PG&E asks California regulators for rate increase to boost shareholder profits

Pacific Gas and Electric Co. on Thursday asked state energy regulators to increase shareholder profits because of the high risk of doing business in California after a historic year of rate hikes sent utility bills soaring.

In filings submitted to the California Public Utilities Commission, PG&E asked that it be allowed a 11.3% return for investors, up a percentage point from the current limit. 

Called a return on equity, it’s a percentage of company revenues that is reserved for shareholders and designed to help investor-owned utility companies like PG&E attract investments in California’s energy system. 

If approved, PG&E’s proposal would increase residential customer bills by about $5.50 per month, the company said. The rate hike would take effect starting in January 2026 at the earliest. 

The request came amid statewide concerns about high electricity bills. Last year, PG&E increased electricity rates on five separate occasions and lowered electricity bills once — which meant average residential customers paid about $440 more annually compared with 2023. The dramatic rise prompted hearings with California lawmakers and regulators about how to lower bills. 

Starting this month, PG&E customer bills rose by about $3 for average households, an increase meant to cover rising transmission service costs and repay the utility company for state-mandated vegetation management work the company completed in 2021.

The company said that it expected overall bill increases to be in the 2-4% range through 2026.

Some of the revenues are paid to shareholders in the form of dividends, and the rest is reinvested in the company. In 2024, PG&E reported $2.47 billion in profits. Of that, $86 million went to shareholder earnings. The rest was reinvested in the company for projects like power line maintenance and inspection programs. PG&E said its dividend is the lowest in the utility industry.

There are mechanisms in place to ensure utility companies like PG&E aren’t driving up expenses to boost profits. The return on equity percentage is a ceiling, and if companies spend more than state regulators approve, they must reduce the amount given to shareholders to cover those cost overruns.

Even so, ratepayer advocates have argued that state regulators have failed to limit utility spending. PG&E and other utility companies are able to go back to regulators to ask for more when projects, which are often budgeted years in advance, cost more than anticipated. 

In the filing, PG&E company officials said that the increase is warranted because its investors in California’s energy system are taking significant risks — and expect to be compensated for that. 

Among those risks, PG&E cited inflation and disruptions to the supply chain, which can increase prices and interest rates. The company also noted that climate change has increased the costly impact of storms and wildfires, and state law holds utilities liable for damage caused by their equipment, even when the companies acted prudently. 

PG&E also said that some of the major policy shifts underway by the Trump administration could drive the cost of doing business higher.

Californians are paying some of the highest electricity rates in the country — and often struggling to afford them. As of December last year, about 1 in 5 households served by PG&E, Southern California Edison or San Diego Gas & Electric were behind on energy payments, according to the state.

Next month, Californians can expect a credit on gas and electric bills as part of the state’s Cap-and-Trade program, which requires polluters to pay for state climate investments. 

The credits, which will amount to about $125 for residential customers who receive both electric and gas service, are automatically applied to customer bills in the spring and fall and are meant to offset rate increases due to the state’s cap-and-trade program that aims to reduce greenhouse gas emissions. The credit is $58 for electric-only customers and about $67 for gas-only customers.

Reach Julie Johnson: julie.johnson@sfchronicle.com; X: @juliejohnson; Bluesky: @jjreport.bsky.social Reach Danielle Echeverria danielle.echeverria@sfchronicle.com