements are funded through the issuance of stock and bonds, and PG&E can minimize overall costs of financing investments when it can attract these funds on reasonable terms.  PG&E’s proposal would also help to minimize increases to customer bills over time by supporting healthy credit ratings and minimizing long-term debt costs. This leads to lower rates for customers, and ultimately, better quality service.

Investors expect to be compensated for the risk they take when providing that funding.

Current risks include:

• Inflation and supply chain disruption that can impact prices and interest rates 

• Recent federal government actions that could impact costs

• Impacts from climate change such as extreme weather events 

• California’s policy of inverse condemnation that makes utilities strictly liable for damages caused by their equipment

PG&E seeks to adequately compensate investors for these risks, consistent with other companies with similar risk levels across the country. 

The application includes testimony from a third-party expert showing that based on PG&E’s risks, its proposed 11.3% return on equity investment is reasonable.  By setting the return at this level, the company is not guaranteed to recover it.  This application just provides the opportunity to do so. 

If approved, PG&E’s proposal would increase residential customer bills by approximately $5.50 per month reflecting a higher interest rate environment. The change would not take effect until Jan. 1, 2026, at the earliest. PG&E expects average annual bill increases still will be limited to 2%-4%, through 2030, without sacrificing safety.

The CPUC will determine the reasonable Cost of Capital in an open, transparent and public process. 

PG&E stabilizing electric prices for customers

PG&E is working hard to achieve additional savings through company-wide cost-cutting programs and accessing lower financing costs. In the last three years, the company has saved approximately $2.5 billion in operating and capital costs by working more efficiently and using new technologies and improved processes, such as using drones to inspect equipment and bundling electric projects into a single scope of work. PG&E has used the savings to do more safety and reliability work for customers more quickly and to offset some costs of that work. 

The company’s efforts to stabilize electric rates are going against the national trend for forecasted electric prices. While PG&E residential electric rates went down in September 2025 and bundled residential electric rates are expected to decrease again in 2026, the U.S. Energy Information Administration forecasts that national electric prices are expected to increase through 2026, outpacing forecasted inflation. 

The typical PG&E residential electric bill is about $12 lower today than it was in January 2024 for a customer who uses 500 kilowatt hours monthly and does not receive income-eligible discounts. Over that time, residential electric prices have dropped three times, which offset any increases.