WEDNESDAY AGGREGATE: Wildfires; Cost of Capital; SoCalGas Microgrid Optional Tariff

The CPUC's mid-November docket flow is converging around wildfire liability, risk signals, and microgrid market boundaries.

• PG&E is testing the full-strength presumption of prudence under Assembly Bill 1054 with a nearly $2 billion recovery request.
• SCE continues to refine operational practices amid tightening weather patterns for its Public Safety Power Shutoffs.
• The investor-owned utilities are mounting a coordinated Cost of Capital push.
• SoCalGas seeks fresh debt authority.
• The battle lines over utility participation in distributed markets sharpen in SoCalGas's Microgrid Optional Tariff proceeding.

Additionally, please see our November 18 electricity rate update for an early look at January 1, 2026 rates.

WILDFIRES

PG&E filed an application seeking review and recovery of costs from the 2019 Kincade and 2021 Dixie Fires. PG&E argues that:

• Both ignitions qualify as “covered wildfires";
• It held valid safety certifications at the time...

...and consequently deserves Assembly Bill 1054’s presumption of prudence while requesting authorization to recover $1.59 billion in net Wildfire Event Mitigation Account (WEMA)-recorded claims, litigation, and financing costs. PG&E requests an additional $314 million in Catastrophic Event Memorandum Account (CEMA)-recorded restoration costs, with balances to be updated in rebuttal.

PG&E asserts that it prudently designed, maintained, and operated the involved facilities, that no imprudence contributed to either ignition, and that extreme winds, drought, fuel loads, and topography exacerbated the fires’ severity.

PG&E highlights substantial reimbursements already received from the Wildfire Fund and anticipates seeking securitization for approved WEMA-electric costs later. PG&E filed an accompanying motion to shorten protest deadlines, requesting protests by December 2 and replies by December 8.

INSTANT ANALYSIS: This is the first catastrophic-wildfire cost-recovery case filed under AB 1054 in which PG&E enters with a full statutory presumption of prudence, making the central fight not about ignition facts but about whether any party can raise “serious doubt." PG&E’s filing is aggressive and clearly coordinated with the Wildfire Fund Administrator. The scale of requested recovery (over $1.9 billion combined across WEMA and CEMA) means this proceeding will set a precedent for how AB 1054 is applied when safety certificates are in place, with major implications for investor confidence, future wildfire-cost securitizations, and statewide affordability trajectories.

PUBLIC SAFETY POWER SHUTOFFS

SCE filed a post-event report that describes a Public Safety Power Shutoff that occurred from October 25 through 30, 2025, when rapidly intensifying Santa Ana winds, extremely dry conditions, and elevated Fire Potential Index values led SCE to deenergize 16 distribution circuits. These circuits spanned Los Angeles, Riverside, San Bernardino, and Ventura Counties and the PSPS affected 2,640 customers.

SCE activated its Emergency Operations Center, issued more than 1.8 million multilingual notifications, and conducted pre-event patrols and real-time monitoring as wind gusts approached 50 to 60 mph in some areas.

No wind-related damage was found, and all service was restored early on October 30. Using its PSPS risk-benefit tool, which showed wildfire risk exceeding PSPS risk on every affected circuit, SCE justified the shutoffs as necessary, though it acknowledged delays and gaps in some customer notifications and outlined corrective steps

INSTANT ANALYSIS: This PSPS was a tight, weather-driven activation triggered by high-confidence Santa Ana conditions, elevated Fire Potential Index values, and gusts approaching 60 mph. SCE's risk modeling showed wildfire consequences far outweighing PSPS harms on every affected circuit, and patrols found no wind-related damage, with full restoration achieved by October 30. The operational execution was clean, but the familiar weak spot reappeared: notification gaps, driven by late-breaking circuit additions and internal campaign-authorization lags.

COST of CAPITAL

On November 13, representatives from PG&E, SCE, SDG&E, and SoCalGas held a joint WebEx meeting with advisors to CPUC President Alice Reynolds and Commissioner Darcie Houck to discuss their 2026 Cost of Capital applications.

The utilities emphasized that a timely CPUC decision is critical to ensure new rates take effect by January 1, 2026. They argued that a higher, just-and-reasonable cost of capital is necessary given what they described as worsening investor risk conditions in California. This included:

• Wildfire-related liability and recovery uncertainty;
• Elevated undercollections;
• Regulatory lag; and
• Increasing disallowances.

The utilities noted that nationwide interest rates and average authorized ROEs have risen since the last full Cost of Capital proceeding, while California’s risk environment has intensified. They pointed to recent wildfires, ongoing uncertainty even after Senate Bill 254, and credit pressures such as S&P’s downgrade of SCE. SoCalGas also highlighted heightened regulatory and financial risk for gas utilities, including delayed cost recovery and higher borrowing costs.

INSTANT ANALYSIS: This is a push by all four IOUs to demonstrate that California’s risk profile has worsened, and therefore their requested ROEs should stand. The arguments are an attempt to pre-empt the CPUC’s inclination toward continuity and to blunt intervenor criticism by packaging the risk story as statewide affordability and reliability concerns rather than shareholder protections.

UTILITY FINANCES

Administrative Law Judge Gerstle issued a proposed decision that, if adopted, would authorize SoCalGas to issue up to $3.3 billion in new long-term debt to:

• Fund capital investments;
• Reimburse its treasury for prior spending; and
• Maintain flexibility for contingencies...

...while also permitting a broad range of financing instruments including first mortgage bonds, debentures, foreign debt, long-term loans, and accounts-receivable financing.

The PD allows SoCalGas to use debt enhancements and hedging tools (e.g., call and put options, swaps, and Treasury locks) under existing CPUC rules to reduce financing costs for ratepayers. The PD stresses that approval to issue debt does not constitute approval of any project or guarantee cost recovery, which will be reviewed in future rate proceedings.

Comments are due December 2. The CPUC is scheduled to consider this item on December 18.

INSTANT ANALYSIS: This is a straightforward financing authorization with no surprises and no opposition. The $3.3 billion authority largely aligns with precedent and preserves standard utility flexibility across instruments, enhancements, and hedging tools.

MICROGRIDS

Cal Advocates filed notice of a November 7 ex parte meeting in the proceeding where SoCalGas requests a Microgrid Optional Tariff (MOT). Cal Advocates met with advisors from the offices of President Reynolds and Commissioner Baker to outline their opposition to SoCalGas’s proposal.

• Cal Advocates argued that supplemental testimony served by SoCalGas fails to remedy deficiencies identified in the scoping memo – the supplement repeats material from the original application instead of providing required detail on legal compliance, ratepayer protections, or competition impacts.
• Cal Advocates argued further that the MOT would improperly leverage ratepayer-funded utility advantages to enter unregulated commercial microgrid markets, while shifting costs and suppressing competition.

Last, Cal Advocates argued that SoCalGas’s claimed precedents (its Distributed Energy Resources Tariff and Hydrogen Innovation Experience) are inapplicable; the former had strict statutory safeguards not present in the MOT proposal, and the latter was a small, shareholder-funded demo project (unlike the large commercial projects anticipated under the MOT).

INSTANT ANALYSIS: The tone of the notice suggests that Cal Advocates may be seeking full dismissal of SoCalGas's application, framing it as an inappropriate attempt by a monopoly gas utility to enter a competitive microgrid market using structural advantages funded by ratepayers. The rebuttal of SoCalGas’s claimed precedents (DERS Tariff, Hydrogen Innovation Experience) also presages arguments that other parties may adopt e.g., that SoCalGas is overstating historical Commission support for utility participation in distributed energy markets.