PG&E Corp (PCG) Risk Factors

ITEM 1A. RISK FACTORS

PG&E Corporation’s and the Utility’s financial results can be affected by many factors, including estimates and assumptions used in the critical accounting estimates described in Item 7. MD&A, that can cause their actual financial results to differ materially from historical results or from anticipated future financial results.  The following discussion of key risk factors should be considered in evaluating an investment in PG&E Corporation and the Utility and should be read in conjunction with Item 7. MD&A and the Consolidated Financial Statements and related notes in Part II, Item 8, Financial Statements and Supplementary Data of this 2025 Form 10-K.  Any of these factors, in whole or in part, could materially affect PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows.

Risks Related to Wildfires

The Wildfire Fund, Continuation Account, and other provisions of AB 1054 and SB 254 may not effectively mitigate the risk of liability for damages arising from catastrophic wildfires.

If the Utility does not have an approved WMP, the Utility will not be issued a safety certification and will consequently not benefit from the presumption of prudency or the disallowance cap under AB 1054 and SB 254. Under AB 1054 and SB 254, the Utility is required to maintain a safety certification issued by the OEIS to be eligible for certain benefits, including a cap on Continuation Account reimbursement and all aspects of the reformed prudent manager standard. The disallowance cap, which caps the amount of liability that the Utility could be required to bear for a catastrophic wildfire, is inapplicable if the Wildfire Fund administrator determines that the electric utility company’s actions or inactions that resulted in the applicable wildfire constituted “conscious or willful disregard for the rights and safety of others,” or the electric utility company fails to maintain a valid safety certification at the time the applicable wildfire ignited. In addition, if the Utility fails to maintain a valid safety certification at the time a wildfire ignites, the initial burden of proof in a prudency proceeding shifts from intervenors to the Utility. The Utility will be required to reimburse amounts that are determined by the CPUC not to be just and reasonable. For more information on the disallowance cap, see Note 14 of the Notes to the Consolidated Financial Statements in Item 8.

Furthermore, for the Continuation Account to be available for payment of eligible claims, the Wildfire Fund administrator must determine that the Continuation Account is necessary, the CPUC must authorize extending the non-bypassable charge, and there must be sufficient funds remaining in the Continuation Account. Funds in the Continuation Account may be depleted more quickly than PG&E Corporation and the Utility anticipate as a result of claims made by California’s other participating electric utility companies. PG&E Corporation and the Utility are also unable to predict whether the administrator will determine that additional contributions are needed, and if so, the timing of those contingent contributions.

If the Utility is unable to maintain a safety certification or if the Continuation Account is exhausted as a result of claims made by California’s other participating electric utility companies or otherwise, the unavailability or insufficiency of the Continuation Account could have a material effect on PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows. Also, the Utility will not be able to obtain any recovery from the Continuation Account for wildfire-related losses in any year that such losses do not exceed the greater of $1.0 billion in the aggregate and the amount of insurance coverage required under AB 1054.

In addition, there could be a significant delay between the occurrence of a wildfire and when the Utility recognizes accelerated amortization of the Wildfire Fund asset due to the lack of data available to the Utility following a catastrophic event, especially if the wildfire occurs in the service area of another participating electric utility. Participation in the Wildfire Fund and the Continuation Account has had, and is expected to continue to have, a material impact on PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows, and the benefits of participating in the Wildfire Fund and the Continuation Account may not ultimately outweigh the substantial costs of the Utility’s contributions to the Wildfire Fund or the Continuation Account. See “Key Factors Affecting Financial Results” and “Critical Accounting Estimates” in Item 7. MD&A.

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PG&E Corporation’s and the Utility’s liabilities for the 2019 Kincade fire, the 2021 Dixie fire, the 2022 Mosquito fire, or the Wildfire-Related Securities Claims could exceed their estimated liabilities, or they could be liable as a result of future wildfires.

Based on the facts and circumstances available as of the date of this report, PG&E Corporation and the Utility have determined that it is probable they will incur losses in connection with the 2019 Kincade fire, the 2021 Dixie fire, and the 2022 Mosquito fire. PG&E Corporation’s and the Utility’s recorded liability estimates for probable losses in connection with these fires do not include several categories of potential damages that are not reasonably estimable, and are subject to change based on new information. Similarly, PG&E Corporation’s and the Utility’s costs to resolve the Wildfire-Related Securities Claims could exceed their estimated liabilities. PG&E Corporation and the Utility could be subject to significant liability in excess of recoveries that would be expected to have a material impact on PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows.

PG&E Corporation and the Utility have been the subject of investigations, regulatory enforcement actions, and criminal proceedings in connection with wildfires and could be the subject of additional investigations, regulatory enforcement actions, or criminal proceedings in connection with the 2019 Kincade fire, the 2021 Dixie fire, the 2022 Mosquito fire, or other wildfires. For more information, see Note 14 of the Notes to the Consolidated Financial Statements in Item 8.

Under California law (including Penal Code section 1202.4), if the Utility were convicted of any charges in connection with a wildfire, the sentencing court must order the Utility to “make restitution to the victim or victims in an amount established by court order” that is “sufficient to fully reimburse the victim or victims for every determined economic loss incurred as the result of” the Utility’s underlying conduct, in addition to interest and the victim’s or victims’ attorneys’ fees. This requirement for full reimbursement of economic loss is not waivable by either the government or the victims and is not offset by any compensation that the victims have received or may receive from their insurance carriers. A hearing on the status of restitution in the Butte County District Attorney’s Office’s investigation into the 2018 Camp fire has been continued several times, most recently to April 24, 2026. For more information, see Note 15 of the Notes to the Consolidated Financial Statements in the 2024 Form 10-K.

Additionally, under the doctrine of inverse condemnation, courts have imposed liability against utilities on the grounds that losses borne by the person whose property was damaged through a public-use undertaking should be spread across the community that benefited from such undertaking, even if the utility is unable to recover these costs through rates. In fact, in December 2017, the CPUC denied recovery of costs that San Diego Gas & Electric Company (“SDGE”) stated it had incurred as a result of the doctrine of inverse condemnation. Legal challenges to that denial were unsuccessful. Plaintiffs have asserted and continue to assert the doctrine of inverse condemnation in lawsuits related to certain wildfires that occurred in the Utility’s service area. Inverse condemnation imposes strict liability (including liability for attorneys’ fees) for damages as a result of the design, construction and maintenance of utility facilities, including utilities’ electric transmission lines.

Although the Utility has taken extensive measures to reduce the threat of future wildfires, the potential that the Utility’s equipment will be involved in the ignition of future wildfires, including catastrophic wildfires, is significant. This risk may be attributable to, and exacerbated by, a variety of factors, including climate (in particular, extended periods of seasonal dryness coupled with periods of high wind velocities and other storms), infrastructure, and vegetation conditions. The Utility’s significant infrastructure investment, vegetation management, and de-energization strategies do not eliminate wildfire risk and may not prevent future wildfires. Once an ignition has occurred, the Utility is unable to control the extent of damages, which are primarily determined by environmental conditions (including weather and vegetation conditions), third-party suppression efforts, and the location of the wildfire.

In addition, wildfires have had and could continue to have (as a result of any future wildfires) adverse consequences on the Utility’s proceedings with the CPUC and the FERC, and future regulatory proceedings, including future applications with the OEIS for the annual safety certification. PG&E Corporation and the Utility may also suffer additional reputational harm and face an even more challenging operating, political, and regulatory environment as a result of the 2019 Kincade fire, the 2021 Dixie fire, the 2022 Mosquito fire, or any future wildfires. For more information about the 2019 Kincade fire, the 2021 Dixie fire, the 2022 Mosquito fire, and the Wildfire-Related Securities Claims, see Note 14 of the Notes to the Consolidated Financial Statements in Item 8.

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The Utility may be unable to recover all or a significant portion of its costs in excess of insurance coverage in connection with wildfires through rates.

PG&E Corporation’s and the Utility’s accrued losses for the 2019 Kincade fire and the 2021 Dixie fire of $1.325 billion and $2.15 billion exceed the amounts of available liability insurance coverage of $430 million and $521 million, respectively. PG&E Corporation and the Utility could also incur substantial costs in excess of insurance coverage in connection with the 2022 Mosquito fire. As of December 31, 2025, the Utility has recorded probable recoveries of $632 million and $61 million for the 2021 Dixie fire and 2022 Mosquito fire, respectively, through FERC TO rates or as costs recorded to the WEMA. The Utility would not be allowed to recover these costs in excess of insurance to the extent that the CPUC or the FERC determines that they were incurred imprudently. The inability to recover all or a significant portion of costs in excess of insurance through rates could have a material effect on PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows. For more information on wildfire recovery risk, see “The Wildfire Fund, Continuation Account, and other provisions of AB 1054 and SB 254 may not effectively mitigate the risk of liability for damages arising from catastrophic wildfires” above and Note 14 of the Notes to the Consolidated Financial Statements in Item 8.

The Utility may not effectively implement its wildfire mitigation initiatives.

The Utility’s infrastructure is aging and poses risks to safety and system reliability. The Utility’s wildfire mitigation initiatives may not be successful or effective in preventing or reducing wildfire-related losses. The Utility will face a higher likelihood of catastrophic wildfires in its service area if it cannot effectively implement these efforts and its WMPs. For example, the Utility may not be able to effectively implement its WMPs if it experiences unanticipated difficulties sourcing, engaging, training, overseeing, or retaining contract workers it needs to fulfill its mitigation obligations under the WMPs.

Wildfires can occur even when the Utility follows its procedures. For instance, a wildfire may be ignited and spread even in conditions that do not trigger proactive de-energization according to criteria for initiating a PSPS event or where EPSS has been implemented on Utility equipment. The Utility’s inspections of vegetation near its assets may not detect structural weaknesses within a tree or other issues. If the Utility’s wildfire mitigation initiatives are not effective, a wildfire could be ignited and spread.

Risks Related to Regulatory Proceedings, Investigations, and Enforcement Matters

The Utility’s ratemaking and cost recovery proceedings may not authorize sufficient revenues, or the Utility’s actual costs could exceed its authorized or forecasted costs.

The Utility’s financial results depend on its ability to earn a reasonable return on capital, including long-term debt and equity, and to recover costs from its customers, through the rates it charges its customers as approved by the CPUC and the FERC. PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows could be materially affected if the CPUC or the FERC does not authorize sufficient revenues for the Utility or if the amount of actual costs incurred differs from the forecast or authorized costs embedded in rates. The outcome of the Utility’s ratemaking proceedings can be affected by many factors, including the level of opposition by intervening parties; potential rate impacts; increasing levels of regulatory review; changes in the political, regulatory, or legislative environments; and the opinions of the Utility’s regulators, consumer and other stakeholder organizations, and customers, about the Utility’s ability to provide safe, reliable, and affordable electric and gas services. If the CPUC does not authorize sufficient funding for investments in the Utility’s infrastructure, it may negatively impact the Utility’s ability to modernize the grid and make it resilient to risks related to climate change, including wildfires.

In addition to the amount of authorized revenues, PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows could be materially affected if the Utility’s actual costs differ from authorized or forecast costs. The Utility’s ability to recover its costs and earn a reasonable rate of return can be affected by many factors, including the time delay between when costs are incurred and when those costs are recovered through rates. The CPUC or the FERC have not allowed and may in the future not allow the Utility to recover costs on the basis that such costs were not reasonably or prudently incurred or for other reasons. Further, the Utility may be required to incur expenses before the relevant regulatory agency approves the recovery of such costs. For example, the Utility has incurred, and continues to incur, wildfire mitigation and prevention costs before it is clear whether such costs will be recoverable through rates. OEIS has required and may in the future require the Utility to perform work for which the CPUC has not yet authorized, and ultimately may not authorize, recovery. Also, the CPUC may deny recovery of uninsured wildfire-related costs incurred by the Utility if the CPUC determines that the Utility was not prudent.

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The Utility may incur additional costs or receive reduced revenue without cost recovery for many reasons including changing market circumstances, unanticipated events (such as wildfires, storms, earthquakes, accidents, or catastrophic or other events affecting the Utility’s operations), whether the CAISO wholesale electricity market continues to function effectively, or compliance with new state laws or policies. See “Trends in Market Demand and Competitive Conditions in the Electricity Industry” in Item 1.

An Enhanced Oversight and Enforcement Process proceeding could result in the Utility losing its license to operate as a utility.

The EOEP is a six-step process with potentially escalating CPUC oversight and enforcement measures based on specific “triggering events” identified for each of the six steps. If the Utility is placed into an EOEP proceeding, it will be subject to additional reporting requirements and additional monitoring and oversight by the CPUC. Higher steps of the process (steps 3 through 6) also contemplate additional enforcement mechanisms, including appointment of an independent third-party monitor, appointment of a chief restructuring officer, pursuit of the receivership remedy, and review of the Utility’s Certificate of Public Convenience and Necessity (i.e., its license to operate as a utility, which could be revoked). The process contains provisions for the Utility to cure and exit the process if it can satisfy specific criteria. The EOEP states that the Utility should presumptively move through the steps of the process sequentially, but the CPUC may place the Utility into the appropriate step of the process upon occurrence of a specified triggering event.

PG&E Corporation and the Utility could be adversely affected by legislative and regulatory developments, including through increased compliance costs and penalties.

PG&E Corporation, the Utility, and their operations are subject to extensive federal, state, and local laws, regulations, and orders. The Utility incurs significant capital, operating, and other costs associated with compliance with these rules. These rules could change, which could increase the Utility’s compliance obligations and the costs to comply with these rules. Non-compliance with these rules could result in the imposition of material fines, on PG&E Corporation and the Utility, other regulatory exposure and financial risk, significant litigation, and reputational harm.

PG&E Corporation and the Utility may also be affected by changes in laws or regulations, or their application, which could impact their business model, rates, rate base, cost recoveries, revenues, or spending, which in turn could materially affect PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows.

For example, the Inflation Reduction Act includes a 15% corporate alternative minimum tax on the adjusted financial statement income (“AFSI”) of corporations with average AFSI exceeding $1.0 billion over a three-year period, effective for tax years beginning on or after January 1, 2023. If the law or its interpretation is not changed to permit PG&E Corporation to deduct repairs and maintenance expense, it will incur federal cash liabilities beginning in 2028, the amount of which may become substantial in future years.

The Utility is subject to extensive regulations and enforcement proceedings in connection with compliance with regulations, which could result in penalties.

The Utility is subject to extensive federal, state, and local laws, regulations, and orders, including those regarding customer billing; customer service; affiliate transactions; wildfire mitigation initiatives and WMP targets (including EPSS, PSPS, vegetation management, asset inspections, and system hardening); design, construction, operating and maintenance practices; safety and inspection practices; federal electric reliability standards; environmental compliance; resource adequacy; GHG emissions; renewable energy; privacy, including laws like the California Consumer Privacy Act, as amended (“CCPA”), which permits consumers to exercise certain rights with respect to their personal information, including opting out of receiving certain communications and data sharing with third parties; and compliance with CPUC general orders (“GOs”) or other applicable CPUC decisions or regulations.

PG&E Corporation and the Utility collect and retain certain personal information of their customers, shareholders, and employees in connection with operating their business and have certain obligations to protect this data. For example, the CCPA requires a business to implement reasonable security procedures to safeguard personal information against unauthorized access, use, or disclosure. The personal information that PG&E Corporation and the Utility collect, as well as other commercially-sensitive data that they possess, could nonetheless become compromised or improperly disclosed, including through the use of generative artificial intelligence or as a result of a cyber incident, human error, the misappropriation of data, or the occurrence of any of the foregoing at any third party with which PG&E Corporation or the Utility has shared information.

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The Utility has been and could in the future be subject to regulatory or governmental enforcement actions with respect to its compliance with such rules.

The Utility is a target of a number of investigations, in addition to certain investigations in connection with wildfires, which could result in enforcement actions. See “Risks Related to Wildfires” above. PG&E Corporation and the Utility could be subject to additional investigations. The Utility is unable to predict the outcome of these pending or potential investigations, including whether they will result in enforcement actions, whether any charges will be brought against the Utility, or the amount of any costs and expenses associated with such investigations.

These investigations or enforcement actions could result in a judgment against the Utility. Failure to comply with laws and regulations could result in material fines, penalties, customer refunds, other payments, increased oversight, and changes in the Utility’s operations and business model, reputational harm, and other negative consequences. If the OEIS determines that the Utility has failed to substantially comply with its WMP, the CPUC will assess penalties. These consequences could have a material effect on PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows. Furthermore, a negative outcome in any of these investigations, or future enforcement actions, could negatively affect the outcome of future ratemaking and regulatory proceedings to which the Utility may be subject; for example, by enabling parties to challenge the Utility’s request to recover costs that the parties allege are somehow related to the Utility’s violations.

Jurisdictions attempt to acquire the Utility’s assets through eminent domain, and third parties attempt to acquire the Utility’s customers by bypassing the Utility’s electric infrastructure system.

Local jurisdictions attempt to acquire some of the Utility’s assets through eminent domain (“municipalization”). For example, the City and County of San Francisco (“San Francisco”) has submitted a petition with the CPUC seeking a valuation of the Utility’s electric assets in or serving San Francisco and has expressed an intent to acquire such assets. San Francisco would still need to, among other things, initiate and prevail in an eminent domain action in state court to acquire the Utility’s assets, but the Utility may not be successful in defending against such an action or related regulatory proceeding. If municipalization proceedings are permitted to move forward and are successful, the Utility would be entitled to receive the fair market value of the assets that are subject to the takeover effort, as well as associated severance damages, but valuation issues in any municipalization proceeding would be highly contentious and could result in the Utility receiving less than what it believes is just compensation for the applicable assets. Any assets acquired by a third party through eminent domain would be excluded from the Utility’s rate base, reducing the Utility’s revenues and opportunity to earn a return on such assets. In addition, third parties attempt to bypass the Utility’s existing electric infrastructure system to provide retail electric service to discrete geographic areas or specific customers. Utility assets that are targeted for municipalization, as well as existing or potential future Utility customers targeted for electric services by third parties that bypass the Utility’s facilities, generally are located in geographic areas that have a lower cost of service relative to billed revenues, so municipalization (or bypass) could negatively impact the affordability of the Utility’s service for remaining Utility customers served outside of those geographic areas. A successful municipalization or bypass attempt could also encourage similar attempts by other municipalities or third parties which, if successful, would further divide the Utility’s assets and reduce the Utility’s rate base, profitability, and affordability for remaining Utility customers. It is also unclear how the CPUC would allocate the compensation received by the Utility for any involuntary sale of its assets between shareholders and customers. As a result of these factors, municipalization or electric bypass could materially affect the Utility’s financial condition, results of operations, liquidity, and cash flow.

Risks Related to Operations and Information Technology

The Utility’s electricity and natural gas operations are inherently hazardous and involve significant risks.

The Utility owns and operates extensive electricity and natural gas facilities, including two nuclear generation units and an extensive hydroelectric generating system. See “Electric Utility Operations” and “Natural Gas Utility Operations” in Item 1 above. The Utility undertakes substantial capital investment projects to construct, replace, and improve its electricity and natural gas facilities. In addition, the Utility is obligated to decommission its electricity generation facilities at the end of their useful operating lives. For more information, see “The operation and decommissioning of the Utility’s nuclear generation facilities expose it to potentially significant liabilities, and the Utility may not be able to fully recover its costs if regulatory requirements or operating conditions change or the facilities cease operations before the licenses expire” below.

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The Utility’s ability to efficiently construct, maintain, operate, protect, and decommission its facilities, and provide electricity and natural gas services safely and reliably is subject to numerous risks, some of which are beyond the Utility’s control, including those that arise from:

•the breakdown, failure of, or supply challenges with equipment, electric transmission or distribution lines, or natural gas transmission and distribution pipelines or other assets or group of assets, that can cause explosions, fires, public or workforce safety issues, large scale system disruption, or other catastrophic events;

•an overpressure event occurring on natural gas facilities due to equipment failure, incorrect operating procedures or failure to follow correct operating procedures, or welding or fabrication-related defects, that causes assets to fail and results in uncontained natural gas flow;

•the failure to maintain adequate capacity to meet customer demand on the gas system that results in customer curtailments, controlled or uncontrolled gas outages, gas surges back into homes, serious personal injury or loss of life;

•a significant prolonged electrical black-out that results in damage to the Utility’s equipment or losses for customers or other third parties;

•the failure to fully identify, evaluate, and control workplace hazards that result in serious injury or loss of life for employees, contractors, or the public, environmental damage, or reputational damage;

•the failure of a large dam or other major hydroelectric facility, or the failure of one or more levees that protect land on which the Utility’s assets are built;

•the failure to take expeditious or sufficient action to mitigate operating conditions, facilities, or equipment, that the Utility has identified, or reasonably should have identified, as unsafe, which failure then leads to a catastrophic event (such as a wildfire or natural gas explosion);

•inadequate emergency preparedness plans and the failure to respond effectively to a catastrophic event that can lead to public or employee harm or extended outages;

•operator or other human error;

•a motor vehicle or aviation incident resulting in serious injuries to or fatalities of the workforce or the public, property damage, or other consequences;

•an ineffective records management program that results in the failure to construct, operate, and maintain a utility system safely and prudently;

•construction performed by third parties that damages the Utility’s underground or overhead facilities, including, for example, ground excavations or “dig-ins” that damage the Utility’s underground pipelines, the risk of which may be exacerbated if the Utility does not have an effective contract management system;

•the release of hazardous or toxic substances into the air, water, or soil, including, for example, gas leaks from natural gas storage facilities; flaking lead-based paint from the Utility’s facilities; leaking or spilled insulating fluid from electrical equipment; and release of contaminants caused by the failure of battery energy storage systems; and

•attacks by third parties, including cyber-attacks, acts of terrorism, vandalism, or war. For more information, see “The Utility’s operational networks and information technology systems could be impacted by a cyber incident, cybersecurity breach, physical attack, or technology failure” below.

The occurrence of any of these events could interrupt fuel supplies, affect demand for electricity or natural gas, cause unplanned outages or reduce generating output, damage the Utility’s assets or operations, damage the assets or operations of third parties on which the Utility relies, damage property owned by customers or others, and cause personal injury or death. As a result, the Utility could incur costs to purchase replacement power, to repair assets and restore service, and to compensate third parties. Any such incidents also could lead to significant claims against the Utility.

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Further, the Utility often enters into agreements for third-party contractors to perform work, such as patrolling and inspection of facilities, vegetation management, or the construction or demolition of facilities. The Utility has less control over contractors than its employees but may retain liability for the quality and completion of the contractor’s work. The Utility has been and may in the future be subject to penalties or other enforcement action if a contractor violates applicable laws, rules, regulations, or orders. The Utility also has been and may be subject to liability, penalties, or other enforcement action as a result of personal injury or death caused by third-party contractor actions or inactions.

Insurance, equipment warranties, or other contractual indemnification requirements may not be sufficient or effective to provide full or even partial recovery under all circumstances or against all hazards or liabilities to which the Utility may become subject. An uninsured loss could have a material effect on PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows.

The electric power and natural gas industries are undergoing significant changes driven by technological advancements and a decarbonized economy, which could lead to the reduction in demand for natural gas as an energy resource that could impact the Utility’s ability to recover the value of its investments through rates.

The electric power industry is undergoing transformative change driven by technological advancements enabling customer choice and state climate policy supporting a decarbonized economy. California utilities also are experiencing increasing deployment by customers and third parties of distributed energy resources, such as on-site solar generation, electric vehicles, electric heat pump space conditioning and water heating, battery electric storage, fuel cells, energy efficiency, and demand response technologies. These developments will require further modernization of the electric distribution grid to, among other things, accommodate increasing two-way flows of electricity and increase the grid’s capacity to interconnect these resources. In addition, enabling California’s clean energy transition will require sustained investments in grid modernization, renewable energy integration projects, energy efficiency programs, energy storage options, electric vehicle infrastructure, and state infrastructure modernization (e.g., rail and water projects). The Utility may be unable to effectively adapt to these potential business and regulatory changes, for instance by failing to meet customer demand for new business interconnections in a timely manner. The CPUC is also conducting proceedings to evaluate changes to the planning and operation of the electric distribution grid in order to prepare for higher penetration of distributed energy resources and consider future grid modernization and grid reinforcement investments; evaluate if traditional grid investments can be deferred by distributed energy resources, and if feasible, what, if any, compensation to utilities would be appropriate for enabling those investments; and clarify the role of the electric distribution grid operator. If the Utility is unable to effectively adapt to these potential business and regulatory changes, its business model and its ability to execute on its strategy could be materially impacted.

Various jurisdictions within California have enacted prohibitions or restrictions on use and consumption of natural gas, for example in buildings, that have reduced, and will continue to reduce the use of natural gas. Reducing natural gas use reduces the gas customer base and could diminish the need for gas infrastructure and, as a result, could lead to certain gas assets no longer being “used and useful” (under CPUC precedent, when an asset no longer meets the standard of “used and useful,” the asset is removed from rate base, which may result in a reduction in associated rate recovery). In that case, gas assets with substantial investment value could become stranded, resulting in accelerated depreciation or impairment of assets. The Utility could also be required to incur significant decommissioning costs, which may require additional funding. However, even as natural gas demand is projected to decline over time, the costs of operating a safe and reliable gas delivery system in California have been increasing, among other things, to cover the cost of long-term pipeline safety enhancements. If the Utility is unable to recover through rates its investments into the natural gas system while still ensuring gas system safety and reliability, its financial condition, results of operations, liquidity, and cash flows could be materially affected.

These industry changes, costs associated with complying with new regulatory developments and initiatives and with technological advancements, or the Utility’s inability to successfully adapt to changes in the electric and gas industry, could materially affect the Utility’s financial condition, results of operations, liquidity, and cash flows.

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The Utility’s operational networks and information technology systems could be impacted by a cyber incident, cybersecurity breach, physical attack, or technology failure.

The Utility relies on technology to operate its business, including complex operational, interconnected networks and information technology systems that support critical functions. The Utility also depends on information technology systems to help it monitor and operate the electric grid, detect ignitions and collect other wildfire-related information, process transactions, track and collect revenues, manage customer billing and energy usage data, maintain internal control over financial reporting, and produce accurate and timely financial statements and regulatory filings. These information technology systems allow the Utility to create, collect, use, disclose, store, and otherwise process sensitive information, including regarding customers, employees, and other individuals. These systems can be damaged or disrupted by malicious events such as cyber or physical attacks, or by technology failure.

Cyber attacks targeting utility systems are significant and are continuing to increase in sophistication, magnitude, and frequency. PG&E Corporation and the Utility face various cybersecurity threats, including attempts to gain unauthorized access to their systems and networks, including access to confidential information about the Utility, its customers and employees, denial-of-service attacks, threats to their information technology infrastructure, ransomware, and phishing attacks. These threats come from a variety of highly organized actors, including nation-state actors. PG&E Corporation, the Utility and their third-party vendors have been subject to, and will likely continue to be subject to, threats, breaches, and attempts to gain unauthorized access to the Utility’s systems and networks, which could disrupt the Utility’s operations. Additionally, artificial intelligence, including generative artificial intelligence, may be used to facilitate or perpetrate these cybersecurity threats. Accordingly, the Utility may not be able to prevent unauthorized access to its operational networks, information technology systems or data, or the disruption of its operations.

The systems and networks of PG&E Corporation and the Utility may also be damaged or disrupted by technology failures due to errors in software or platforms or the inability to appropriately support, update, expand, recover or integrate technology within PG&E Corporation and the Utility’s networks.

PG&E Corporation and the Utility add, modify and replace information technology systems and technology vendors from time to time. The Utility is engaged in complex projects regarding its billing and enterprise resource planning systems. Modifying existing systems or implementing new or replacement systems or providers is costly and involves risks, including the risks involved in integrating with the Utility’s existing systems and processes, implementing associated changes in accounting procedures and controls, and ensuring that data conversion is accurate and consistent.

Physical attacks targeting the Utility’s physical assets or personnel have caused damage, disrupted operations, and caused injuries and could do so in the future.

Any failure, interruption, or decrease in the functionality of the Utility’s operational networks could cause harm to the public or employees, significantly disrupt operations, negatively impact the Utility’s ability to safely generate, transport, deliver and store energy and gas or otherwise operate in a safe and efficient manner or at all, damage the Utility’s assets or operations or those of third parties, increase costs, and impact the Utility’s ability to track or collect revenues and to maintain effective internal controls over financial reporting. Such events could subject the Utility to significant expenses, claims by customers or third parties, government inquiries, penalties for violation of applicable privacy laws, investigations, lawsuits, and regulatory actions and could result in material fines, penalties, loss of customers, and harm to PG&E Corporation’s and the Utility’s reputation, any of which could have a material effect on PG&E Corporation’s and the Utility’s business strategy, financial condition, or results of operations.

The operation and decommissioning of the Utility’s nuclear generation facilities expose it to potentially significant liabilities, and the Utility may not be able to fully recover its costs if regulatory requirements or operating conditions change or the facilities cease operations before the licenses expire.

The operation of the Utility’s nuclear generation facilities exposes it to potentially significant liabilities from environmental, health, and financial risks, such as risks relating to operation of the DCPP nuclear generation units as well as the storage, handling, and disposal of spent nuclear fuel, and the release of radioactive materials caused by a nuclear accident, seismic activity, natural disaster, or terrorist act. If the Utility incurs losses that are either not covered by insurance or exceed the amount of insurance coverage available, such losses could have a material effect on PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows. In addition, the Utility may be required under federal law to pay up to $332 million of liabilities arising out of each nuclear incident occurring not only at the Utility’s DCPP facility but at any other nuclear power plant in the United States.

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Operations at the Utility’s two nuclear generation units at DCPP could cease before their planned retirement dates in 2029 and 2030 as a result of new legislation, regulations, orders, or their interpretation, or as a result of operational costs. In such an instance, the Utility would not receive the payments for extended operations at DCPP and could be required to record a charge for the remaining amount of its unrecovered investment. These developments could have a material effect on PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows.

The Utility may be unable to attract and retain specialty personnel and may face workforce disruptions.

The Utility’s workforce is aging, and many employees are or will become eligible to retire within the next few years. The Utility’s efforts to recruit and train new field service personnel may be ineffective, and the Utility may be faced with a shortage of experienced and qualified personnel in certain specialty operational positions, such as certain positions at DCPP. Additionally, the Utility could experience workforce disruptions as a result of labor union activity or pandemics. If the Utility were to experience such a shortage or disruptions, work stoppages could occur.

Any such occurrences could materially affect PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows.

PG&E Corporation’s and the Utility’s business activities are concentrated in one industry and in one region.

PG&E Corporation’s and the Utility’s business activities are concentrated in one industry (electric and gas utility) and in one region (Northern and Central California). As a result, their business performance may be affected by events, environmental conditions and economic factors unique to such industry or region, or by regional regulation, legislation or judicial decisions, without the benefit of geographic or business diversification.

Risks Related to Environmental Factors

Severe weather events, extended drought, and climate change could materially affect PG&E Corporation and the Utility.

Extreme weather, drought and shifting climate patterns have intensified the challenges associated with many of the other risks facing PG&E Corporation and the Utility, particularly wildfire management in California. The Utility’s service area encompasses some of the most densely forested areas in California and, as a consequence, is subject to higher risk from vegetation-related ignition events than other California IOUs. Further, environmental extremes, such as drought conditions and extreme heat followed by periods of wet weather, can drive additional vegetation growth (which can then fuel fires) and influence both the likelihood and severity of extraordinary wildfire events. In particular, the risk posed by wildfires, including during the recent wildfire seasons, has increased in the Utility’s service area as a result of an ongoing extended period of drought, bark beetle infestations in the California forest, and vegetation growth due to rising temperatures and record rainfall following the drought, and strong wind events, among other environmental factors. Precipitation patterns in California vary significantly from year to year, often leading to periods of severe to extreme drought. Drought conditions often occur and can persist in nearly all of the Utility’s service area depending on the amount of precipitation received in the current or previous water years. More than half of the Utility’s service area is in an HFTD and faces heightened fire risk. Local land use policies and forestry management practices also contribute to these risks by limiting precautionary or remedial activities.

Severe weather events, particularly wildfires, have had a material effect on PG&E Corporation's and the Utility's financial condition, results of operations, liquidity and cash flows, including through significant claims being made against the Utility. In addition, severe weather events and other natural disasters, including wildfires and other fires, storms, tornadoes, floods, extreme heat events, drought, earthquakes, lightning, tsunamis, rising sea levels, mudslides, pandemics, solar events, electromagnetic events, wind events or other weather-related conditions, climate change, or natural disasters, could result in severe business or operational disruptions, prolonged power outages, property damage, injuries and loss of life, significant decreases in revenues and earnings, and significant additional costs to PG&E Corporation and the Utility. Any such event could have a material effect on PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows. Any such event also could lead to significant claims against the Utility. Further, these events could result in regulatory penalties and disallowances, particularly if the Utility encounters difficulties in restoring power to its customers on a timely basis or if the related losses are found to be the result of the Utility’s practices or the failure of electric and other equipment of the Utility.

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The Utility has been studying the potential effects of climate change (increased severity and frequency of storm events, sea level rise, land subsidence, change in temperature extremes, changes in precipitation patterns and drought, and wildfire) on its assets, operations, and services, and the Utility is developing adaptation plans to set forth a strategy for those events and conditions that the Utility believes are most significant. Consequences of these climate-driven events may vary widely and could include increased stress on the energy supply network due to new patterns of demand, reduced hydroelectric output, physical damage to the Utility’s infrastructure, higher operational costs, and an increase in the number and duration of customer outages and safety consequences for both employees and customers. As a result, the Utility’s hydroelectric generation could change, and the Utility would need to consider managing or acquiring additional generation. If the Utility increases its reliance on conventional generation resources to replace hydroelectric generation and to meet increased customer demand, it may become more costly for the Utility to comply with GHG emissions limits imposed by California. In addition, climate hazards have damaged and could again damage the Utility’s facilities. The Utility could incur substantial costs to repair or replace facilities, restore service, or compensate customers and other third parties for damages or injuries, or regulators could order the Utility to perform additional work. The Utility anticipates that the increased costs would generally be recovered through rates, but as rate pressures increase, the likelihood of disallowance or non-recovery may increase. See “Concerns about high rates for the Utility’s customers could negatively impact PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows” below.

Events or conditions caused by climate change could have a material impact on the Utility’s operations and could result in lower revenues or increased expenses, or both. If the CPUC fails to adjust the Utility’s rates to reflect the impact of events or conditions caused by climate change, PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows could be materially affected.

The Utility’s environmental remediation costs could exceed its liability estimates.

The Utility has been in the past, and may be in the future, required to pay for environmental remediation costs at sites where it is or may be identified as a potentially responsible party under federal and state environmental laws. These costs can be difficult to estimate due to uncertainties about the extent of contamination, emerging contaminants, remediation alternatives, the applicable remediation levels, and the financial ability of other potentially responsible parties, and the Utility’s recorded liabilities for known environmental obligations may not accurately estimate its losses.

Environmental remediation costs could also increase in the future as a result of new legislation or regulation. See “PG&E Corporation and the Utility could be adversely affected by legislative and regulatory developments, including through increased compliance costs and penalties” above.

Some of the Utility’s environmental costs, such as the remediation costs associated with the Hinkley natural gas compressor site, are not recoverable through rates or insurance. For more information, see “Environmental Regulation” in Item 1 and Note 15 of the Notes to the Consolidated Financial Statements in Item 8. The Utility’s costs to remediate groundwater contamination near the Hinkley natural gas compressor site and to abate the effects of the contamination, changes in estimated costs, and the extent to which actual remediation costs differ from recorded liabilities have had, and may continue to have, a material effect on PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows.

Risks Related to PG&E Corporation’s and the Utility’s Environment and Financial Condition

The Utility may be unable to manage its costs effectively.

The Utility has set a goal to increase its capital investments to meet safety and climate goals, while also achieving operating cost savings. The Utility’s ability to achieve such savings depends, in part, on whether the Utility can improve the planning and execution of its work by continuing to implement the Lean operating system, improve its work management, identify additional opportunities to convert expenses to capital expenditures, and improve organizational design. Even if the Utility is able to reduce some costs through such efforts, other emerging priorities, such as emergency response, public purpose programs, wildfire mitigation initiatives, or California’s clean energy transition, could require it to reinvest those savings, which would offset the beneficial effect of such savings on net income. Moreover, under cost-of-service ratemaking, the Utility’s earnings depend in large part on its ability to manage costs, and if it is unable to manage costs effectively for the foregoing or any other reasons, PG&E Corporation's and the Utility's financial condition, results of operations, liquidity and cash flows may be adversely affected.

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Concerns about high rates for the Utility’s customers could negatively impact PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows.

The rates paid by the Utility’s customers are impacted by the Utility’s costs, commodity prices, and broader energy trends. The Utility’s capital investment plan, increasing procurement of renewable power and energy storage, increasing environmental regulations, and the cumulative impact of other public policy requirements, collectively place continuing upward pressure on customers’ rates. In particular, the Utility will need to make substantial, sustained investments to its infrastructure to adapt to climate change, enable the clean energy transition, and mitigate wildfire risk. Other factors that could increase customer rates include increases in the Utility’s pass-through commodity costs, cost shifts resulting from self-generation of electricity by customers, decreased gas system load, technological developments, changes in federal or state subsidies, a decrease in the volume of sales, or load growth that is slower or fails to reduce other customers’ bills to the extent PG&E Corporation and the Utility forecast. High rates could also lead to a decline in the number of customers, which could further increase rates. For more information on factors that could cause the Utility’s costs to increase, see “The Utility’s ratemaking and cost recovery proceedings may not authorize sufficient revenues, or the Utility’s actual costs could exceed its authorized or forecasted costs” above.

In addition, the CPUC considers affordability as it adjudicates the Utility’s rate cases, and concerns about affordability could cause the CPUC to approve lesser amounts in the Utility’s ratemaking or cost recovery proceedings. To relieve upward rate pressure on customers, the CPUC has authorized and may in the future authorize lower revenues than the Utility requested or increase the period over which the Utility is allowed to recover amounts. The Utility’s level of authorized capital investment could decline as well, leading to fewer new business interconnections and a slower growth in rate base and earnings. Concerns about affordability could also result in new legislation, see “PG&E Corporation and the Utility could be adversely affected by legislative and regulatory developments, including through increased compliance costs and penalties” above. As a result, PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows could be materially affected.

PG&E Corporation’s and the Utility’s substantial indebtedness may adversely affect their financial health and operating flexibility.

PG&E Corporation and the Utility have a substantial amount of indebtedness, most of which is secured by liens on certain assets of PG&E Corporation and the Utility. As of December 31, 2025, PG&E Corporation had approximately $5.7 billion of outstanding indebtedness (such indebtedness consisting of PG&E Corporation’s $2.15 billion aggregate principal amount of convertible senior secured notes due 2027, $1.5 billion aggregate principal amount of Junior Subordinated Notes due 2055, $1.0 billion aggregate principal amount of senior secured notes due 2028, and $1.0 billion aggregate principal amount of senior secured notes due 2030, and the Utility had approximately $55.3 billion of outstanding indebtedness. In addition, PG&E Corporation had $650 million of additional borrowing capacity under the Corporation Revolving Credit Agreement, and the Utility had $3.2 billion of additional borrowing capacity under the Utility Revolving Credit Agreement. In addition, PG&E Corporation and the Utility had outstanding preferred stock with aggregate liquidation preferences of $1.6 billion and $258 million, respectively.

Since PG&E Corporation and the Utility have a high level of debt, a substantial portion of cash flow from operations will be used to make payments on this debt. Furthermore, since a significant percentage of the Utility’s assets are used to secure its debt, this reduces the amount of collateral available for future secured debt or credit support and reduces its flexibility in operating these secured assets or using them for other financing transactions. This high level of debt and related security could have other important consequences for PG&E Corporation and the Utility, including:

•limiting their ability or increasing the costs to refinance their indebtedness;

•limiting their ability to borrow additional amounts for working capital, capital expenditures, debt service requirements, execution of their business strategy or other purposes;

•limiting their ability to use operating cash flow in other areas of their business;

•increasing their vulnerability to general adverse economic and industry conditions, including increases in interest rates, particularly given their substantial indebtedness that bears interest at variable rates, as well as to catastrophic events such as wildfires; and

•limiting their ability to capitalize on business opportunities.

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Under the terms of the agreements and indentures governing their respective indebtedness, PG&E Corporation and the Utility are permitted to incur additional indebtedness, some of which could be secured (subject to compliance with certain tests) and which could further accentuate these risks. As a result of the high level of indebtedness, PG&E Corporation and the Utility may be unable to generate sufficient cash through operations to service such debt and may need to refinance such indebtedness at or prior to maturity and be unable to obtain financing on suitable terms or at all. As a capital-intensive company, the Utility relies on access to the capital markets, particularly investment grade capital markets. PG&E Corporation's and the Utility's substantial indebtedness may limit their ability to procure additional financing in the future and elevated interest rates, as experienced from 2022 to 2024, may further increase their interest expense. If the Utility were unable to access the capital markets or the cost of financing were to further increase, its financial condition, results of operations, liquidity, and cash flows could be materially affected. Although the Utility is generally entitled to seek recovery of its cost of capital, because such requests are subject to CPUC review, the Utility may not successfully recover its cost of capital. Even when cost recovery is granted, the timing of such recovery will generally not occur until after the costs are required to be paid. The Utility’s ability to obtain financing, as well as its ability to refinance debt and make scheduled payments of principal and interest, are dependent on numerous factors, including the Utility’s levels of indebtedness, maintenance of acceptable credit ratings, financial performance, liquidity and cash flow, and other market conditions. The Utility’s inability to service its substantial debt or access the financial markets on reasonable terms could have a material effect on PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows. In addition, adverse changes in PG&E Corporation’s or the Utility’s credit ratings may increase their cost of capital or restrict their access to the financial markets.

The documents that govern PG&E Corporation’s and the Utility’s indebtedness limit their flexibility in operating their business.

PG&E Corporation’s and the Utility’s material financing agreements, including certain of their respective credit agreements and indentures, contain various covenants restricting, among other things, their ability to:

•incur or assume indebtedness or guarantees of indebtedness;

•incur or assume liens;

•sell or dispose of all or substantially all of their property or business;

•merge or consolidate with other companies;

•enter into any sale-leaseback transactions; and

•enter into swap agreements.

In addition, the Utility’s DOE Loan Guarantee Agreement contains similar covenants as well as certain affirmative and negative covenants, events of default, and prepayment events which are incremental to those contained in the Utility’s credit agreements and indentures.

The restrictions contained in these material financing agreements could affect PG&E Corporation’s and the Utility’s ability to operate their business and may limit their ability to react to market conditions or take advantage of potential business opportunities as they arise. For example, such restrictions could adversely affect PG&E Corporation’s and the Utility’s ability to finance their operations and expenditures, make strategic acquisitions, investments, or alliances, sell assets, restructure their organization, or finance their capital needs. PG&E Corporation’s and the Utility’s ability to comply with these covenants and restrictions may be affected by events beyond their control, including prevailing regulatory, economic, financial and industry conditions. Failure to comply with these covenants could result in an event of default, which, if not cured or waived, could accelerate PG&E Corporation’s or the Utility’s repayment obligations and could result in a default, acceleration or other consequences under other agreements. For example, a default on indebtedness in a principal amount in excess of $200 million could result in a cross-default or cross-acceleration.

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PG&E Corporation capital stock is subject to ownership and transfer restrictions intended to preserve PG&E Corporation’s ability to use its net operating loss carryforwards and other tax attributes.

PG&E Corporation has incurred and may also incur in the future significant net operating loss carryforwards and other tax attributes, the amount and availability of which are subject to certain qualifications, limitations and uncertainties. The Amended Articles (as defined below) impose certain restrictions on the transferability and ownership of PG&E Corporation common stock and preferred stock (together, the “capital stock”) and other interests designated as “stock” of PG&E Corporation by the Board of Directors as disclosed in an SEC filing (such stock and other interests, the “Equity Securities,” and such restrictions on transferability and ownership, the “Ownership Restrictions”) in order to reduce the possibility of an equity ownership shift that could result in limitations on PG&E Corporation’s ability to utilize net operating loss carryforwards and other tax attributes from prior taxable years or periods for income tax purposes. Any acquisition of PG&E Corporation capital stock that results in a shareholder being in violation of these restrictions may not be valid.

Subject to certain exceptions, the Ownership Restrictions restrict (i) any person or entity (including certain groups of persons) from directly or indirectly acquiring or accumulating 4.75% or more of the combined value of outstanding Equity Securities and (ii) the ability of any person or entity (including certain groups of persons) already owning, directly or indirectly, 4.75% or more of the combined value of the Equity Securities to increase their proportionate interest in the Equity Securities. Additionally, the application of the Ownership Restrictions, as defined in the Amended Articles, will be determined on the basis of a number of shares outstanding that differs materially from the number of shares reported as outstanding on the cover page of its periodic reports under the Exchange Act because it excludes shares owned by the Utility. See “Tax Matters” in Item 7. MD&A for an example of these calculations. Any transferee receiving Equity Securities that would result in a violation of the Ownership Restrictions will not be recognized as a shareholder of PG&E Corporation or entitled to any rights of shareholders, including, without limitation, the right to vote and to receive dividends or distributions, whether liquidating or otherwise, in each case, with respect to the Equity Securities causing the violation.

The Ownership Restrictions remain in effect until the earliest of (i) the repeal, amendment, or modification of Section 382 (and any comparable successor provision) of the IRC, in a manner that renders the restrictions imposed by Section 382 of the IRC no longer applicable to PG&E Corporation, (ii) the beginning of a taxable year in which the Board of Directors of PG&E Corporation determines that no tax benefits attributable to net operating losses or other tax attributes are available, (iii) the date selected by the Board of Directors if it determines that the limitation amount imposed by Section 382 of the IRC as of such date in the event of an “ownership change” of PG&E Corporation (as defined in Section 382 of the IRC and Treasury Regulation Sections 1.1502-91 et seq.) would not be materially less than the net operating loss carryforwards or “net unrealized built-in loss” (within the meaning of Section 382 of the IRC and Treasury Regulation Sections 1.1502-91 et seq.) of PG&E Corporation, and (iv) the date selected by the Board of Directors if it determines that it is in the best interests of PG&E Corporation’s shareholders for the Ownership Restrictions to be removed or released. The Ownership Restrictions may also be waived by the Board of Directors on a case-by-case basis.

PG&E Corporation may not be able to use some or all of its net operating loss carryforwards and other tax attributes to offset future income.

As of December 31, 2025, PG&E Corporation had net operating loss carryforwards for PG&E Corporation’s consolidated group for U.S. federal and California income tax purposes of approximately $38.3 billion and $34.1 billion, respectively. PG&E Corporation may also continue to incur significant net operating loss carryforwards and other tax attributes. The ability of PG&E Corporation to use some or all of these net operating loss carryforwards and certain other tax attributes may be subject to limitations. Under Section 382 of the IRC (which also applies for California state income tax purposes), if a corporation (or a consolidated group) undergoes an “ownership change,” such net operating loss carryforwards and other tax attributes may be subject to limitations. In general, an ownership change occurs if the aggregate value of the stock ownership of certain shareholders (generally five percent (5%) shareholders, applying certain look-through and aggregation rules) increases by more than 50% over such shareholders’ lowest percentage ownership during the testing period (generally three years).

As of the date of this report, it is more likely than not that PG&E Corporation has not undergone an ownership change and its net operating loss carryforwards and other tax attributes are not limited by Section 382 of the IRC. However, whether PG&E Corporation underwent an ownership change as a result of the transactions in PG&E Corporation’s equity that occurred pursuant to the Plan or in combination with other changes in the ownership of PG&E Corporation’s equity depends on several factors outside PG&E Corporation’s control and the application of certain laws that are uncertain in several respects. Accordingly, the IRS may successfully assert that PG&E Corporation has undergone an ownership change pursuant to the Plan. If the IRS successfully asserts that PG&E Corporation did undergo, or PG&E Corporation otherwise does undergo, an ownership change, the limitation on its net operating loss carryforwards and other tax attributes under Section 382 of the IRC could be material to PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows.

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In particular, limitations imposed on PG&E Corporation’s ability to utilize net operating loss carryforwards or other tax attributes could cause U.S. federal and California income taxes to be paid earlier than would be paid if such limitations were not in effect and could cause such net operating loss carryforwards or other tax attributes to expire unused, in each case reducing or eliminating the benefit of such net operating loss carryforwards and other tax attributes. Further, PG&E Corporation’s ability to utilize its net operating loss carryforwards is critical to PG&E Corporation’s and the Utility’s commitment to make certain operating and capital expenditures. Failure to obtain alternative sources of capital could have a material adverse effect on PG&E Corporation and the Utility and the value of PG&E Corporation capital stock.

PG&E Corporation is a holding company and relies on dividends, distributions, and other payments, advances, and transfers of funds from the Utility to pay dividends on its capital stock and meet its obligations.

PG&E Corporation conducts its operations primarily through its subsidiary, the Utility, and substantially all of PG&E Corporation’s consolidated assets are held by the Utility. Accordingly, PG&E Corporation’s cash flow, ability to pay dividends on its capital stock, and ability to meet its debt service obligations under its existing and future indebtedness largely depend upon the earnings and cash flows of the Utility and the distribution of these earnings and cash flows to PG&E Corporation. The ability of the Utility to pay dividends or make other advances, distributions, and transfers of funds will depend on its results of operations and is restricted by, among other things, applicable laws limiting the amount of funds available for payment of dividends and certain restrictive covenants contained in financing agreements. See “Liquidity and Financial Resources” in Item 7. MD&A. The Utility must use its resources to satisfy its own obligations, including its obligation to serve customers, to pay principal and interest on outstanding debt, to meet its obligations to employees and creditors, and to pay preferred stock dividends, before it can distribute cash to PG&E Corporation. In particular, the CPUC requires PG&E Corporation’s and the Utility’s Boards of Directors to give first priority to the capital requirements of the Utility, as determined to be necessary and prudent to meet the Utility’s obligation to serve or to operate the Utility in a prudent and efficient manner. The CPUC also regulates the Utility’s capital structure. Dividend payments on PG&E Corporation’s capital stock are also subject to the discretion of PG&E Corporation’s Board of Directors. See Note 6 of the Notes to the Consolidated Financial Statements included in Item 1.

The deterioration of income from, or other available assets of, the Utility for any reason could limit or impair the Utility’s ability to pay dividends or make other distributions to PG&E Corporation, which could, in turn, materially and adversely affect PG&E Corporation’s ability to pay capital stock dividends or meet other financial obligations.

Inflation and supply chain issues may adversely affect PG&E Corporation and the Utility.

PG&E Corporation and the Utility have observed that prices for equipment, materials, supplies, employee labor, contractor services, variable rate debt, and other inputs have increased and may continue to increase more quickly than expected as a result of inflation, import tariffs, fiscal and monetary policy, or other factors. Additionally, the Utility has experienced shortages in certain items, longer lead times, and delivery delays as a result of domestic and international raw material and labor shortages. If these inflationary pressures and disruptions to the supply chain persist or worsen, the Utility may be delayed or prevented from completing planned maintenance and capital projects work. PG&E Corporation and the Utility may be unable to secure these resources on economically acceptable terms or offset such costs with increased revenues, operating efficiencies, or cost savings, which may adversely affect PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows.