The U.S. Department of Energy’s Loan Programs Office (LPO) announced the closing of a $15 billion loan guarantee 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. The loan guarantee for PG&E’s Project Polaris is designed to 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 would help PG&E meet forecasted load growth, increase electric reliability, and reduce costs for its consumers across California.
This announcement marks the first Energy Infrastructure Reinvestment (EIR) project to reach financial close 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, in order to help 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.
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.
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. This investment supports the Biden-Harris Administration’s Justice40 Initiative, which sets a goal that 40% of the overall benefits of certain federal investment in climate, clean energy, and other areas flow to disadvantaged communities that are marginalized by underinvestment and overburdened by pollution. PG&E has committed to locate many projects in disadvantaged communities, as identified by the Climate and Economic Justice Screening Tool.
