May 9 (Reuters) - The California utilities regulator on Thursday rejected PG&E's move to transfer its non-nuclear generation assets to Pacific Generation amid talks with private equity firm KKR & Co to sell a minority interest in the unit.

The Oakland, California-based company had moved to separate its non-nuclear generation assets in 2022 into Pacific Generation, estimated to be worth $3.5 billion, and had been seeking regulatory approval to sell a stake of up to 49.9% in the unit.

PG&E had entered into exclusive talks to sell the minority interest in Pacific Generation to KKR & Co's unit last month, as the utility firm seeks funding to improve its energy grid.

The California Public Utilities Commission said "PG&E has done no substantive analysis to support the claim that the proposed transaction will be a superior alternative" and added that it has not attempted to quantify or analyze the costs and benefits of the deal, compared to others alternatives.

PG&E has been blamed for sparking numerous wildfires, including some of California's most deadly, and has been making investments to improve the reliability of its power grid. (Reporting by Tanay Dhumal and Anushree Mukherjee in Bengaluru; Editing by Shailesh Kuber)