OAKLAND — PG&E claims a record-setting $15 billion federal loan will help customers save money on an array of critical projects — but multiple advocacy groups warn the utility’s ratepayers may face higher bills.
The U.S. Energy Department Loan Program Office has disclosed a decision to provide a $15 billion loan to PG&E for an array of endeavors including upgrades to power lines and hydroelectric systems.
The $15 billion loan guarantee to PG&E by the outgoing Biden Administration was the largest loan committment issued in the history of the DOE’s Loan Program Office, according to the Wall Street Journal, which was the first to report the energy agency’s decision.
“These infrastructure investments will help PG&E meet forecasted load growth, increase electric reliability, and reduce costs for its consumers across California,” the DOE Loan Program Office stated in a prepared release. The Loan Office described the decision as a “conditional commitment.”
Oakland-based PG&E quickly attempted to assure customers that the loan could provide savings of “up to $1 billion” in “net present value” over the life of the loan, the utility titan stated in a blog post.
“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,” PG&E chief executive officer Patricia Poppe stated in the blog post. “The DOE 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 has vowed to ensure that PG&E customers will begin to travel a path to lower monthly bills. PG&E bills, however, have zoomed higher at a far faster pace than the Bay Area inflation rate.
Some advocacy groups, however, warned that the repayment of the loan could cause monthly bills to jump in the future.
“The long-term consequences for ratepayers could mean higher bills, more financial strain, and an ever-growing reliance on taxpayer funds to prop up this struggling monopoly utility,” said Ken Cook, president of the Environment Working Group and a Bay Area resident.
Other observers who are concerned about PG&E’s rising monthly bills — which have rocketed higher at a far faster pace than the overall inflation rate — warned that customers could be on the hook over this financing gambit.
“It’s possible bills could go up,” said David Weisman, Executive Director of the Alliance for Nuclear Responsibility Legal Fund. “What happens with the loan payments is down-the-road kind of stuff.” Weisman added, “Santa is coming early to stuff PG&E’s stocking with the public’s money.”
PG&E, however, argues that the loan is being used to help bankroll work that is already approved. The unique sources of funding from the federal agency offer PG&E a lower cost than would otherwise be the case through the commercial finance markets.
“These projects are not new work,” said Lynsey Paulo, a PG&E spokesperson. “Partially funding these projects with the lower-cost financing from the DOE Loan Program Office would allow us to do already-approved grid work at a lower cost to our customers than conventional borrowing.”
To be sure, at face value, the DOE loan appears to have a lower interest rate than the general financial marketplace. But consumer groups urged PG&E customers to brace for potential bill impacts in years to come.
“This loan is less a solution for California’s energy future and more a bailout for PG&E,” Cook said. ” Somebody must repay it, and it certainly won’t be the company’s shareholders or executives.”
The difference in financing costs could benefit customers, in the view of Mark Toney, executive director of The Utility Reform Network, or TURN, a consumer group.
But the key battles related to the ultimate impact of the DOE loan might depend on whether consumer groups can pressure the state Public Utilities Commission to ensure PG&E spends its money wisely on relevant projects.
“We have to make sure PG&E doesn’t just spend the money on their pet projects, but spend every dollar on projects that the PUC has determined will provided the greatest public benefit to the ratepayers,” Toney said. “The customers are the ones who are going to have to pay this back.”