IOUs Submit Final Electrification Impacts Study (Part 2): PG&E Claims Electrification Could Cut Rates 25% Despite Billions in Upgrades

The three large electric utilities have filed their final "Electrification Impacts Study Part 2" reports in the High DER proceeding, collectively outlining how electrification, policy, and demand flexibility could reshape distribution system investment through 2040. (See CRI's coverage of the draft studies, here and here.)

All three studies respond to a 2024 CPUC decision (D.24-10-030) and evaluate multiple futures built on the California Energy Commission's Integrated Energy Policy Report load forecasts, comparing a base planning case against equity-focused adoption patterns and varying levels of demand flexibility.

San Diego Gas & Electric

SDG&E's filing frames electrification primarily as a distribution-level cost and capacity challenge under three scenarios:

• Base Case;
• Equity Scenario, and
• Demand Flexibility Scenario.

Under the Base Case, SDG&E projects peak load growth from approximately 6.2 GW in the late 2020s to about 7.0 GW by 2040, requiring more than $3.2 billion in primary and secondary distribution upgrades. Per SDG&E, concentrating Distributed Energy Resource adoption in disadvantaged communities raises both peak demand and infrastructure needs modestly, pushing total costs closer to $3.6 billion by 2040.

By contrast, the Demand Flexibility Scenario reduces projected peak load and materially lowers required upgrades, cutting total distribution costs to about $2.5 billion. SDG&E emphasizes that while demand flexibility shows clear planning value, its study does not commit to specific programs and cautions against mandates that would constrain utility planning discretion.

Southern California Edison

SCE’s Electrification Impacts Study Part 2 applies a similar scenario framework but at a much larger system scale, evaluating four cases:

• Base case aligned with its current Distribution Planning Process;
• Equity-driven DER dispersion case; and
• Two demand flexibility cases with increasing levels of participation.

SCE estimates total distribution investment of approximately $13.1 billion under the base scenario through 2040, with the equity scenario adding only marginal incremental cost. The demand flexibility cases, however, show potential savings ranging from a few hundred million dollars to more than $1 billion, depending on how aggressively flexible loads (especially electric-vehicle charging, storage, and HVAC) are managed at the circuit level.

SCE highlights that these scenarios are analytical constructs rather than forecasts, but notes that the tools and automated solutioning methods developed in Electrification Impacts Study Part 2 will inform future distribution planning cycles.

Pacific Gas & Electric

PG&E’s report presents the most expansive analysis, positioning electrification as both a capital-intensive undertaking and a potential source of long-term customer benefit. PG&E estimates that meeting electrification demand will require between $23 billion and $31 billion in distribution investment through 2040 across its scenarios.

Unlike Electrification Impacts Study Part 1, PG&E says that all Part 2 scenarios are “mitigated,” incorporating engineering best practices, load transfers, and existing forms of load management.

PG&E finds that these mitigations already reduce primary system costs by several billion dollars relative to earlier studies, and that enhanced, orchestrated demand flexibility could further lower infrastructure needs by about $1.8 billion.

Uniquely, PG&E also concludes that electrification growth could place downward pressure on distribution rates (potentially as much as 25% by 2040) as increased load spreads fixed costs over more kilowatt-hours. PG&E holds that equity-driven adoption raises total investment needs but remains consistent with higher load and utilization assumptions, rather than representing inefficiency in planning.

INSTANT ANALYSIS

The three IOUs’ final Electrification Impacts Study Part 2 filings feature a shared conclusion: electrification drives substantial distribution investment through 2040, but outcomes are governed less by aggregate load growth and more by load shape.

• Across SDG&E, SCE, and PG&E, equity-focused adoption patterns increase costs only incrementally, while demand flexibility produces the largest divergence by deferring circuits, transformers, and substation upgrades. Timing and location of load remain the dominant variables.
• At the same time, the utilities establish limits on how demand flexibility is treated in planning. Flexibility is modeled as a sensitivity, not as a guaranteed substitute for infrastructure. None of the studies commit to specific programs, participation rates, or performance obligations, and all emphasize that distribution planning must continue to assume physical upgrades unless flexible load proves persistent, locationally reliable, and measurable at the circuit level.

The filings also normalize very large capital requirements over multi-decade horizons. SCE and PG&E present distribution investment in the tens of billions of dollars as operationally manageable, with PG&E arguing that higher utilization from electrification can offset costs over time through improved rate base economics.

The debate no longer seems to be whether electrification will reshape the grid, but how much discretion planners retain over the pace and scale of upgrades as policy, customer behavior, and load management practices evolve.