PG&E Says It May Spin Off Gas Business If California Doesn't Overhaul Fire Liability Rules

PG&E says it may spin off, sell or otherwise separate its natural gas business if California lawmakers don't overhaul the state's wildfire liability rules. Chief Executive Patti Poppe said the utility's roughly 4 million gas customers are effectively bearing the higher borrowing costs tied to PG&E's sub-investment-grade credit rating, even though that risk stems almost entirely from wildfire liability tied to the electric business.

A review born of legislative gridlock

PG&E opened the strategic review in early September after California's legislature deadlocked on wildfire liability reform, leaving utilities facing continued uncertainty over their financial exposure to fire-related claims. Governor Gavin Newsom had pushed a plan to shield publicly traded utilities from some of that liability, but the proposal failed to gain traction among lawmakers, deepening investor concerns about PG&E's balance sheet.

That deadlock has already had consequences: Fitch Ratings downgraded PG&E after the legislative effort stalled, and the company separately said it would defer about $2 billion of planned work as a result of the uncertainty. Separating the gas business would, in theory, let that unit raise capital on its own credit profile rather than being dragged down by the wildfire risk concentrated in PG&E's electric operations — though any such move would likely require regulatory approval and take considerable time to execute.