8. PG&E Corp. (NYSE:PCG)
Number of Hedge Fund Holders: 74
Average Volume (3-Month): 23.673 million
Upside Potential as of February 19: 39.86%
PG&E Corp. (NYSE:PCG) is an energy provider that delivers electricity and natural gas to a vast customer base across northern and central California. Utilizing a diverse energy portfolio, which includes nuclear, hydroelectric, and renewable sources, it maintains a complex infrastructure of transmission and distribution systems to power homes, businesses, and critical infrastructure.
Citi analysts, on February 11, looked at the company’s potential to power data centers. They think it could provide 5 GW of power: 3.4 GW by 2029, which is already in planning, and another 1.5 GW between 2030 and 2040. However, wildfires, tricky pricing rules, local resistance, and power reliability problems might prevent this. If California builds fewer data centers, then the companies with existing data centers would likely make more money. Citi still maintains a Buy rating on PG&E with a $21 target.
The company has 5.5 gigawatts of potential data center load in its application pipeline. This “beneficial load” is expected to increase revenue and lower customer bills. Of the 5.5 gigawatts, 1.4 gigawatts have passed preliminary engineering studies, meaning these projects are advancing. These 1.4 gigawatts represent 15 customers across 27 sites and are expected to be online by 2030, with some coming as early as 2026.
PG&E Corp. (NYSE:PCG) is working to streamline the process for these large customers, proposing upfront funding through filings like Electric Rule 30. It estimates that every 1,000 megawatts of data center load could lead to a 1-2% reduction in customer electricity bills, making this load growth beneficial for both the company and its customers.
Third Point Management highlighted PG&E Corp.’s (NYSE:PCG) strong legal protections and wildfire mitigation efforts under AB1054, providing a cautiously positive outlook despite wildfire risks. It stated the following in its Q4 2024 investor letter:
“We are devastated by the recent events in Southern California. Several of our family members and team members call Los Angeles home, and our hearts are with all impacted by the fires.
While PG&E Corporation (NYSE:PCG) does not operate in this region, there is press speculation that one of the fires, Eaton, may have been related to transmission equipment owned by SoCal Edison (SCE), another investor-owned utility (parent company Edison International.) Edison has stated publicly that they do not believe their equipment was involved. The investigation is ongoing, and we believe it is premature to make conclusions about the origin of the fire…
If the Eaton fire ignition was related to SCE equipment, the California legal standard of “inverse condemnation” exposes SCE to resultant property damage liabilities. After PG&E’s bankruptcy in 2019, California passed a bill called AB1054 which protects the state’s investor-owned utilities (Edison, PG&E and Sempra) from these liabilities as long as they adhere to a rigorous safety standard. This includes a comprehensive wildfire mitigation plan approved annually by the government and a commitment to spend billions to harden the grid; for example, PG&E is spending a whopping $18 billion on wildfire mitigation from 2023 -2025. In exchange, AB1054 includes several protections, such as a legal prudency standard that entitles the utility to cost recovery via multiple avenues in the event of a catastrophic fire and a $21 billion insurance fund to cover incurred liabilities. SCE has an active safety certificate and thus should benefit from the protections under AB 1054, just as PG&E would in case of a future fire. Regulator-approved cost recovery is a routine proceeding for utilities in areas prone to severe climate events (hurricanes, tornadoes, earthquakes, etc.) in acknowledgement of the fact that it is not feasible to remove all risk from overhead grid infrastructure. PCG has been the preeminent advocate in California for undergrounding, which we believe is the only way to permanently eliminate wildfire risk from grid assets…” (Click here to read the full text)
