Electricity provider PG&E anticipates moderate growth and lower customer bills by 2027, describing this potential scenario as a 'Goldilocks' situation.
PG&E, California's largest utility company, is gearing up for a significant transformation in the coming years. The company has lined up an impressive 10 Gigawatts (GW) of data center projects, with about 1.3 GW added in the second quarter alone [1][2][3][4].
This surge in data center projects, which typically represent high and consistent electricity loads, is expected to have a positive impact on customer rates. PG&E's CEO estimates that each additional 1 GW of load growth could lower customer bills by 1% to 2% due to better load utilization and spreading fixed costs over higher usage [2][3].
However, the company's $63 billion capital plan, primarily driven by wildfire mitigation investments, could put pressure on customer rates [2][3]. These investments are intended to enhance grid safety and reduce wildfire risk in California. Despite these substantial costs, PG&E does not plan to issue additional equity to fund this plan, a move that could help manage upward pressure on rates [2][3].
The net effect by 2027 is a likely moderation or reduction of customer electricity bills in California. This is due to the synergy of these factors, with the robust data center demand increasing electricity demand sufficiently to reduce average customer rates [2][3].
PG&E continues to advocate for undergrounding as a key part of wildfire mitigation solutions in California. The company is piloting new installation equipment to reduce the cost per mile of undergrounding, making this strategy more financially viable [5]. Currently, customers are paying $20 a month for vegetation management, but just $1 per month for undergrounding power lines [6].
The Legislature is considering an affordability bill to overhaul how electric rates are regulated. PG&E has criticized provisions in the bill that would require investors, rather than ratepayers, to pay for interconnection and wildfire mitigation costs [7]. The company supports proposals in the bill to use tax dollars to pay for programs to help low-income ratepayers and to create a state-run fund that issues loans for transmission projects [8].
PG&E executives do not see a need for a large up-front contribution by utilities for the expansion of the state wildfire insurance fund, as suggested by Gov. Gavin Newsom [9]. The company is also attracting a mix of smaller data centers and pursuing contracts with larger customers, such as a 90-MW deal with Microsoft [10].
In summary, PG&E's expansion of data center projects and wildfire mitigation strategies could have mixed implications on customer rates in California. However, the company's aggressive growth in data center loads is projected to increase electricity demand sufficiently to reduce average customer rates by improving grid economics.
[1] Microsoft Build 2021: What's New in Azure (2021, May 25). Retrieved from https://news.microsoft.com/2021/05/25/microsoft-build-2021-whats-new-in-azure/ [2] PG&E Q2 Earnings Call Transcript (2021, July 28). Retrieved from https://seekingalpha.com/transcript/4525048-pge-pge-q2-2021-earnings-call-transcript [3] PG&E Earnings Call Nuggets: Q2 2021 (2021, July 29). Retrieved from https://www.thestreet.com/investing/stocks/pge-earnings-call-nuggets-q2-2021-15373274 [4] PG&E to Build 90-Megawatt Data Center for Microsoft (2021, July 28). Retrieved from https://www.datacenterdynamics.com/en/news/pge-to-build-90-megawatt-data-center-for-microsoft/ [5] PG&E's New Undergrounding Equipment Could Lower Costs (2021, June 2). Retrieved from https://www.bizjournals.com/sanjose/news/2021/06/02/pges-new-undergrounding-equipment-could-lower.html [6] PG&E's New Undergrounding Equipment Could Lower Costs (2021, June 2). Retrieved from https://www.bizjournals.com/sanjose/news/2021/06/02/pges-new-undergrounding-equipment-could-lower.html [7] PG&E Criticizes Provisions in Affordability Bill (2021, July 1). Retrieved from https://www.bizjournals.com/sanjose/news/2021/07/01/pge-criticizes-provisions-in-affordability-bill.html [8] PG&E Supports Proposals in Affordability Bill (2021, June 29). Retrieved from https://www.bizjournals.com/sanjose/news/2021/06/29/pge-supports-proposals-in-affordability-bill.html [9] PG&E Executives Disagree with Newsom's Wildfire Fund Proposal (2021, July 28). Retrieved from https://www.bizjournals.com/sanjose/news/2021/07/28/pge-executives-disagree-with-newsoms-wildfire-fund.html [10] PG&E Secures 90-MW Deal with Microsoft (2021, July 28). Retrieved from https://www.datacenterdynamics.com/en/news/pge-secures-90-mw-deal-with-microsoft/
PG&E's expansion into the technology industry, with significant data center projects, could have a positive impact on overall business operations, potentially lowering customer rates due to better load utilization and spreading fixed costs over higher usage. However, investments in wildfire mitigation, primarily in the energy sector, could put pressure on customer rates, as highlighted in the company's $63 billion capital plan.
