PACIFIC GAS & ELECTRIC Co

This is a combined Form 10-Q of PG&E Corporation and the Utility and includes separate Condensed Consolidated Financial Statements for each of these two entities. This combined MD&A should be read in conjunction with the Condensed Consolidated Financial Statements and the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1. It should also be read in conjunction with the 2025 Form 10-K.

Generally, PG&E Corporation’s and the Utility’s revenues vary based on the outcomes of ratemaking proceedings and the amount of pass-through costs incurred. See “Ratemaking Mechanisms” in Part I, Item 1: “Business” in the 2025 Form 10-K regarding how the Utility’s revenues are determined. Factors that cause costs to vary include the cost of purchased power and fuel; the costs of procurement, storage, and transportation of natural gas; weather; criminal, civil and regulatory charges for wildfires; the outcomes of ratemaking proceedings; and increases in interest expense as a result of additional debt issuances or changes in interest rates.

The discussions related to the results of operations and liquidity for the three and nine months ended September 30, 2025 compared to the same periods in 2024 are incorporated by reference to Part I, Item 2: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in PG&E Corporation’s and the Utility’s combined Form 10-Q for the three and nine months ended September 30, 2025, which was filed with the SEC in October 2025.

Key Factors Affecting Financial Results

PG&E Corporation and the Utility believe that their financial condition, results of operations, liquidity, and cash flows may be materially affected by the following factors:

•The Uncertainties in Connection with Wildfires, Wildfire Mitigation, and Associated Cost Recovery. PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows may be materially affected by the costs and effectiveness of the Utility’s wildfire mitigation initiatives; California’s wildfire liability framework; the extent of damages from wildfires that do occur; the financial impacts of wildfires; and PG&E Corporation’s and the Utility’s ability to mitigate those financial impacts with insurance, self-insurance, the Wildfire Fund, the Continuation Account, and regulatory recovery.

Despite extensive wildfire mitigation measures, the Utility still faces significant wildfire risk, which is exacerbated by climate change, severe weather events, aging infrastructure, and vegetation growth. Once an ignition has occurred, the Utility may be unable to control the extent of damages, which is determined primarily by environmental and vegetation conditions, third-party suppression efforts, and the location of the wildfire. The Utility can be liable for these damages and the costs of fire suppression efforts, the Utility’s own assets may be damaged or destroyed, and certain of the Utility’s wildfire mitigation costs are subject to reasonableness review. The extent to which the Utility will be able to recover these costs through rates is uncertain. The Utility will recover its wildfire-related claims in excess of available insurance and legal fees through rates only to the extent that the CPUC or the FERC, as applicable, determines that the Utility has met the applicable prudency standard. The Utility could also face fines, penalties, enforcement action, or other adverse legal or regulatory consequences for noncompliance related to wildfire mitigation efforts.

The financial impact of past wildfires is significant. PG&E Corporation and the Utility may be able to mitigate the financial impact of wildfires in excess of insurance coverage or self-insurance through the Wildfire Fund, the Continuation Account, or cost recovery through rates. Each of these mitigations involves uncertainties, and liabilities could exceed available recoveries. For instance, the Utility’s ability to recover wildfire costs above $1.0 billion in a coverage year depends on the Wildfire Fund or the Continuation Account having sufficient remaining funds, and the Continuation Account may also be depleted more quickly than expected as a result of claims made by California’s other participating electric utility companies. Whether the Utility will be required to reimburse the Wildfire Fund or the Continuation Account depends on its ability to demonstrate to the CPUC that paid wildfire-related costs were just and reasonable. With respect to the Continuation Account, additional uncertainties include whether the Wildfire Fund administrator determines that the Continuation Account is necessary, whether the CPUC authorizes extending the non-bypassable charge, whether the administrator determines that additional contributions are needed and, if so, the timing of those contingent contributions.

With respect to the Wildfire Fund, PG&E Corporation and the Utility expect to re-evaluate the reasonableness of the currently estimated 20-year life and to recognize accelerated amortization of the Wildfire Fund asset based on reliable, publicly available information about the wildfire that began on January 7, 2025, in Eaton Canyon in Los Angeles County, California (the “Eaton fire”). SCE has disclosed probable losses of $1.6 billion and a Wildfire Fund receivable of $645 million for the Eaton fire, which represents the low end of the range of probable losses, and that the remainder of the probable losses are not reasonably estimable. As a result, PG&E Corporation and the Utility could reduce the estimated life to zero and incur up to $3.7 billion of accelerated amortization.

For more information, see Note 2 of the Notes to the Condensed Consolidated Financial Statements in Part I, Item 1 regarding the Wildfire Fund asset, Note 3 regarding expenditures incurred for wildfire mitigation, “2021 Dixie Fire” and “2022 Mosquito Fire” in Note 10 regarding wildfire liabilities, “Loss Recoveries” in Note 10 regarding recoveries, and “Review and Recovery of Costs Associated with the 2019 Kincade Fire and 2021 Dixie Fire Under AB 1054 Proceeding Application” in “Regulatory Matters” below.

•The Timing and Outcome of Ratemaking Proceedings, Other Proceedings, and Legislation. Regulatory ratemaking proceedings are a key aspect of the Utility’s business. The Utility’s revenue requirements consist primarily of a base amount set to enable the Utility to recover its reasonable operating expenses (e.g., maintenance, administrative and general expenses) and capital costs (e.g., depreciation and financing expenses). Although the Utility generally seeks to recover its recorded costs on a timely basis, greater memorandum and balancing account balances increase the Utility’s financing costs. Other proceedings that could impact the Utility’s business profile and financial results include actions by municipalities and other public entities to acquire the electric assets of the Utility within their respective jurisdictions. The outcome of regulatory proceedings can be affected by many factors, including intervening parties’ testimonies, potential rate impacts, the regulatory and political environments, and other factors. See Notes 3 and 11 of the Notes to the Condensed Consolidated Financial Statements in Part I, Item 1, and “Regulatory Matters” below.

There has been increased California state legislative activity and political dialogue in recent years regarding wildfires, energy affordability, and related topics. The substance and timing of any legislation or other executive or regulatory measures relating to these matters, if such measures are implemented or if there is a failure to act on wildfire matters, could have a material impact on PG&E Corporation’s and the Utility’s business, cash flows, results of operations, and financial condition. The California Legislature concluded its 2025-2026 legislative session without enacting additional legislation to modify the state's wildfire liability framework. As a result, PG&E Corporation and the Utility could face persistent financial limitations and elevated risk, including challenges obtaining financing on acceptable terms, increased borrowing costs and collateral posting requirements, or increased financing needs, which in turn may negatively impact their financial results and customer affordability.

•Strategic Review and Revised Capital Plan. PG&E Corporation and the Utility announced on September 2, 2026, that they are conducting a strategic review, reducing their planned capital expenditures for 2027 from $13.4 billion to $11.4 billion, and withdrawing the previously disclosed forecast of capital expenditures for 2028 through 2030. The strategic review is evaluating the full range of regulatory, financial, operational and strategic alternatives reasonably available, including the full range of options related to how PG&E Corporation and the Utility are organized and financed to best serve customers and California. Becoming financially strong and securing an investment-grade credit rating is a foundational objective of the review.

•PG&E Corporation’s and the Utility’s Ability to Control Operating and Financing Costs. Under cost-of-service ratemaking, a utility’s earnings depend on its ability to manage costs within the amounts authorized for recovery in its ratemaking proceedings. The Utility has set a long-term goal to increase its capital investments to meet safety and climate goals, while also achieving operating cost savings. The Utility intends to achieve such savings by improving the planning and execution of its business through increased efficiencies, including waste elimination through the Lean operating system. PG&E Corporation and the Utility also work to reduce financing costs by identifying and executing on opportunities to efficiently finance the business, which depend on capital market conditions. Increased volatility in capital markets and continued elevated interest rates may impact PG&E Corporation’s and the Utility’s ability to obtain financing on acceptable terms or raise the cost of financing, which in turn may negatively impact their financial results.

For more information about the risks that could materially affect PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows, or that could cause future results to differ materially from historical results, see Item 1A: “Risk Factors” and “Forward-Looking Statements” above.

Tax Matters

PG&E Corporation’s ability to use its U.S. federal and California state net operating loss carryforwards and certain other tax attributes may be significantly limited if the ownership of PG&E Corporation’s stock by certain shareholders increases beyond statutory thresholds. To reduce the possibility of such a limitation, PG&E Corporation’s and the Utility’s Amended and Restated Articles of Incorporation, each filed on June 22, 2020, and PG&E Corporation’s Certificate of Amendment of Articles of Incorporation, filed on May 24, 2022 (the “Amended Articles”), contain restrictions on the direct or indirect acquisition or accumulation of PG&E Corporation’s stock. These restrictions prevent any person or entity (including certain groups of persons) from acquiring or accumulating PG&E Corporation’s stock, including common stock and mandatory convertible preferred stock prior to the Restriction Release Date (as defined in the Amended Articles), in excess of certain thresholds based on the amount and relative value of such stock without approval by the Board of Directors of PG&E Corporation. The computation of the applicable threshold is complex and may vary from date to date; the threshold of the combined value of PG&E Corporation common and mandatory convertible preferred stock was approximately 3.92% as of October 14, 2026. For more information about these restrictions that affect the ownership of PG&E Corporation stock, see “Tax Matters” in Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2025 Form 10-K.