Patti Poppe, CEO of California's biggest utility, PG&E, is exasperated.
Again.
"We've worked too hard to be sitting at the stoplight," says Poppe, who once worked in the auto industry. "I don't like neutral."
What's stymied Poppe: Last month, the California's state legislature kicked the can down the road on wildfire liability protection for utilities. PG&E's stock got zapped, losing 18% of its value on Aug. 31, and a throng of Wall Street analysts downgraded the stock. Like that iconic Californian Ronald Reagan once said, "There you go again."
The back story here is a California classic, featuring massive fires with unacceptable death counts and subsequent billions of dollars of litigation. But this is also the story of a utility that powers the electrification movement and the buildout of data centers. (California has 334 operating or planned, third in the nation after Virginia and Texas.) More than that, PG&E -- parent of Pacific Gas and Electric -- keeps the juice on at Alphabet, Anthropic, Meta Platforms, et al., serving arguably the world's most important economic ecosystem. Coursing underneath all of this is left coast politics.
Poppe (pronounced "poppy") became CEO of PG&E in January 2021, after it emerged from bankruptcy the previous July. (She notes with a grin that the poppy is California's state flower.) The utility, which serves the northern portion of the Golden State, filed for Chapter 11 in 2019. That was after the wildfires of 2017 and 2018, including the Camp Fire, caused by PG&E equipment, which killed 84 people. Overall, the company paid $25.5 billion in settlements.
Poppe's tenure started well enough. By late 2024, PG&E's stock had rallied from $12 to over $21, as the CEO worked on network safety by clearing vegetation, replacing equipment, and burying 10,000 miles of power lines in high-risk fire areas. She also restored the dividend, even if it was only to a penny a share. Then, in January 2025, the Eaton and Palisades Fires roared across greater Los Angeles, torching PG&E's stock, even though the fires were nowhere near PG&E's service area. Why was that? Because some claims from these fires would be paid out of the California Wildfire Fund, which all state utilities pay into. Given how large the fires were, the fear was that PG&E would have to pay more into the fund.
By July 2025, PG&E's stock was back down to $13. Again, the stock rallied over optimism that a proposal by Gov. Gavin Newsom to reform the wildfire liability would pass. Lawmakers couldn't agree on the details of a settlement and declined to vote on the bill. Again, the stock crashed.
Before we get to what's next, note that Poppe has quite the back story, too. The youngest of seven daughters of a schoolteacher-principal and an engineer with Consumers Energy who grew up in Jackson, Mich. (midway between Detroit and Kalamazoo), Poppe went to Purdue University, worked for General Motors, and then got an M.B.A. at Stanford University. In 2016, she became CEO of CMS Energy, the parent of Consumers Energy. Yup, in her hometown, where her father worked. ("A fun day for my Dad and me.") When she took the job at PG&E, she became the first woman to become CEO of two Fortune 500 companies.
The only thing that matters to Poppe now, though, is extricating PG&E from the mire. "The liability policy needs to be resolved," she says. "It's actually a paragraph of text, and though it's complicated, it's very clear. Just write down the paragraph, vote on it, and let us get back to work." Poppe says this legislation "definitely could still get done this year," before Newsom leaves office in January.
If not, Poppe will move forward with a strategic review announced on Sept. 2, which right off the bat reduced PG&E's capital spending next year from $13.4 billion to $11.4 billion. What else might the company look to do?
"The strategic review has a full range of options," she says. "Maybe grow the dividend faster. Maybe take different actions on how we deploy capital so investors have a reason to invest in California infrastructure. I have a large suite of businesses. My four million natural-gas customers are paying a sub-investment-grade cost of debt for a company that has nothing to do with wildfire.
"We have incredible generation assets: hydro, nuclear, a couple gas plants," she adds. "That fleet of generation assets has never been more valuable. There's definitely an ability to unlock value for customers as well as investors."
OK, but investors have heard this before. What's different this time?
"Getting in at this price is an incredible deal. It's an automatic correction when the legislation is passed. I would stack us up as a premium utility. Using price/earnings ratios as a comparison, we're trading at a 56% discount to the sector average. No utility has hung out at this ZIP Code for this long. It's a single gating issue, and as soon as that issue is resolved, we rerate very significantly. So, there's opportunities for people to not miss that moment," Poppe says.
Analysts are struggling with conviction here, though. "We see shares of PCG remaining at a deep discount despite top-tier [earnings] and rate base growth," BMO Capital Markets' James Thalacker wrote recently. "Absent further legislative support, we see a challenging setup."
Thacker also sees a wildly binary set of outcomes. Downside: Absent any regulatory relief and more claims against the wildfire fund, you could see a $3 stock. Upside: Wildfire reform happens soon, in which case he sees shares hitting $35. That's a bit of a range.
Much as some Californians might like to see it, PG&E isn't going away. The question is, can the politicians finally do the right thing and let Poppe put her foot on the gas?
Comments