LPO Announces Conditional Commitment to Pacific Gas & Electric Company to Expand Hydropower Generation, Battery Energy Storage, and Transmission

As part of the Biden-Harris Administration’s Investing in America agenda, the U.S. Department of Energy’s Loan Programs Office (LPO) announced a conditional commitment for a loan guarantee of up to $15 billion to Pacific Gas & Electric Company (PG&E), a combined natural gas and electric utility serving Northern and Central California. PG&E submitted its loan application to LPO in June 2023. If finalized, the loan guarantee for PG&E’s Project Polaris will support a portfolio of projects to expand hydropower generation and battery storage, upgrade transmission capacity through reconductoring and grid enhancing technologies, and enable virtual power plants throughout PG&E’s service area. These infrastructure investments will help PG&E meet forecasted load growth, increase electric reliability, and reduce costs for its consumers across California.

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Today’s announcement marks the second Energy Infrastructure Reinvestment (EIR) project under LPO’s flexible loan facility and disbursement approach tailored for regulated, investment-grade utilities. Electric utility borrowers for EIR projects must demonstrate that the financial benefits received from the DOE loan guarantee will be passed on to the customers of, or communities served by, that utility. LPO’s financing of the individual projects within the loan facility comes at a lower interest rate than traditional capital market financing, helping reduce upward pressure on electricity costs for PG&E’s 16 million customers.

PG&E will partner with the International Brotherhood of Electrical Workers (IBEW) Local 1245 to train and employ members of underserved groups interested in operational roles through its existing PowerPathway program. Currently, approximately two-thirds of PG&E employees are covered by collective bargaining agreements with unions. At full deployment, PG&E’s investments are expected to support thousands of on-going construction and operations jobs.

Through its due diligence approach to regulated utility lending, LPO confirms one or more anchor projects meet program eligibility and environmental review requirements for inclusion in the guaranteed loan facility, verifying PG&E’s ability to identify and execute eligible projects. 

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LPO borrowers must develop and implement a comprehensive Community Benefits Plan (CBP), which ensures borrowers meaningfully engage with community and labor stakeholders to create good-paying, high-quality jobs and improve the well-being of the local community and workers. In its CBP, PG&E plans to expand its outreach programs to boost engagement and deliver community benefits in partnership with key stakeholders, including local governments, Native American Tribes, community-based organizations, and low-and-middle income customers. PG&E has committed to locate many projects in disadvantaged communities, as identified by the Climate and Economic Justice Screening Tool.

President Biden’s Inflation Reduction Act created the EIR category under the of Title 17 Clean Energy Financing Program. Also known as the Title 17 Clean Energy Financing Program (Section 1706), EIR supports projects that retool, repower, repurpose, or replace energy infrastructure that has ceased operations or that enable operating energy infrastructure to avoid, reduce, utilize, or sequester air pollutants or greenhouse gas emissions. 

While this conditional commitment indicates DOE’s intent to provide a loan guarantee to finance the project, DOE and the company must satisfy certain technical, legal, environmental, and financial conditions before the Department enters into definitive financing documents and funds the loan.