The U.S. Department of Energy’s Loan Programs Office on Dec. 17 announced a conditional commitment for a loan guarantee of up to $15 billion to Pacific Gas & Electric Company, a combined natural gas and electric utility serving Northern and Central California.
Investor-owned 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.
The 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.
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, DOE said.
LPO borrowers must develop and implement a comprehensive Community Benefits Plan, "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," DOE said.
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.
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.
