PG&E Submits Testimony to California Regulators Outlining $22.5 Billion Cost of Government Grid Takeover in San Francisco

San Francisco reliability and substation resilience investment in 2026 is 16% above the 2025 level.

Rhea-AI Summary

PG&E (PCG) outlined $370 million in San Francisco reliability and substation resilience investments for 2026, alongside longer-term grid improvement plans.

The 2026 investment is 16% more than in 2025. PG&E has spent $3 billion on reliability upgrades over the past decade and plans to invest nearly $2 billion more over the next five years. Work planned for completion this year includes 23 reliability projects, upgrades to 10,000 feet of underground cable and installation of 50 isolation and switching devices to reroute power during outages.

Over the next several years, PG&E plans to spend $75 million in the Richmond district and $60 million in the Sunset neighborhood to convert circuits to higher capacity. In Bayshore and Hunters Point, the company is investing $600 million to rebuild its substation and circuits and is improving overhead power lines.

3 points · 0 major

PositiveiHow this balance works

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Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.

It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.

Rhea-AI Sentiment measures something else, the tone of the wording.

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0 major · 0 points

Hollow bars mark forward-looking points. How the balance works

Positive

• Moderate point. Forward-looking: it has not happened yet and may not happen.2026 reliability and substation resilience investment totals $370 million, 16% more than in 2025.
• Minor pointSan Francisco reliability upgrades received $3 billion over the past decade.
• Minor point. Forward-looking: it has not happened yet and may not happen.Further investment is planned at nearly $2 billion over the next five years.

Negative

• None.

News Explained

The $22.5 billion is a company estimate for a proposed takeover, not an agreed payment or completed transfer.

PG&E has submitted testimony responding to San Francisco's petition asking the California Public Utilities Commission to value PG&E's electric grid in the city; the disclosure concerns a proposed takeover, not a completed transfer. PG&E estimates that a takeover would require the city to pay $22.5 billion to PG&E and its remaining customers. Of that estimate, $13.9 billion is for assets and $8.6 billion for severance damages, which PG&E describes as physical separation and preventing statewide program costs from shifting to remaining customers.

The headline's $22.5 billion cost is PG&E's estimate for a proposed takeover, while San Francisco has asked the CPUC to determine grid value, so it is not a settled takeover price. On asset value alone, PG&E estimates approximately $13.9 billion, compared with the city's April estimate of $3.4 billion.

PG&E says both valuations omit hundreds of millions of dollars in startup costs for a city-run utility and do not account for approximately $100 million a year in tax and franchise-fee revenue San Francisco would forgo.

Key Figures

Takeover costs: $22.5 billion PG&E asset valuation: $13.9 billion CCSF asset valuation: $3.4 billion +5 more

Takeover costs

$22.5 billion

PG&E filing's stated costs of a CCSF takeover

PG&E asset valuation

$13.9 billion

Fair-market value of electric and real property assets

CCSF asset valuation

$3.4 billion

Amount CCSF cited in April 2026

Severance damages

$8.6 billion

Takeover costs described in PG&E's filing

Business severance damages

$7.6 billion

Component of PG&E's valuation

Physical separation damages

$1 billion

Component of PG&E's valuation

Burden per account

About $53,000 per account

PG&E's stated division of total takeover burden across San Francisco electric accounts; not a forecast of a bill or charge

Electric accounts

420,000 accounts

San Francisco account count used in PG&E's per-account comparison

Key Terms

fair-market value, severance damages, franchise fee

3 terms

fair-market value financial

"a fair-market value of approximately $13.9 billion for its electric and real property assets"

The price at which an asset would change hands between a willing buyer and a willing seller, neither being under compulsion to buy or sell and both having reasonable knowledge of the relevant facts. When an active public market exists, fair-market value equals the quoted market price; when no market price is available, it is estimated using accepted valuation methods (for example discounted cash flows, comparable transactions, or appraisals) that reflect prevailing market conditions.

severance damages financial

"valuation also includes $7.6 billion in damages for business severance"

A monetary award intended to compensate a party for losses caused by the termination or wrongful severing of a contractual relationship, including employment contracts. Severance damages are determined under contract or tort law and are meant to put the injured party in the position they would have been in had the contract not been breached or wrongfully ended. The term differs from a negotiated or planned severance package (an employer-paid payout under a contract or policy): severance damages are typically calculated by a court or arbitrator and their amount and method of calculation depend on the contract terms and the governing law.

franchise fee financial

"tax and franchise fee payments of approximately $100 million a year"

A franchise fee is a one-time payment a business pays to the owner of a brand in order to use its name, systems and support—like buying a license to run a familiar restaurant or store. For investors it matters because these fees provide upfront cash, show how quickly a brand can expand through partners, and signal the value and demand for the brand, all of which affect revenue, growth forecasts and company valuation.

AI-generated analysis. How Rhea-AI works. Not financial advice.

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Filing Includes $8.6 Billion in Business Severance Damages and Physical Separation Costs that the City's Valuation Does Not Yet Address 

OAKLAND, Calif., Oct. 21, 2026 /PRNewswire/ -- Pacific Gas and Electric Company (PG&E) on Tuesday responded to the City and County of San Francisco's (CCSF) petition asking the California Public Utilities Commission (CPUC) to determine the value of PG&E's electric distribution grid in San Francisco.

PG&E's filing details that the CPUC-required costs of a CCSF takeover would be $22.5 billion.

CCSF's April 2026 filing estimated only the fair-market value of the grid's assets. PG&E's filing includes both the fair-market value of the grid's assets and the costs CCSF would have to pay PG&E and its remaining customers as part of its proposed takeover:

• Physical separation of the San Francisco grid from PG&E's larger, integrated grid
• Lost revenue for statewide energy programs that a CCSF utility would shift to customers outside of San Francisco

"A government takeover of our grid is not the right solution for our San Francisco customers," said PG&E Corporation CEO Patti Poppe. "We have decades of specialized expertise operating San Francisco's complex electric system. And now our filing shows that a takeover doesn't make financial sense for customers."

PG&E's filing outlines a fair-market value of approximately $13.9 billion for its electric and real property assets in San Francisco, compared to the $3.4 billion that CCSF cited in April. However, PG&E's valuation also includes $7.6 billion in damages for business severance and $1 billion in damages for physical separation.

An accurate accounting of the cost of a government takeover of PG&E's San Francisco electric distribution grid is essential to understanding how it would affect San Franciscans. Dividing PG&E's total burden of a takeover across the 420,000 electric accounts in San Francisco would equal about $53,000 per account. That is not a forecast of a specific customer bill or charge. However, it's clear that a takeover would burden San Franciscans with significant debt for decades to come.

CCSF significantly undervalues PG&E's assets

The CPUC already has ruled that CCSF will have to pay "the highest value" that a hypothetical buyer might pay for the assets, and PG&E's analysis finds that CCSF's April offer for the company's assets is well below fair-market value.

CCSF's April filing suggested a total value of just $3.4 billion for PG&E's San Francisco grid.

But CCSF's filing assigned zero value on PG&E's more than 2,000 real estate interests that include easements and licenses throughout the city.

CCSF also dramatically undervalued PG&E's underground distribution system in San Francisco, failing to account for higher construction costs, the challenges associated with working around existing infrastructure, and unique permitting and specialized installation practices specific to San Francisco.

Severance damages would constitute $8.6 billion in takeover costs

Severance damages fall into two categories: Costs to physically separate PG&E's electric system within San Francisco from the company's larger grid, and costs to ensure that a government takeover would not financially harm PG&E's remaining customers.

CCSF's takeover proposal includes taking PG&E's Martin Substation in Daly City, plus transmission and distribution facilities, real estate, telecommunications assets and other infrastructure that supports service to customers outside San Francisco.

After physically severing assets, any separation plan would have to physically restore safe and reliable service to PG&E's remaining customers, including:

• Building a new PG&E substation, likely in San Mateo County, to replace the Martin Substation
• Building a new service center to maintain gas and electric operations for PG&E's remaining Bay Area customers
• Reconfiguring or building power lines to restore service to PG&E customers outside of San Francisco, particularly in San Mateo County

This work would require new costs, permitting and extensive outage management to reduce its effects on customers.

CCSF would also have to pay business severance damages to prevent cost shifts for state-mandated programs onto remaining PG&E customers. Business severance damages reflect set costs that fewer customers would pay following a takeover, increasing the costs on customers outside of San Francisco. Those statewide programs include:

• Wildfire risk reduction
• Low income-qualified assistance
• Energy efficiency initiatives

Neither PG&E's analysis nor CCSF's valuation includes hundreds of millions of dollars in startup costs that CCSF would incur to establish a city-run electric company, including hiring a highly skilled workforce. Nor does either valuation consider the PG&E-generated revenue that CCSF would forego, including tax and franchise fee payments of approximately $100 million a year, that help pay for public services including fire and police protection.

Improving reliability, making investments

To put CCSF's takeover bid in further context, over the past decade PG&E has spent $3 billion on reliability upgrades—nearly the total amount CCSF proposes to pay for PG&E's San Francisco distribution grid—and the company plans to invest nearly $2 billion more in the next five years.

PG&E is investing $370 million in reliability and substation resilience improvements in San Francisco in 2026—16% more than in 2025. The work the company plans to complete this year includes 23 reliability projects, upgrading 10,000 feet of underground cable, and installing 50 isolation and switching devices to reroute power during outages.

To further improve upon this reliability progress and modernize the grid, the company over the next several years will spend $75 million in the Richmond district and $60 million in the Sunset neighborhood to convert circuits to higher capacity. In Bayshore and Hunters Point, PG&E is investing $600 million to rebuild its substation and circuits and is improving overhead power lines.

"My coworkers and I love serving San Francisco. San Francisco's expectations are high, and we intend to measure up," Poppe said. "We have 600 people who serve you every day and if San Francisco were to take over PG&E's assets, those people would leave the city and go work on other parts of our system. It saddens me to imagine a day when a whole convoy of blue and white trucks drives across the Bay Bridge heading to Oakland, never to come back. I don't think that's in San Francisco's best interest."

About PG&E 

Pacific Gas and Electric Company, a subsidiary of PG&E Corporation (NYSE: PCG), is a combined natural gas and electric utility serving more than 16 million people across 70,000 square miles in Northern and Central California. For more information, visit pge.com and pge.com/news.

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SOURCE Pacific Gas and Electric Company

FAQ

AI-generated questions and answers. How Rhea-AI works. Not financial advice.

How much is PG&E investing in San Francisco grid reliability in 2026?

PG&E is investing $370 million in San Francisco reliability and substation resilience improvements in 2026, 16% more than in 2025.

What are PG&E's longer-term investment plans for San Francisco?

PG&E plans to invest nearly $2 billion more over the next five years, following $3 billion spent on reliability upgrades over the past decade.