Investing.com — The Biden administration has pledged a record $15 billion loan to the Pacific Gas and Electric Company (PG&E (NYSE:PCG)), California’s largest utility company. The loan, which is offered through the Energy Department’s Loan Programs Office, will fund a range of projects aimed at combating the effects of climate change and enhancing the electrical grid.
PG&E plans to use this funding for several infrastructure projects that will enable the utility to meet its net-zero emissions goals and keep pace with demand growth. These projects include increasing the capacity of its network of hydroelectric dams, introducing new batteries coupled with transmission upgrades, and exploring “virtual power plants” – networks of batteries and energy management systems that can help meet local demand needs.
The loan will be provided in installments over several years as PG&E develops projects that will have to be approved by loan-office officials. This financial assistance comes at a crucial time for PG&E, which is under pressure to reduce its electricity rates, which have surged over 50% in the past three years. The company has also been forced to invest billions of dollars to mitigate wildfire risks after its equipment sparked the deadly 2018 Camp Fire, which destroyed the town of Paradise and led the company into bankruptcy.
The loan is expected to save PG&E customers close to $1 billion over the life of the financing, according to the utility. “We see this as a win for our customers and we think this is a great opportunity to lower rates through this financing,” said PG&E Treasurer Mari Becker.
The loan commitment is the largest in the loan office’s nearly two-decade history and stands as a signature achievement for the office, which has made more than $42.4 billion in loan commitments and more than $24.1 billion in closed loans and guarantees under the Biden administration. The loan to PG&E will help the utility meet forecasted electricity demand growth, ensure system reliability, and dramatically reduce costs for its customers, said Chris Creed, chief investment officer of the Loan Programs Office.
The loan will also support PG&E’s proposed grid upgrades, which are expected to cost tens of billions of dollars. The company is preparing for a surge in electricity demand driven by California’s shift to electric vehicles and efforts to phase out fossil-fuel use in homes and buildings. The development of data centers tied to the growth of artificial intelligence is also expected to increase power demand.
While wildfire-mitigation projects aren’t directly eligible for funding under the terms of the loan, projects that simultaneously target grid safety and reliability could qualify. The loan office plans to close the PG&E loan before President-elect Donald Trump assumes office.
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