PG&E Natural Gas Rates for January 1, 2026: Rates Fall on Accounting, Not Reform

PG&E Annual Gas True-Up Filing

PG&E filed Advice Letter 5160-G, seeking CPUC approval of its 2026 Annual Gas True-Up to update gas transportation rates effective January 1, 2026.

The filing replaces PG&E's preliminary Annual Gas True-Up (see our summary here), which the CPUC approved earlier this month. Updated forecasts are based on recorded balances through November 30, 2025 and incorporate final, CPUC-authorized revenue requirement changes adopted late in the year.

PG&E now proposes total 2026 gas transportation revenue requirements of $5.676 billion, a net reduction of $292 million from amounts currently in rates, driven primarily by lower end-use transportation revenue requirements and reduced gas Public Purpose Program surcharges, partially offset by higher unbundled storage and backbone costs.

Gas transportation balancing accounts are projected to be undercollected by $108 million at year-end 2025 ($98 million less than the balances currently being amortized) resulting in downward adjustments to customer class charge components.

The Annual Gas True-Up rolls forward a limited set of notable balancing accounts, including:

• Core and noncore fixed-cost true-ups ($37 million core undercollection; $67 million noncore overcollection), which drive much of the net end-use transportation reductions
• Hazardous substance cost recovery ($102 million to be collected system-wide); this is one of the largest discrete adders embedded in transportation rates
• Revenue-sharing mechanisms (a $70 million overcollection returned to customers); this contributes significantly to a downward pressure on rates
• Uncollectibles and affordability programs (tens of millions in aggregate); this reflects continued credit stress without establishing a new cost baseline
• Biomethane administration (low, single-digit millions); this is directionally notable but immaterial to overall rate movement
• Wildfire-related adjustments ($14 million in cost recovery, partially offset at transmission); this activity is mostly normalized into base true-ups now rather than considered exceptional
• Approved capital program impacts such as Gas AMI ($40.6 million distribution and $3.9 million transmission).

The filing excludes 2026 core gas procurement costs, which are addressed separately in PG&E’s concurrent procurement advice letter, which is summarized directly after this item.

Protests are due January 12.

INSTANT ANALYSIS: In this filing, gas affordability is being expressed almost entirely through balancing-account hydraulics rather than new CPUC direction. The rate impacts here reflect downstream true-ups of prior policy decisions, not fresh Commission judgment, namely:

• Cost of Capital Reset: The CPUC's 2026 cost-of-capital decision (D.25-12-043; see our summary here) lowered the return applied to authorized gas rate base. That directly compresses fixed-cost recovery and is one of the largest drivers of the end-use transportation decline in this true-up filing.
• General Rate Case Attrition Mechanics: The CPUC's GRC and adopted attrition formulas set what costs are allowed; how quickly they escalate; and how much lag is embedded. Those mechanics determine how over- and undercollections accumulate. The true-up filing is merely draining (or refilling) the reservoirs those rules created.
• Public Purpose Program Normalization: PPP surcharges were already reset in AL 5138-G (see our summary here). The true-up filing just reconciles balances and CARE offsets, contributing $77 million worth of downward pressure.
• Capital Program Authorizations (Gas AMI, Safety, Wildfires): Capital program costs such as Gas Advanced Metering Infrastructure (see D.25-12-029, summarized here), wildfire mitigation, and safety investments were first tracked in memorandum accounts and later authorized for recovery, at which point they were transferred into balancing accounts and flowed through rates via the true-up submission. At the implementation layer, these costs function as non-discretionary pass-throughs: the Commission's policy judgment has already been made, and the true-up's role is limited to mechanical reconciliation and allocation.
• Depreciation Lives and Asset Treatment: Longer depreciation lives and restrained asset growth temper near-term revenue requirements, even as policy fights over gas system contraction continue elsewhere. In short, the CPUC has deferred difficult gas-planning choices and let depreciation do the smoothing.

PG&E Procurement Filing

PG&E’s Advice Letter 5159-G submits routine but consequential revisions to its gas tariffs to implement updated core procurement and transportation rates effective January 1, 2026.

The filing updates gas procurement charges for residential, small commercial, large commercial, and natural gas vehicle core customers, reflecting a lower weighted-average cost of gas compared to the prior month, alongside several short-term amortization surcharges to true up under-collections in the Purchased Gas Account and related subaccounts. These include recoveries for prior under-collections tied to:

• Core sales, reflecting PG&E’s procurement of gas on behalf of its core customers;
• Shrinkage, which captures the difference between gas entering PG&E’s system and gas ultimately billed, including physical losses, measurement error, and unaccounted-for gas;
• Firm storage, reflecting contracted storage capacity used to manage seasonal swings and ensure winter deliverability;
• Pipeline demand charges, which are fixed reservation fees paid to interstate and intrastate pipelines to secure firm transportation capacity regardless of actual throughput; and
• PG&E’s winter hedging program, which relies on financial instruments and physical hedges to limit exposure to winter price spikes.

Consequently, procurement charges vary modestly by customer class based on capacity cost allocation, with residential core procurement set at $0.63850/therm and lower levels for larger commercial and natural gas vehicle customers.

In parallel, Advice Letter 5159-G incorporates updated core transportation rates and Public Purpose Program surcharges that are being established through PG&E’s Annual Gas True-Up filing (summarized above).

Protests are due January 12.

INSTANT ANALYSIS: This filing shows how January 1 gas rate movement is being produced. Procurement charges ease because the weighted-average cost of gas declined month over month, with that relief partially offset by amortizations clearing prior under-collections tied to core sales, shrinkage, storage, pipeline reservations, and winter hedging. Rate changes are therefore coming from fuel price normalization layered on top of balance-account cleanup rather than changes to service scope. Viewed alongside PG&E’s Annual Gas True-Up, the pattern reveals broader gas cost recovery trends: falling throughput is concentrating fixed capacity costs into frequent true-ups and amortizations. For market participants, the focus is not new investment, but the pace of under-collection clearance, the treatment of hedging costs, and how much discretion remains in future recovery cycles.