Moody's Ratings has left the current credit ratings for PG&E Corporation and its utility subsidiary unchanged but has shifted their outlooks to positive from stable, a move that applies to about $44 billion of debt securities.
The agency maintained PG&E's Issuer rating at Baa3 and held the holding company, PCG's, senior secured and junior subordinated ratings at Ba2 and Ba3, respectively. In announcing the outlook revisions, Moody's emphasized expectations for stronger financial ratios in the 2026-2027 period.
"The positive outlooks reflect our expectation that PCG and PG&E will improve their financial ratios during the 2026–2027 period," said Nati Martel, Moody's Ratings VP - Senior Analyst. Martel also noted that the positive credit trajectory anticipates continued progress on wildfire mitigation and the effective application of California's legislative protections designed to address wildfire-related liabilities.
As of the end of 2025, PG&E reported a cash flow from operations before changes in working capital (CFO pre-W/C) to debt ratio of approximately 16%, while PCG's equivalent ratio was about 13.5%. Moody's projects that PG&E can sustain CFO pre-W/C in the high-teens percent range on a steady-state basis even as the company takes on additional leverage to support capital expenditures.
Moody's said several drivers underpin the expected financial improvement: ongoing cost-saving measures at the utility and a rate increase scheduled for 2026 that was approved in the 2023 general rate case. The rating agency made clear, however, that the ability to maintain stronger metrics will depend in part on the result of a pending 2027 general rate case, which will determine rates through 2030.
For the holding company, Moody's expects PCG to produce a CFO pre-W/C to debt ratio around 15%. That outlook rests on management's strategy to limit the use of holding company debt to finance investments, a tactic Moody's says should keep the holding company debt to consolidated debt ratio near 10%. Moody's also highlighted PCG's targeted dividend payout ratio of 20% as a favorable metric compared to peers.
The affirmation of ratings reflects a balance between several factors: Moody's cited a constructive regulatory relationship for PG&E and mechanisms that allow cost recovery, while also pointing to the substantial wildfire exposure present across the utility's service territory. The ratings action assumes PG&E will continue to secure safety certifications that permit access to the $21 billion wildfire fund established under Assembly Bill 1054 in 2019.
California's wildfire protection framework received an additional capital commitment of $18 billion with the enactment of Senate Bill 254 in September 2025. Moody's said that extra committed capital reduced the risk that wildfire funds would be exhausted in the wake of the January 2025 Los Angeles wildfires in another utility's service area.
In regulatory developments, PG&E initiated proceedings in November 2025 to recover costs tied to the Dixie (2021) and Kincade (2019) wildfires. Moody's described these filings as the first real test of California's newer prudency standards for utility cost recovery.
SB 254 also requires the administrator of the wildfire fund to deliver recommendations by April 1, 2026, on alternative models for managing costs related to wildfire damage. Moody's noted that while some reform proposals identified by that study may not be implemented within 12-18 months, the review will nonetheless clarify potential ways to enhance the existing framework.
Moody's outlined the conditions that could support an upgrade. For PG&E, a sustained CFO pre-W/C to debt ratio in the high-teens percent range, excluding the effects of any wildfire securitization, would make an upgrade possible. PCG's ratings could be eligible for a lift after a PG&E upgrade if the holding company maintains a CFO pre-W/C to debt ratio around 15% and achieves retained cash flow to debt in the 13-14% range.
Overall, Moody's action signals an improved near-term financial outlook for PG&E and PCG while tying future upgrades to clear, measureable cash flow thresholds and continued regulatory access to wildfire funding mechanisms.