PG&E aims to raise up to $1B for transmission through leases to Citizens Energy

PG&E aims to raise up to $1B for transmission through leases to Citizens Energy | Utility Dive

Pacific Gas & Electric is seeking to raise up to $1 billion for transmission projects by leasing parts of its transmission assets to Citizens Energy, a non-profit power provider, according to a Tuesday filing at the California Public Utilities Commission.

The investments by Citizens — to be made in five parts with Citizens providing roughly $200 million upfront payments for each tranche — will permit PG&E to accelerate infrastructure investments needed to meet California’s decarbonization goals, while increasing capacity, reliability and the interconnection of generation, including renewable generation, and load on its system, the San Francisco-based utility said.

“We’re committed to finding innovative and affordable new ways to ensure that the transformation of California’s energy system benefits all the state’s residents,” PG&E Corp. CEO Patti Poppe said in a press release.

The proposed “investment program” will raise capital for PG&E without affecting its credit metrics, a benefit to customers, the San Francisco-based utility said.

Citizens, based in Boston, will dedicate part of its after-tax profits from the arrangement — 50% initially and ramping up to 90% — to fund energy-related charitable programs for disadvantaged communities and low-income families in PG&E’s service territory in Northern and Central California, according to PG&E.

Under the proposal, PG&E may offer Citizens Pacific Transmission, a Citizens for-profit subsidiary, up to five 30-year leases on new high-voltage transmission projects as well as upgrades, rebuilds and expansions that meet eligibility requirements. Citizens’ leasehold interest in the entitlements to any given project will be capped at 49.9%.

The first potential funding tranche includes leases on nine transmission projects for which Citizens would make a $138.6 million upfront payment. If approved, Citizens would have a 45.3% rental stake in the projects.

The proposal is modeled on two PUC-approved transactions between Citizens and San Diego Gas & Electric. Through leases, Citizens made an $86 million investment in the Sunrise Powerlink project and a $27 million investment in the Sycamore Penasquitos project, according to PG&E.

Citizens will receive revenue from its entitlements, which will be paid by the California Independent System Operator through its high-voltage transmission access charge. PG&E and Citizens will need Federal Energy Regulatory Commission approval for the individual leases.

PG&E expects that Citizens will invest about $200 million a year on average over five years. Using its profits from the program, Citizens anticipates contributing more than $400 million to charitable energy programs over 35 years.

PG&E proposed that the PUC make a decision on the application by Aug. 30. Pending regulatory approval, PG&E and Citizens expect to close on the first lease option in early 2025.

PG&E expects to spend $62 billion on capital projects from 2024 through 2028, up 20% from its previous five-year plan, according to a Feb. 22 earnings presentation. The spending includes about $9.1 billion on FERC-related transmission projects.