Operator:

Good morning and welcome to the PG&E Corporation Second Quarter 2024 Earnings Release. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. [Operator Instructions] I will now turn the call over to Jonathan Arnold, Vice President of Investor Relations. Please go ahead.

Patricia Poppe :

Thanks, Jonathan. Good morning, everyone. I'm pleased to report another quarter of solid progress. Our core earnings per share for the second quarter came in at $0.31, bringing us to $0.69 for the first half. We are reaffirming our 2024 guidance range of $1.33 to $1.37, up at least 10% from 2023. And we're also reaffirming our longer-term earnings per share growth of at least 9% each year starting in 2025 and continuing through 2028. In addition, we remain firm in our commitment to no new equity in 2024, and there have been no changes to our five-year financing plan, which we shared with you during our first quarter call. Moving to Slide four. We were excited to see so many of you in June at our investor event in New York City. Our message in New York was that with our layers of physical and financial protections as the foundation, and with our simple, affordable model making critical infrastructure investments affordable for our customers, we see a pathway where electrification can deliver a decarbonized energy future at a lower societal cost. As we discussed in New York, new load is actually a key enabler to lowering the unit cost of electricity, eliminating the green premium, and enabling a low carbon future. This potential for a cleaner, more resilient energy future at a lower cost to consumers is why we refer to our graphic on this slide as the power pyramid. It's what motivates our team every day here at PG&E. It's our mandate and also our mission. It's beneficial for our customers and it's also good for our investors. Just this month, in fact, the CPUC voted out Phase 2 of our general rate case, authorizing an incremental $2.3 billion of capital investment for energization with an opportunity to go back in and request more if customers need it. We were encouraged by comments from the commissioners, which supported the thesis that connecting new load can be beneficial for broader customer affordability. At the same meeting, the CPUC approved staff's resolution affirming increasing our return on equity to 10.7%. California's regulatory environment is strong, forward-looking, and delivers real value for customers and investors. Using the power pyramid as our framework, and turning to Slide five, a brief update on our performance mitigating physical risk. The bottom line is that our layers of protection strategy has reduced wildfire risk significantly across our service area. I'm sure you've seen plenty of news coverage of recent heat and wind events we've been experiencing in California, and I could not be prouder of our team for their continued tenacity with consistent execution, day in and day out. Take, for example, the 8.5-day stretch over the July 4th holiday week. This was the longest-duration excessive heat warning ever issued by the National Weather Service Bay Area Office, and it brought in increased system reliability risk as well as elevated wildfire risk. What's important is our readiness posture no matter the conditions on the ground, and the results speak for themselves. No flex alerts and no serious safety incidents. On the reliability front, California has added over nine gigawatts of capacity in just the last year, and it did the job. The state now also has ten gigawatts of battery storage that are providing significant benefits in terms of additional flexible supply to the grid, and this is more than double the battery capacity from this same time last year. Overall, our system performed well in the early July heat wave and benefited from numerous proactive steps taken ahead of time. For example, when looking at San Jose data and comparing July performance to the September 2022 heat wave, unplanned and sustained outages were down more than 50%, with the total cumulative duration of those outages down more than 85%, and the Bay Area region overall saw a 22% reduction in outages. This is climate resilient infrastructure in action for new extreme weather norms. On the wildfire front, the key takeaway is that while we've certainly seen a more active start to this year's wildfire season, as of today, we've had no fires of consequence linked to PG&E. We are pleased with this performance given the increased wildfire activity being seen across California. So far this season, we've planned and prepared for three PSPS events and executed two with about 2,000 customers affected in the largest one. Risk is certainly up versus 2023 with our circuit mile days under high-risk conditions increasing 48% year-to-date and our CPUC reportable ignitions under R3 or higher conditions running at 20 year-to-date versus six at this time last year. These dynamic conditions require a dynamic response. To prevent ignitions, we have layers of protection as listed on slide five, all of which have been improved year-over-year, including another year of inspections and repairs, more vegetation management, and more system hardening, both undergrounding and covered conductor. Finally, when conditions warrant, we can turn to public safety power shutoffs. Where we do have ignitions, thanks to EPSS and improved situational awareness tools, including our weather stations, advanced meteorology, and fire science models, we have less energy released and faster reaction times as our post-ignition mitigations come into play. These include our safety infrastructure protection teams made up of 90 former firefighters who protect our assets every day. Our 32 public safety specialists, most of whom are former CAL FIRE or U.S. Forest Service Chief Officers with at least 30 years of agency leadership experience. Our 24/7, 365 hazard awareness warning center. Over 600 wildfire cameras with AI smoke detection automatically notifying first responders. Plus, rapid response capabilities, including Blackhawk helicopters equipped to drop water on fire retardants, which we are making available to county fire agencies to supplement the significant state-level resources deployed through CAL FIRE. One point I would like to note is that we recently completed a third-party risk assessment by Moody's. Analysis using the Moody's RMS wildfire model estimates that our mitigations have reduced the risk of economic loss to PG&E from wildfires by 93%. Going forward, you should expect us to refer to this third-party benchmark, which it is based on a model widely used by the insurance industry to price risk, takes into account a wider range of conditions than the CPUC methodology we referred to in the past, and provides for better comparability across other utilities. The key message is, no matter the conditions, our physical risk mitigations are making our system safer every day. Turning to Slide 6, financial risk mitigations are also in place through Assembly Bill 1054. These include access to liquidity, an improved prudence standard, and a cap on shareholder exposure. With our customer-funded self-insurance in place since 2023, our near-term financial exposure is limited to $50 million deductibles, while our customers benefit from the significant savings compared to commercial insurance. While the benefits of AB 1054 are in place and working as designed, I know that some of you are keen to see the wildfire fund reimbursement process in action. Well, during the second quarter, we passed the $1 billion threshold for settled claims related to the 2021 Dixie Fire. This means that we are now eligible to access liquidity from the fund. Our accrual for the Dixie Fire remains $1.6 billion, and the fund previously took a $600 million reserve in anticipation of funding our claims. We've been working closely with the administrator to ensure an orderly reimbursement process beginning as soon as the third quarter, with requests for payment to be submitted monthly. We made our first such request earlier in July, and the fund has a statutory requirement to reimburse us within 45 days of claim adjudication. Given that timeline, we anticipate having an update on progress with our next quarterly call. California, both physically and financially, has an entirely differentiated safety posture for our citizens and our investors. Wildfire has become a well-understood risk with well-understood mitigations and controls. Moving up our power pyramid, here on Slide 7 is our simple affordable model with our strong existing plan on the left and the opportunity we see for amplification on the right. Execution against this model is how we make needed safety, reliability, and resiliency investments while keeping bills at or below inflation for our customers. Think of this as our runway for additional value for customers and investors, an enduring winning model with no big bets. Now, let's turn to Slide 8 and my story of the month. I wanted to share an update from the team working on reinventing our inspections. As a reminder, in June, we shared that using our performance playbook, we're avoiding costs by doing the right work through changes to our inspection strategy. You heard from our team at our Dublin Innovation Center that they expect to save over $100 million this year, and that's roughly 50% of our O&M reduction target. Our reinvented process is resulting in less false positives, and the team has already realized $15 million of O&M savings through standard work, aerial inspections, and bundling. Most importantly, we are identifying the right work and completing it 50% faster than our previous standard. This is the power of our performance playbook, and it's just one example of the culture of performance that we are shaping at PG&E. With that, let me turn it over to Carolyn.

Patricia Poppe:

Thank you, Carolyn. Our power pyramid is our differentiated path forward built on the foundation of safety with well-understood and well-managed wildfire-related physical and financial risk. Our simple affordable model delivers for customers and investors with room to grow. Ultimately, California's aspiration for an electrified economy at a lower societal cost is our destination and we are well on our way. This is a winning proposition for our customers, for the state of California, and for you, our investors. With that, operator, please open the line for questions.

Shar Pourreza :

Hey guys, good morning. Patty, obviously you guys have talked about this in the prepared comments, but it's obviously been a pretty active fire season. So starting off kind of on the plan for undergrounding, I mean obviously we appreciate that you're waiting for the final go-ahead for filing, but I guess how have your assumptions and plan evolved over the past few quarters? Any thoughts on maybe layering in incremental miles versus the GRC approved levels?

Shar Pourreza:

Got it. Okay, that's perfect. Thank you. And then just lastly, any comments on sort of the Park Fire in Butte County? I mean, is there any kind of early indications on the cause or any kind of presence of PG&E's equipment? I guess, how are you executing on PSPS preparedness and response in that area? I mean, it's such a new event. There's no data on it, no EIRs, and we're getting a lot of questions. It'd be great if you can maybe just provide a little bit of elaboration. Thanks.

Shar Pourreza:

Got it. Thank you, and I know it's been a very difficult season this year, and congrats on the execution so far around it. It's pretty obvious. Appreciate it.

Operator:

Our next question comes from Steve Fleischman with Wolf Research. Please go ahead.

Patricia Poppe:

Morning, Steve.

Patricia Poppe:

Thanks, Steve. Yes, so I think what's very important is that, and we've communicated this before, that we do have a framework. We have certain guideposts when we consider financing any new capital. One, it needs to be affordable for customers, and then we define that as being within the 2% to 4% of bill growth that we've talked about over the course of our plan. It must be accretive to EPS. And, again, I'll just remind you that our current financing plan assumes issuance of equity and still meets the 10% growth this year and 9% in ‘25 to ‘28. And, finally, it needs to be helpful to our balance sheet. So those are our goalposts. And when you look at our current financing plan, two key elements that we've maintained. It's balanced, and it provides flexibility. And that flexibility, again, is in the ramp-up of the dividend and then the parent debt pay-down of $2 billion by the end of 2026. So when we think about new capital, we, you know, just think about our current financing plan and using that same approach. We're going to be balanced, and we're going to try to maintain flexibility. And so you can assume, one way to think about this is that you can assume that we're going to follow our authorized regulatory structure at the utility and always find ways to make it as efficient as possible by using the parent debt -- on the parent level. So we'll always be mindful of market conditions. We're very aware of where our stock is trading. And we're going to maintain, as I said, that balance and that flexibility.

Patricia Poppe:

Yes. Thanks, Steve. This is an exciting part of our story. And, you know, as we mentioned in New York, and some people may remember this, right now in our plan, we only have a couple hundred megawatts of data center load growth built into our capital plan. So the cluster study that's underway where we're looking at our pipeline of data center demand that we shared in New York, we're going to make sure that any of that we would add in would be incrementally beneficial for customers, both on cost savings for customers, most specifically. We don't want our residential customers subsidizing the big data center load growth. And so this year that study is underway. We have a lot of demand, as we mentioned. And, in fact, by offering up the opportunity to participate in this cluster study, we've gotten much better visibility to what the real forecasted expectations should be. And so when we complete that study, we'll share those results. But, obviously, that's not materializing in terms of load this year because that's the plan for coming years. On the EV front, EVs continue to sell well here. We're up to now 610,000 EVs on the road in California, in fact, in our service area, up from 580 that we reported in New York. So we're tracking at about 25% of new vehicles sold continue to be electric. And given the CARB Regulation, the executive order here in California for banning internal combustion engines by 2035, we are actively benefiting from the transition. And it's interesting because I know I spend time in other parts of the country, and when I'm there, I don't see what I see here in California, which is an active adoption of electric vehicles and the infrastructure being built out to serve them. So we continue to see EV load growth, and that's, again, beneficial, as we shared, to customers from a cost perspective. Both that customer who bought the EV saves about 20% of their household energy costs because the switch from gasoline to electricity is cheaper, as well as all customers benefit because that's the kind of beneficial load that we love the most.

Operator:

Our next question comes from Jeremy Tonet with JPMorgan Securities. Please go ahead.

Patricia Poppe:

So are you asking, Jeremy, about the regulatory procedures, or are you asking about the actual CapEx?

Patricia Poppe:

Yes, okay. So first of all, you know, the commission's order to include $2.3 billion of incremental funding is a cap. And so what we do then is we'll make filings that reflect what we actually were completing and up to that cap. So what was really good was that the commission made it clear that if there were incremental demand beyond that cap, which frankly we see, then we can make additional applications. And we'll consider doing that even yet this year to show that when we have real demand that we can serve, we'll file for that and that should give the commission then more visibility into what the actual customer need is. And therefore, that could go above and beyond that $2.3 billion cap.

Patricia Poppe:

Does that answer your question, Jeremy?

Patricia Poppe:

Yes, because of the moisture that we received early in the year, the fuel levels are very high. So there's a lot of grasses and then it got really hot. So those excessive fuels got very dry. So the fuel moisture levels are very low. And that means that there is a risk of even, a small spark can quickly move. But let me give a shout out to a couple of things. You know, we talked a little bit in our prepared remarks about our layers of protection post-ignition. And this is really important. We talked about this in New York as well. And I think it's probably a part of our layers of protection that are least understood. We have, first of all, visibility to real-time information about an ignition occurring. And so our AI-enabled cameras can directly alert a first responder. In the past, it took some good citizen noticing there was smoke somewhere and calling someone. If you can imagine, that's a very unpredictable response. Our AI cameras now enable very predictable response. Our Hazard Awareness Center is monitoring those cameras. They see it. They confirm that first responders have been notified. And then our safety infrastructure preparedness teams are out there, protection teams are out there, often on the site nearly as quickly as our first responders. We are our own first responders protecting our assets. So then you combine that with CAL FIRE. And there's a couple stats I'd love to share about CAL FIRE that might surprise you. First of all, kudos to California and California policymakers and our governor for continuing to fund the importance of these first responders. So CAL FIRE's budget has tripled since 2015. It was $1 billion. It is now $3 billion annually. And there were no cuts this year, even though there was budget constraints here in the state. Their staffing is up 80%. We have 12,000 CAL FIRE professional firefighters on the job every day, and we couldn't be more grateful for their great work. And then finally, the CAL FIRE aircraft system, it is the largest civil aerial firefighting fleet in the world. We have 60 aircraft that are armed and ready to go. And, in fact, our CAL FIRE aerial fleet can get anywhere that they serve in under 20 minutes when there's sign of trouble. Listen, California's posture is dramatically improved from previous years. This is a statewide effort. PG&E's posture is dramatically changed, but so has the states and our neighborhoods, our communities. And I couldn't be more thankful for the partnerships across the state for all the good work that's happening. So I just want people to understand that when we say California's safety posture is differentiated, we've got lots of evidence to validate that we have the financial protections with AB 1054, but we have massive physical protections that make a catastrophic wildfire very unlikely.

Patricia Poppe:

You know, we're actively involved in those discussions, mainly providing, you know, insight and experience. Our lawyers and the federal affairs teams are very engaged across the utilities to understand what are the benefits of AB 1054, how could something be structured like that federally. And I would say there's definitely lots of interest from the western states. I do think it's a long put from some of the other states who are not as affected by wildfire to want to support a national solution. But we keep making the case that this is just another climate resilience infrastructure standard that needs to be established and where some states have risk of hurricanes or tornadoes or flooding. Those states that have risk of wildfire need to have a preparedness plan. And if there's a federal backstop, I think that really helps serve the smaller states that don't have the paying capacity and the volume and scale that California has that can deal with a problem like this.

Operator:

Our next question comes from Julian Dumoulin Smith with Jefferies. Please go ahead.

Patricia Poppe:

Hey, Julian. Welcome back. Nice to hear your voice.

Patricia Poppe:

So, Julian, a couple things. Number one is my honor to lead the people at PG&E. And this has been the greatest challenge of my professional career. And I'm so happy to be part of the team. On the contract front, there's a lot of work to do. I definitely don't think we're done and nor will we be done in a year from now. We'll work through the contract. But what's most important and the thing that I remind my team all the time is that we're building a system. We've got a performance playbook here at PG&E. We're building a bench. We're building a talent machine. So, we don't have to rely on one person that is the linchpin to the whole program. This isn't a charismatic CEO turnaround that when she goes, all of a sudden, the thing falls apart. My job is to build a system that lasts and stands the test of time. And that's what we're up to. And when I go off into the sunset, it's going to be when I know that that performance playbook is solid and my team is equipped and able to execute the continued service to the people of California at the standards that I expect.

Carolyn Burke:

Yes, there's a lot there, Julian. Thank you for the question. So, let me just start with in terms of timeline and improving our overall financial health. I'm very pleased with the progress that we've made. You can just look to our credit ratings, and that's sort of proof in the pudding that we've had a number of upgrades recently. We're just one notch below investment grade at Moody's and on positive outlook there, similar with Fitch, and even S&P upgraded us in the last year. So, we have those continued conversations, and we're continuing to see positive momentum there. We're on target for our capital investment this year. We have SB410 right in front of us now, and that's particularly constructive and helpful for our outlook there. We're on target for our O&M savings of at least 2%, and we're on target for our EPS growth. And particularly important, if you look at our operating cash flow, we are on target to increase from $5 billion in 2023 to $8 billion in 2024. So, all of those are very positive signs in terms of and keeping us on track towards our investment grade and improving our balance sheet. When we think about new capital, I mentioned that earlier in terms of bringing it into the plan. I will say our current financing plan, again, we've built it to be balanced and to have flexibility. So, when we think about that parent debt, which we have a commitment to pay down by the end of 2026 in the amount of $2 billion, that remains at this point in time, but there is flexibility there in terms of both the timing and the amount of that pay down. So, that's how we're thinking about it. And so, that provides us flexibility to bring in new capital into the plan. Again, I'll just repeat, is the dividend and the ramp up of that dividend. Right now, as we've communicated, we see it going slower in the front end and then increasing in the back end. But that is our choice as well. And that's what differentiates us is that we have a choice about how we ramp up that dividend to facilitate additional capital.

Julian Dumoulin Smith:

Yes, indeed. I hear you on this, B410. Thank you guys very much. I'll see you soon, all right? Appreciate it.

Carly Davenport :

Hey, good morning. Thanks so much for taking my question. I wanted to just start on the O&M target. I guess how should we think about the path or catalyst there to maybe shift towards the opportunity level that you highlighted at the investor event versus that 2% target? I think, Carolyn, you had referenced three years being a trend. So just curious of sort of getting through this year at or above target could be what you need to see to get comfortable there.

Patricia Poppe:

Yes, Carly, and I'll just add it. This is Patty. I'll add a little bit of layering on to that. Because how does this work? How do you make it real? We have a waste elimination as our play five in our lean playbook. We've taught thousands of our co-workers about how to see and identify waste. We then have a weekly operating review where we are reviewing people's ideas, a funnel of ideas, thousands of ideas coming through that funnel to determine which ones have the most viability and how do we convert them from an idea into execution. These are bottoms-up ideas coming from our people all across the organization, because we can see that ratio of capital to O&M. They experience the ratio of capital to O&M of 0.8 to 1 in how we do our work, in how work comes to them, in the waiting that they might experience, in inefficient paper processes that could be automated and digitized. Our people are really getting enthusiastic about our waste elimination targets. In fact, our IT department has a waste can award that they present. We're having a good time with this because making your work easier to do, and I think all of us, every one of us at all of our companies, can imagine doing our work more efficiently in some of the laborious processes and steps we have can be eliminated and work can be more fun. You can do higher value work for a lower cost for customers. That's what we're teaching people how to do and systematically teaching it. As Carolyn said, we have some big ticket items, and those are great. We love those as a kind of a priming of the pump, but what we really love is when all of our co-workers are learning to see waste and eliminate it on a daily basis, and that's the culture of performance that we're shaping here. That's what we want to really communicate here on the call.

Patricia Poppe:

Yes, we haven't determined when we would file, but what will drive that is customer demand. And so as we fill out our work plan, now that we have this decision, we're working our work plan for ‘24. We're already building our ‘25 and ‘26 work plan, and where we see we've got deficiencies, where we've got more demand than the decision allows, then that's what we'll file for that incremental funding. What I can tell you is that we see that demand is outstripping that $2.3 billion, which, again, is another signal of the growth here in California, of our potential for growth. We just need to build a work plan so that when we make that filing, we've got the real bottoms-up demand numbers for the commission to make a good decision.

Operator:

Our next question comes from Gregg Orrill with UBS. Please go ahead.

Patricia Poppe:

Well, you know, I think, Greg, that Cal Advocates does not yet understand the simple affordable model. This is new for California. This is new for PG&E. And so we will prove out that we can maintain rate increases below the rate of inflation with the simple affordable model. We have all the key components. That's why we're so excited about the amplification of that simple affordable model with more O&M savings, more efficient financing, more load growth. Being able to demonstrate that for our customers is going to take some time. They're going to have to learn to trust that what we say is what we'll do. And so that's just, I just think it's a matter of time. They're forecasting based on previous experience, not based on what we know that we are doing here at PG&E.

Operator:

Our next question comes from Anthony Crowdell with Mizuho. Please go ahead.

Patricia Poppe:

So far, Anthony, again, heavily weather dependent, our throughput, but pretty flat, pretty flat. I wouldn't say we've seen notable decrease in throughput as a result of electrification, though we've seen it in targeted locations, where we make a decision, for example, I do think PG&E is uniquely positioned because of our overlapping gas and electric service areas. So we're really well equipped to answer these questions, Anthony. But where we see a specific case, for example, we have a mobile home program where if we were scheduled to replace the service lines for that mobile home, we've determined that per mobile home it's cheaper to electrify those mobile homes than it is to actually change those gas service lines. And so in those cases, we're doing what we call targeted electrification. We're doing some other projects where we want to start to show that electrification is viable for homes and economic. And so that's where we're really working to prove out those theories. And so I see this gas throughput change probably in the latter half of our 10-year plan versus so much here in the first next five years.

Patricia Poppe:

Yes, they're similar across the enterprise. And, you know, we can get into some of those details and get you some more of those specifics, Anthony, after the call. But, yeah, they're pretty similar enterprise-wise.

Operator:

Our next question comes from Ryan Levine with Citi. Please go ahead.

Patricia Poppe:

It's predominantly, Ryan, SB410, as well as the OGO approval that we received affected in. Go ahead, Carol.

Patricia Poppe:

And just to clarify the OGO. Yes, sorry. The OGO is $900 million.

Ryan Levine:

Okay. So you're assuming the SB410 CapEx continues beyond ‘26. Is that what I'm hearing?

Ryan Levine:

Okay. And then in terms of the fire protection index that you had highlighted in a previous analyst day, any sense on what the outlook is for the remaining portion of this year compared to prior years on that internal PG&E Fire Protection Index?

Ryan Levine:

Okay. And then one just clarifying question, Carol, I think you mentioned that next week you're planning to issue the third AB1054 fund issuance? Just wanted to clarify if that was the correct message.

Ryan Levine:

Appreciate it. Thank you.

Operator:

Our final question comes from Michael Lonegan with Evercore ISI. Please go ahead.

Patricia Poppe:

Yes, typically you're going to get, some of those ideas rolling in the beginning of the year and they materialize in the second half of the year. So that's not unusual. We would expect to see that kind of trend.

Michael Lonegan:

Okay, great. Thank you. And then you reaffirmed your undergrounding target of 250 miles this year. You know, with this quarter, you installed 46 miles underground and energized 15 miles in the first quarter. I know first quarter is typically low because of snow conditions in some of your territory. But, you know, implying an acceleration and undergrounding the balance of the year, just wondering if summer conditions have presented a risk to the full year target, you know, given a potential diversion of workforce to unplanned work?

Michael Lonegan:

Great. Thanks for taking my question.

Operator:

There are no further questions at this time. I will now turn the call back over to Patty for any closing remarks.

Operator:

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Operator:

Ladies and gentlemen, thank you for standing by, and welcome to the PG&E Corporation First Quarter 2024 Earnings Release. [Operator Instructions] As a 0reminder, today's call is being recorded.

Jonathan Arnold:

Good morning, everyone, and thank you for joining us for PG&E's First Quarter 2024 Earnings Call. With us today are Patti Poppe, Chief Executive Officer; and Carolyn Burke, Executive Vice President and Chief Financial Officer. We also have other members of the leadership team here with us in our Oakland headquarters.

Patricia Poppe:

Thank you, Jonathan. Good morning, everyone. I'm pleased to report another quarter of solid progress with our core earnings per share for the first quarter coming in at $0.37. We're also reaffirming our 2024 guidance range of $1.33 to $1.37, up at least 10% from 2023.

I'll end here on Slide 17, with a reminder of our value proposition:

9.5% great base growth through 2028, at least $5 billion of incremental investment opportunities, at least 10% core earnings per share growth in 2024 and at least 9% in 2025 through 2028. Growing momentum around credit ratings with 2 agencies, Moody's and Fitch now just 1 notch below investment grade and with positive outlook and the continued consistent execution of our simple affordable model, delivering both for our customers and you, our investors.

Patricia Poppe:

Thanks, Carolyn. As I reflect on the progress we've made over the last 3 years, just imagine our performance in the next [indiscernible]. With the wildfire-related legal and regulatory protections in place and with our physical and financial risk mitigation progress, well understood and managed, we look to the energy transition in front of us and see nothing but opportunities.

Shahriar Pourreza:

Patti just running off on the new financing disclosures. Can we maybe elaborate sort of on the timing of equity needs and the levers to manage the equity needs over time. The $2.5 billion dividend use of funds implies kind of a big step up from the current levels. So is the timing and the amount of the dividend, kind of a lever to minimize dilutive equity? And do you assume -- have an assumption around getting to IG status at the parent as a potential headroom for the equity needs?

Carolyn Burke:

Yes. Shar, thank you for asking that question because frankly, I think [ Buffet ] got it wrong in California. California has done the hard work to mitigate both physical and financial risk. When I think about the physical risk reductions and the wildfire mitigation that we have in place, we reduced 94% of our wildfire risk, and that remaining 6% is protected with all of our situational awareness and the investments that the state has made and CAL FIRE's ability to respond. Our weather stations that have AI-enabled cameras that are often the first notification, the first responders. We used to have to wait for a citizen to notice smoke and call it in.

Operator:

Your next question is from the line of Steve Fleishman with Wolfe.

Carolyn Burke:

Yes. I mean I think our intent is to have a competitive payout ratio over the long term, right? And our financing here with the 5 years is that we intend to make meaningful progress towards having that competitive payout ratio. So when we think about it, you're right, yes, we're going to start slower.

Patricia Poppe:

Yes. And Steve, when I think about that dividend payout, combined with our sector-leading EPS growth, we feel that's a pretty compelling investment thesis. So we look forward to layering that on top of our -- already forecast at least 9% EPS growth in '25 through '28.

Carolyn Burke:

Yes. I think that's fair. We've not changed our FFO. We haven't changed any of our guidance for 2024. So we remain on target with our capital investment and our lean O&M savings and our EPS growth and the FFO to debt. And as our operating cash flow increases and again, it increases $3 billion just from '23 to '24, but then you see it continuing to increase, we would -- this is what's driving our balance sheet health and improving our credit metrics over the plan period.

Patricia Poppe:

Yes. Great question, Steve. And I'll share a couple of thoughts. One, I think we will definitely be one of the big ancillary winners of the demand growth for data centers as well as electric transportation given our state policies and electrification of the state, the decarbonizing of our energy system.

Nicholas Campanella:

Appreciate everything on the financing plan. I guess, can you talk about how this kind of takes into account your views on the authorized cap structure and the operating company, just knowing that you have that waiver through '25. Do you kind of continue to assume that you get back to that over time? Or how should we kind of think about that?

Nicholas Campanella:

It does. I appreciate that. And then I guess just on [indiscernible]. I think the liability is $1.6 billion, and I'm just thinking about your prepared remarks about AB 1054 framework. And maybe you can kind of walk us through the process of when you file up the administrator or the time line [indiscernible], if any? And how is your going to be thinking about funds potential against that liability?

Carly Davenport:

Maybe just on Pac Gen. Can you just refresh us on kind of the next steps to watch there? Obviously, you mentioned it got held at the last meeting until potentially May 9. So just what should we be watching on that front?

Carly Davenport:

Got it. I appreciate that color. And then maybe just on the balance sheet, thanks for the commentary before on the FFO to debt levels. Just curious what your latest views are on sort of the milestones or the time line to get back to the IG rating?

Jeremy Tonet:

Just wanted to come back to the financing plan a little bit more, if I could, parsing through there. And just want to make sure I understood things right, think about the right way. If I think about the holdco debt, our understanding is it's more of a commitment to pay down as opposed to an obligation, which would seem to imply some flexibility there. And if that is the case, how do you weigh that versus, I guess, equity dilution or even capital deployment pace? Just wondering how this all kind of mixed together. It seems like that could be a lever to reduce [indiscernible] there, Pac Gen doesn't materialize as hoped.

Patricia Poppe:

P That's right. It's a commitment. We're -- and as we said, we're very focused on our balance sheet health and reaching investment-grade status.

Patricia Poppe:

Yes, Jeremy, thanks for asking the question. We feel compelled to play our part. We've learned a lot through some tough times. And so it would be a shame if we didn't share those learnings with others, just like other energy and utility providers have shared with us, and we have learned from them. So we do feel that we can play an important role nationally.

Patricia Poppe:

Yes. I think there is a possibility. I think one of the things we lack at the national level is a national safety regulator for wildfire. Like we have FEMSA on the gas pipeline. FEMSA did a great job of bringing together all the parties and establishing safe practices that have then been implemented nationwide that regulators can look to and know that their utilities are not gold plating, but their utilities are doing the recommended safety standards.

Operator:

Your next question is from the line of Gregg Orrill with UBS.

Carolyn Burke:

Yes. I think let me just take the second one first, and then we can go back. I think on the FFO to debt, as we mentioned answering Steve's question. So yes, so our FFO to debt does is one, we -- one we're hitting our target for this year. And two, as you look at our operating cash flow, that's where I really draw your attention to. You can see that our operating cash flow continues to improve throughout the 5-year plan. And our FFO to debt is really improving across the plan as our operating cash flow improves.

Steven Fleishman:

No. Understood. Got it.

Ryan Levine:

In terms of cost-cutting initiatives, how much visibility do you have in achieving your goals? I know you've been making a lot of progress there, but trying to get a sense of how many quarters or years out you have line of sight to achieving these [indiscernible] goals?

Ryan Levine:

Great. And then one on financing to the extent you're able to comment. So with the stated intention, correct me if I'm not hearing this correctly around a programmatic ATM starting in '25. To the extent that Pac Gen were to be monetized in some way or form. Would that -- is that viewed to be direct offset to equity? Or are there other considerations that we should take in mind?

David Arcaro:

I was just -- maybe a bit of a follow-on that. As I'm thinking about the $5 billion in potential upside CapEx opportunities, how would you think about financing that in terms of potential equity needs incremental to the plan?

Patricia Poppe:

Yes, it's a great question. I will say that I think there's a national challenge with the supply chain and being able to access some of the necessary equipment to build out that capacity as well as timely cash recoveries and cost recoveries for that investment.

Operator:

At this time, there are no further questions. I will now hand today's call over to Patti Poppe, Chief Executive Officer, for closing remarks.

Operator:

Thank you for standing by. And welcome to the PG&E Corporation Fourth Quarter 2023 Earnings Release Call. I would now like to welcome Jonathan Arnold, Vice President of Investor Relations to begin the call. Jonathan, over to you.

Patricia Poppe:

Thank you, Jonathan. Good morning, everyone. This morning we reported full year core earnings of $1.23 delivering at the high end of our annual guidance range. This result represents growth of 12% over our 2022 results of $1.10. In the fourth quarter we recognized the full year benefit of our 2023 general rate case as expected. I’m also pleased to announce that we exceeded our 2% annual nonfuel O&M savings target for the second consecutive year with savings coming in at 5.5% and pushing our EPS to the high end of the range. Because these savings were predominantly generated by reducing waste and improving service, they benefit customers today and benefit investors for years to come. Looking to 2024, we are reaffirming our at least 10% growth target which is now based on our actual 2023 results of $1.23. This results in an increase to our 2024 core earnings guidance range with a new higher midpoint of $1.35 versus our previous guidance of $1.33. We also reaffirm our commitment to at least 9% core EPS growth for both 2025 and 2026, re-based off our actual 2023 results in our new 2024 range. In addition, I'm pleased to share that we're extending our core EPS growth guidance of at least 9% for an additional two years through 2028. Our needed customer investment leads to strong rate-based growth, which continues to be the primary driver of our future earnings growth. We're providing you with updated five-year forecasts for both rate-based and CapEx in today's slides. These numbers now extend to 2028 and show a consistent compound annual growth rate of 9.5% using the new base year of 2023. Finally, we reaffirm our commitment to no new equity in 2024 and remain committed to pursuing the most efficient forms of financing available for 2025 and beyond, which Carolyn will discuss in her remarks. On slide four, we've added 2023 actuals illustrating our high end of guidance results and the rebasing of forward year growth rates now through 2028. This is our simple, affordable model in action. The list in 2023 reflects our 5.5% non-fuel O&M reduction well above our 2% plan. Slide five is a reminder of the key elements of our simple, affordable model, which allows us to continue growing customer capital investment at 9% or more while containing customer bill increases at or below assumed inflation in the 2% to 4% range. Key enablers in the model are ongoing annual non-fuel O&M reductions of 2%, efficient financing, and electric low growth in the 1% to 3% range. The proof is in the numbers. The simple, affordable model works. You first saw slide six during our November business update call. This version has been updated for a few additional known items, such as the 2024 cost of capital trigger. Our new ROE of 10.7% took effect on January 1st this year, with collections beginning this month in gas rates and next month for electric. Delivering on this projected 2% to 4% bill growth trajectory is an essential element of the PG&E plan, and one which will be important for building trust with our customers over the long run. For our average gas and electric residential customer, average monthly bill increases are limited to the 2% to 4% range from 2023 through 2026. I wanted to be clear that this includes the step up in 2024 as we implement the GRC and other deferred cost recoveries. Our plan shows average bills stepping down, beginning later this year and further in both 2025 and 2026, keeping the average annual increase in the lower half of the 2% to 4% range as catch-up recoveries roll off. Two of the larger items are around $1 billion of 2022 WMCE interim rate relief, which comes off bills in mid-2024, and the 24-month collection of our first-year GRC revenues, which come off at the start of 2026. Let me say that again. Based on what we know today, our bills will rise at the lower half of the range, around 2.5% per year on average for the duration of this rate case from 2023 through 2026. Let's shift gears to the significant progress the team has made on risk mitigation. Slide seven updates our 2023 admission data for the full year. Total CPUC reportable admissions came in at 65% for 2023, down 68% from the 2017 baseline, and 29% down from 2022. On the right side of the slide, we're showing our weather normalized ignition rate, which is a metric from our wildfire mitigation plan. This year's number of 0.93 was a reduction of 71% from 2017, and our lowest annual number since we began calculating this metric. The metric demonstrates that we continue to drive down wildfire risk in 2023, even after adjusting for fewer circuit mile days under our three or higher conditions when the risks of catastrophic wildfire are highest. While we're extremely pleased with these results, our team certainly isn't stopping here. We see further opportunities to drive overall wildfire risk reduction beyond the 94% achieved in 2023, as we continue with additional system hardening and deployment of new technologies. In addition to the physical risk reduction, financial risks are also lower, including key protections under AB 1054, which were reaffirmed with the issuance of our annual safety certificate last month. Looking forward, here on Slide eight, we want to take a moment to highlight how we see PG&E offering investors a truly differentiated, high-quality utility growth story. This starts with premium rate-based growth and industry leading 9.5%. What sets us apart is our commitment to make this investment affordable for our customers. The key enabler is our ability to drive consistent non-fuel O&M savings as we deploy our lane operating system in a utility, which previously saw cost compound at an annual 10% rate over the prior five years. As a reminder, several years of doing whatever was necessary to respond to back-to-back crisis pushed our capital-to-expense ratio far below the industry average. This is where we have a wealth of opportunity and a long runway to drive efficiencies with sustainable savings benefiting both our customers and our investors. We expect future load growth related to California's leadership and electrification to be a further differentiator and one which will help keep customer build growth within our 2% to 4% forecast. In addition to continued adoption of electric vehicles throughout our service territory, we have seen a three-fold increase in data center applications in 2023 versus the prior four years. We plan to speak more about these load growth trends over the course of this year, including at an investor meeting which we are planning for June 12th in New York, so please mark your calendars for that. The fundamental differentiators of rate-based growth, O&M savings, and load growth, we would add our constructive state regulatory and policy environment in California. Key elements of the California regulatory model include four years of revenue certainty under the GRC, returns which are set separately from the GRC including a formulaic adjustment mechanism, and timely recovery for pass-through of important cost categories including fuel and pension. With our GRC resolved, we now have revenue certainty extended through 2026, giving us the best level of regulatory visibility we've had since I joined PG&E and something which any regulated utility would love. This brings me to our performance playbook, including our lean operating system, which is becoming a critical differentiator for PG&E as we continue building a sustainable culture based on continuous improvement and what we refer to as breakthrough thinking. And so, on slide nine, to my story of the month, or in this case, the story of the year. Let me first take you back to the beginning of 2023. We had a goal to underground 350 miles of electric lines at a unit cost of $3.3 million per mile. We started 2023 with only about five miles of civil construction fully complete. At that point, we had hundreds of miles still to design, thousands of individual easements to negotiate, 345 miles of trenches to dig, and 350 miles of cable to pull. And then, the winter storms hit. 15 atmospheric rivers to be exact, which brought civil work to a near standstill through April. So, how did we deliver on 2023 undergrounding plan? As scoped, on time, and at better than targeted unit cost performance? Well, during a visit with our board of directors in December, I watched proudly as the undergrounding team described how they use the PG&E performance playbook every day and at every level. What they shared wasn't one silver bullet, not just a breakthrough idea or a value stream map or a waste elimination. Rather, it was this team's commitment to living the culture, using the tools, and building the capabilities that enabled our results and which will cause future success. In 2023 alone, the undergrounding team eliminated $68 million in waste for the benefit of our customers. They did this by updating our standards, deploying optimal construction methods, and better managing spoils. With additional improvements, average unit cost came in below our target of $3.3 million to just under $3 million per mile. And the average construction cycle time improved from five and a half months back in February 2023 to three and a half months today. This was a total game changer in meeting and exceeding our 350 mile goals. Thanks to our 2023 undergrounding efforts, we can avoid proactively turning off power to about 15,000 households during dangerous high wind events. These customers who live in our highest risk areas can now sleep at night knowing they do not have to trade safety for reliability or worry that a tree might land on the power line in their backyard. This is climate resilient infrastructure for all weather conditions and for generations to come. The team reminded us that before lean we would have managed the underground efforts through spreadsheets and phone calls. That was the old PG&E way. Undergrounding team is showing us the new PG&E. Imagine the impact our performance playbook can have enterprise-wide. It's great that we achieved our 2023 goals. What's even better is that we've created a playbook enabling consistent premium performance year-end and year-out. As I like to say, performance is power. This means delivering safe, affordable and reliable service to our hometowns along with consistent predictable financial results. With that, let me turn it over to Carolyn.

Patricia Poppe:

Thank you, Carolyn. Before we take your questions, let me introduce our new report card here on slide 16, against which you'll be able to track our record of differentiated performance. We're showing our results for 2022 and 2023, along with our goals for 2024 and beyond. We believe, we have a differentiated plan and the right team in place to deliver on these objectives. As I said earlier, performance is power, and we have significant operational momentum with a healthy set of catalysts in front of us. The PG&E turnaround is on track. We trust you feel the momentum as we do. We look forward to seeing you at upcoming investor conferences, as well as our investor meeting scheduled for June 12th in New York. With that, Operator, please open the lines for questions.

Shar Pourreza:

Hey guys, good morning.

Shar Pourreza:

Just Patti, on the PacGen process, I mean, have you received sort of any feedback after the last round of communications with the commission? Any sort of thoughts on hurdles and deliberation. And as you guys are sort of planning around the scenarios, does the delay potentially move your equity, especially as you return OpCo cap structure to authorized levels? Thanks.

Carolyn Burke:

Thanks, Shar, for the question. Yes, and if you don't mind, I covered a lot of this in the call, but I do recognize it's been a busy morning for many of you. So let me just cover a couple of points. First, we raised and extended our core EPS guidance today. It's 12% in 2023 and at least 10% in 2024, and at least 9% now through 2028. Our refreshed five-year plan includes improvement in our operating cash flows, rising from about $5 billion in 2023 to $11 billion in 2026. And that's providing the resources to grow our capital investment and further improve our cash flow. Three, key point here, our guidance includes no new equity in 2024 with or without PacGen. And then as we look forward beyond 2024, as we said on the call, we have many good financing choices. And they include, close to $2.5 billion of annual retained earnings today, which is rising at our present load level of dividend. We have half of our funding provided from normal utility debt. We talked about substantial levers of prior cost recovery, favorable tax conditions. We are constantly working our working capital improvements. And of course, we have potentially reintroducing an at-the-market or ATM equity program in 2025. We're not giving you all the final mix of that 2025 financing plan today, but one thing that you can count on is that our plan will include choices which are accretive to our guidance.

Carolyn Burke:

Well, if I just one thing on it, because I do know, and I just know I'm going to get lots of questions on the ATM. And so I just want to close that. I think it's, I just want to say very clearly to everyone that it's just simply too soon to size the potential ATM. As we've said on this call, we have a number of other good financing choices available to us. And we have other things that we need to consider, which include our growing lien capability and O&M savings. The pace at which we introduce the additional $5 billion of CapEx. And then our own advocacy and timely regulatory outcomes. And of course, the pace of our dividend growth. So just there's a lot there. And I just thought maybe because it's been a busy morning, I want to just restate all of that for you all.

Shar Pourreza:

Got it. And Carolyn, this is super helpful. And thank you. And just to make sure we confirm this, it sounds like you're, I don't want to say shifting, but some of your prior messaging, with the stock price kind of dictating your equity timing to now being a little bit more focused around a more systematic approach to raising equity through the trajectory like the rest of this industry is transitioning towards. Is that a fair statement?

Shar Pourreza:

Fantastic. Thank you guys so much. Appreciate it.

Operator:

Our next question comes from the line of Steve Fleishman with Wolfe Research. Please go ahead.

Patricia Poppe:

Hi, Steve.

Patricia Poppe:

It's a long game, Steve. It's a long game. We know it's going to be all right.

Patricia Poppe:

Yes. Thanks, Steve, for that question. And we know that this -- obviously, our dividend is low today and the growth rate of our dividend is an area of interest for a lot of people. So I'm glad you asked. Our intent truly is to have a competitive payout ratio. And we intend to show meaningful progress during this 5-year period. And so I'm happy to be able to share more about this 5-year planning horizon. So as we think about it, this catch-up growth rate will be significant, dramatically different from peers, given our starting point. So how quickly we move within these 5 years is obviously driven by our differentiating and differentiated financing choices that Carolyn just described. And so, in this near term, I do think it's important for people to remember that we are prioritizing a healthy balance sheet, affordable investment for customers, our premium EPS growth, and then we will feather in that it would end over time. But it will obviously, as I said, have a dramatically different growth rate from peers given our starting point.

Patricia Poppe:

Yes. No, I think a couple of things just in terms of context. I do believe the adjudication of our rate case provides a lot of good visibility and discussion about cash flow, it's importance. So I do think we definitely have better alignment with the commission on subject for us, which is why we would be pursuing a PacGen transaction. I think they value the resources. And they want to make sure, on behalf of the customers of California that it's a good transaction for customers, we believe that it is a great transaction for customers it sets us up to have a partnership overtime to invest in these clean energy resources. We see growing load growth in California. We see need for new generation. This allows us to have a partner in that journey. And we know that, that will be the lowest cost of financing then for customers. And so we stand by the transaction. We know that additional time with the commission only allows us to better communicate and align with them on that.

Patricia Poppe:

No. I think that's the way you're thinking. I think that's right the way you're thinking about it. I'll just remind you that there is an additional $5 billion of incremental CapEx that we're looking at financing as well. And we would, again, consider that ensure that we are financing that so that it's accretive to earnings.

Operator:

Our next question comes from the line of Nicholas Campanella with Barclays. Please go ahead.

Patricia Poppe:

Yes. Thanks for the question, Nick. We've been having good conversations with both Moody's and S&P. We remain intently focused on improving the credit quality, and we're laser-focused on achieving investment grade. We continue to make good progress on improving our credit metrics every year, and we're continuing to target mid-teens FFO to debt to 2024. Our 5-year plan shows the significant progress in 2024 and 2025 with sustained high levels of cash generation, as you mentioned, and the rating agency is obviously are looking beyond just the credit metric and beyond just our cash flow. They're also looking at improvements in our risk mitigation as it relates to wildfires, one more season perhaps for S&P. Moody's is laser focused as well on the wildfire mitigation, governance and management and improvement in our credit metrics. I think that's the most important gauge for you to look at when you consider milestones is the rating agencies and their reports themselves. We were very happy to see the recent upgrade and that we're -- we continue to be on positive outlook with both Moody's and S&P. So we're going to continue to execute on our plan, continue to execute on our risk mitigation, continue to execute on our O&M savings and continue to execute on ensuring that we see those improvements in our credit metrics for our rating agencies.

Patricia Poppe:

I'd say one of the things that we want to make sure people know is the California context and the California backdrop for the clean energy transition. This, I would say, is going to be a very differentiated part of our story relative to peers. We see the transition here in full swing, and we are a key player in that transition. So we look forward to sharing more about our load growth forecast, what that means, what does electrification really hold for both PG&E, our shareholders, our investors as well as our customers and our hometowns. So we look forward to really giving a better long-term business outlook and of course, further refinement of our financial plan.

Patricia Poppe:

Thanks, Nick.

Julien Dumoulin-Smith:

Hey team, can you guys hear me okay?

Julien Dumoulin-Smith:

Wonderful. So look, I just wanted to follow up on a couple of things that were said thus far. In terms of updates around this ATM, I know you said you're expecting a lot of questions, but just to frame it out really. In terms of the time line here, I mean, A, you've got to know what happens with PacGen by middle part of the year. But B, I suspect you're going to continue to evaluate asset sales, you said that would be something incremental to what PacGen would materialize that. And then by the end of the year, if there was nothing else that would materialize, then you would kind of go back to that sort of last resort ATM. I mean, given the success in cost cuts, etcetera, I mean, you could kind of interpret that as effectively saying, Look, there's a lot of other levers we'll probably pull in the interim and a successful outcome at least at this stage with this equity price would be not necessarily pursuing an ATM. Is that kind of a fair way to frame it?

Julien Dumoulin-Smith:

I appreciate you entertaining another question on this. And maybe just coming back, speaking of investment and successes, right, I appreciate your story, Patti. Can you talk a little bit to -- in light of those successes, how do you think about the cadence of undergrounding as you think about this year and further years, I mean, has that sort of unlocked an ability to actually accelerate what you were doing earlier and really remain on track in a more structural way. And what would be the regulatory considerations around that be to the extent to which that was an avenue that you now see increasingly as possible?

Julien Dumoulin-Smith:

Excellent. Fair enough guys. I’ll see you soon.

Operator:

Our next question comes from the line of Gregg Orrill with UBS. Please go ahead.

Patricia Poppe:

So the $5 billion to the $8 billion from 2023 to 2024 million is your question. What's driving that? Just making sure I'm...

Patricia Poppe:

Yes. Well, primarily, that is our GRC from 2024 to 2024, the additional revenues from there. In addition to that, just remember, we have our 2% savings being compounded. And so we see that. The other key part of 2024 versus 2025 as we see a decrease in litigation as it relates to our wildfire has been part of our puzzle. And then as we -- our outlook on commodity prices, we have lower collateral postings as well. So there's a lot of moving parts, but the primary driver of the increase really is our rate base recovery from our GRC. That is the main part of the story, but there's a lot of other moving parts.

Operator:

Our next question comes from the line of Ryan Levine with Citi. Please go ahead.

Patricia Poppe:

Just the savings from PacGen sale, is that in terms of the benefits from that -- I'm sorry I'm just making sure.

Carolyn Burke:

Yes. We think this is a great transaction for customers, right? It provides customer affordability primarily through financing costs at PacGen as well as because it's improving our balance sheet, we expect to be able to up and we expect to lower financing costs for our customers G&A as well. But as Patti mentioned, we also see significant benefits for customers because these assets are so key to the clean energy goal. And having a partner that is bringing both the resources and the interest and expertise in supporting these future capital growth needs of this very important portfolio, we think that's where it's particularly going to benefit customers. So there are the two things I would point to.

Patricia Poppe:

Yes. We do an assessment of all of our leaders and what their maturity is of the adoption and implementation of our 5 basic place, and it's a self-assessment. So the team reviews what's the standard and how are they performing to the standard of these 5 plays. And the point of the 44% score is that, that means that we have lots of room to grow our maturity. And so if you can imagine, delivering 5.5% non-fuel O&M savings, at a maturity level in the 40s, just think of the potential benefit for customers and our processes and our O&M savings over time when we grow that maturity enterprise-wide.

Patricia Poppe:

So if the cost of capital trigger does not hold with the implications. It's very minor in terms of the monthly bill rate for the cost of capital adjustment. It was a couple of bucks.

Patricia Poppe:

I think it would depend on the determination and how that determination is implemented.

Patricia Poppe:

Thanks, Ryan.

Anthony Crowdell:

Hey good morning team. Just I wanted to have a quick follow-up to one of Nick's questions, I guess, on the credit rating. Curious, Carolyn, on S&P, I think you had stated there waiting for one more season. Do you know what they want to see in the one season prior to an upgrade?

Patricia Poppe:

And I would just say in our conversations with S&P, they focus on three main things. I would say, first, it's management and governance post-bankruptcy. So I do believe that's what they're looking at first, and then they want to see additional wildfire performance, which we feel very confident about. And then finally, obviously, the financial metrics. And so, we do -- we're -- we've been on positive outlook with them. They put us on positive outlook at the end of the year. So we look forward to them moving on that sometime in 2024.

Patricia Poppe:

There is nothing firm or definitive about that. You're right. Your thoughts are correct, though, that it is in rates and it doesn't have a bearing on our 2024 earnings other than to say that we have planned conservatively for either outcome.

Operator:

Our final question comes from the line of David Arcaro with Morgan Stanley. Please go ahead.

Patricia Poppe:

We have a great plan, and it's anchored in our simple, affordable model. We have ample capital demand. And this is the thing that I want to just acknowledge for our customers who are feeling the catch-up in our bills right now. We know that we can deliver this capital infrastructure, which they have been demanding and requesting and asking for us to deliver in an affordable way. So as we look forward, we have a conservative plan. We ride that roller coaster so we can deliver a consistent outcome for investors and better service every single year for customers. And frankly, we look forward to a time in the not-too-distant horizon where we're going to be lowering bills for customers as we do that. The simple affordable model will work here in California. We are in the early days. But as we look forward, we see the capital demand matched by our cost savings, load growth and efficient financing, which allows for affordable bills for customers. That's a formula that can work for a long time forward. It gives us a lot of confidence as we give forecasted EPS growth guidance in the next 5-year plan.

David Arcaro:

Okay. Excellent, thanks. And then maybe on load growth, it's the data center backdrop seems to have changed quite a bit maybe since you've given that 1% to 3% load growth figure. And it sounds like you might address that in upcoming Analyst Day. I was just wondering if that's reflective of what you've seen in your service territory in terms of that data center demand, is that accelerating ramping up from what your prior expectations had been?

David Arcaro:

Okay, great. Much appreciated

Operator:

I would now like to turn the call over to Patti Poppe for closing remarks.

Operator:

This concludes today's call. You may now disconnect.

Operator:

Hello. My name is Chris, and I’ll be your conference operator today. At this time, I’d like to welcome everyone to the PG&E Corporation Third Quarter 2023 Earnings Release. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] Thank you, Jonathan Arnold, Vice President, Investor Relations. You may begin.

Patti Poppe:

Thank you, Jonathan, and good morning, everyone. I’m pleased to report another quarter of solid progress. As you’ll see on Slide three, our core earnings per share of $0.24 for the third quarter bring us to $0.76 for the first 9 months of 2023. We continue to work through the review process of our general rate case at the California Public Utilities Commission and have, therefore, not yet recognized the benefit in our earnings. With the customary memo account in place, once we receive the final order, we will book the new GRC revenues starting from the January 1, 2023 effective date. As you may know, our general rate case is on the agenda for CPUC’s November 2 voting meeting next week, and we trust that the commission appreciates the importance of reaching a timely and constructive resolution, one which provides sufficient cash flow to support the critical work we have in front of us. If the GRC is not voted out next week, there are two further voting meetings in November one on the 16th and one on the 30th. Resolving our GRC will be a key milestone as it sets our CPUC base revenue through 2026. While we await the final decision, our memo account allows us to reaffirm our 2023 guidance range of $1.19 to $1.23. We also reaffirm our commitment to at least 10% earnings per share growth in 2024 and at least 9% in both 2025 and 2026, along with our plan for no new equity issuance through 2024. Looking ahead, once we have the final GRC decision, we anticipate scheduling a follow-up investor call, and we look forward to providing you with a more granular update on our financial plan at the time. Then on our year-end call in February, you should expect further detail around our investment plans. With respect to reinstating our common dividend, we recognize how important this is to traditional utility and income investors, and we look forward to recommending this important step to our Board soon. Turning back to our GRC. In our filed comments with the CPUC as well as in our public advocacy, we have been vocal that we view the ALJ’s proposed decision or PD and the assigned commissioner’s alternate proposal proposed decision, or APD, as falling short of providing the funding to accomplish the necessary safety work we have proposed on behalf of customers. As we have said, we are disappointed at the PDs apparent willingness to trade safety and reliability for short-term cost considerations. This is critical work, and in many cases, work that is required for us to execute on the safety commitments we make in our annual wildfire mitigation plan or under other regulatory orders. One good example, and there are others, is that the current PDs declined to fund over $260 million of capital for corrective maintenance of our gas meters. This work is not optional and is, in fact, required for compliance with CPUC General Order 58-A, which sets the state-wide standards for gas service in California. Unless the CPUC makes meaningful changes to the cash flow elements of the current PDs, we will have to slow down making our system safer and delay meeting legislative directives and regulatory requirements. My management team and I stand for delivering safety, reliability and affordability. We believe that our plan, thanks to the simple affordable model offers a clear pathway to keep build growth well below the current level of inflation at 2% to 4% annually over the rate case period. The CPUC’s GRC process is designed to get the best outcome, and the state has been very clear about the infrastructure they want us to build. We stand by our filing and continue to view our undergrounding plan as the fastest and most affordable path to keep our customers safe. To that end, we have been encouraged by significant statements of support received from our local leaders and stakeholders. Aside from the GRC on Slide four, we continue to mitigate physical and financial risk. On the physical side, we’re pleased with our continued progress mitigating wildfire risk through our layers of protection strategy. This remains at the heart of our plan, and we stand unapologetically on the side of public safety. In Sacramento, this year’s legislative session included a number of bills which sought to address the very real challenges utilities have had keeping up with customer growth. Since our last update, the SB 410 Energization Bill was passed by the legislature and signed into law by Governor Newsom. We viewed SB 410 as a constructive solution, allowing us to deliver the necessary work for our customers with more timely cost recovery. One key provision is for the CPUC to establish a ratemaking mechanism allowing for recovery of energization investment above what is approved in our GRC. We believe this is appropriate given the fast-moving and unpredictable nature of electrification-related customer demand and emerging and high-quality problem for any utility would love to have. In the newly opened Phase 2 of our GRC, we’ve proposed a new balancing account to implement the provisions of SB 410. Keeping affordability in mind, our proposal would cap annual incremental customer bill impact at 2.5% of electric distribution rates. This could amount to over $200 million of annual revenue, supporting close to $1.5 billion of increase of incremental capital investment. The ratemaking mechanism in addition to the GRC authorized funding will allow an estimated 300-plus distribution capacity projects and over 35,000 new business connections over the next three years if the proposed rate-making mechanism is adopted. As with the pending GRC decision, it’s critical that the Phase 2 proceeding support the necessary cash flow and timely resolution to do the work our legislature has directed and on the time line our customers are requesting. Since our last call, we’ve also made progress on legacy legal risk, reaching a settlement with the CPUC’s Safety and Enforcement Division with respect to the Dixie fire. This was for $45 million, most to be spent on the new electronic record system over five years. We continue to maintain we were a prudent operator and our settlement with SED specifically preserves our ability to apply for cost recovery, both from the CPUC and from the state Wildfire Fund. Turning to Slide five. Our layers of protection strategy continue to underpin our approach to wildfire risk as we strive to make our communities safer each and every day. We’ve now completed the work, which improves our risk reduction from 90% at the start of the year to 94%, in line with our 2023 wildfire mitigation plan. Much of this year’s improvement relates to installing down conductor detection technology, supplementing our enhanced power line safety settings and public safety power shutoff programs. Other improvements this year include securing AFA [Ph] approval for beyond line of sight drone inspections and integration of artificial intelligence for smoke detection on 610 cameras covering over 91% of PG&E’s high fire risk areas. Our latest wildfire mitigation plan is working through the review process with the Office of Energy Infrastructure Safety or OEIS. Last month, we submitted our supplemental response to their revision notice and their updated schedule calls for a draft decision by November 14 with a final decision by December 29. As directed, we’re expecting to file for our 2023 safety certificate by December 12. And remember that under AB 1054, the current certificate remains in full force, while OEIS reviews the new request. Turning slide six. Let’s review our wildfire season performance to date. First, we are pleased to report that we are on track with our primary goal of zero catastrophic wildfire ignitions associated with PG&E equipment. As of October 22, CPUC reportable admissions in our high-risk zones are down 27% from last year and down 67% from 2017. The extended period of winter storms we experienced in 2023 certainly delayed the start of fire season, but this also led to an abundance of growth and fuel once conditions dried out. While we are really pleased with the headline data, variances and weather conditions from year-to-year can create some comparability challenges. To account for this, we track a weather-normalized ignition rate. We expressed this as ignitions per 100,000 circuit mile days under R3 or higher conditions, as measured by our Fire Potential Index. We’ve seen the ignition rate decline by 70% overall since 2017, including significant step-downs in 2021 and 2022, validating our layers of protection approach. This year, through mid-October, I am pleased to report that we’ve seen our weather-normalized ignition rate come down by a further 7% versus 2022. One point I want to reinforce, at PG&E, we’re ready every day for dangerous conditions. Our layers of protection do not rely on weather being in our favor. We’ve implemented state-of-the-art situational readiness technology, tools and people -- we treat every day as a high-risk day. This is the mind-set that will protect our customers and our communities. No matter the conditions we are ready. A good example is our use of public safety power shutoffs. Last year, we didn’t need to activate any PSPS events since we did not experience sufficiently high-risk wind conditions. This year, we’ve initiated two PSPS events, one in August and one in September, and both were quite localized. Through our enhanced situational awareness, which breaks the system down into 2-kilometer polygons, along with our extensive use of data and advanced meteorology, we are continuing to refine our PSPS capabilities. Our program is now far more surgical than when we first rolled it out in 2018. Because of those improvements, our PSPS events only affected around 3,900 customers in August and 1,200 in September. Our post-event analysis shows that our 2023 shutoffs prevented two likely ignitions and close to 30,000 acres, which might have otherwise burned. We are standing for our hometown and are resolved the catastrophic wildfires shall stop. PSPS and EPSS our enhanced Powerline safety settings program have been very effective at reducing ignitions. But both present unacceptable reliability challenges for customers. That’s why we see undergrounding as the right long-term infrastructure for the very specific high-risk miles identified in our 10,000-mile plan and affordable for customers at $3.40 per month for the average noncare residential customers. In fact, based on our analysis over the expected life of the assets to be installed during the GRC period, our proposal returns billions of dollars more in net present value compared to the APD. Just like our layers of physical protection, our financial plan also includes multiple layers of protection as illustrated on Slide seven. The orange wedge represents the difference between the APD rate base and our guidance midpoint. Most critically, our layers of protection include improving on the cash elements of the rate case PDs, which we are working hard to do in our advocacy. There are also three items where the PDs do not recommend this allowances, but instead shift cost recovery into other future proceedings. These include future Whimsy [Ph] or equivalent filings incremental spending on energization as provided under SB 410 and our 10-year undergrounding plan under SB 884. We also see no shortage of incremental investment headroom in our FERC jurisdiction rate base. Keep in mind that capital investment for the benefit of customers’ needs can be offset with O&M reductions and efficient financing, along with low growth to make sure safe infrastructure is also affordable. This is the heart of our simple, affordable model. Our regulators and key stakeholders are just becoming familiar with this model. And we must implement it in a very trustworthy way so that California can have the modern infrastructure in place that keeps people safe and energized, which takes me to my story of the month on Slide eight. A couple of weeks ago, I visited a site in Vacaville, where my co-workers are burying lines in a high-fire threat area. The project manager and field engineer were on site and could not have been more excited about what they were accomplishing for their home talent. This undergrounding project was originally estimated to cost close to $3.5 million a mile with a completion date in 2024. The team is now estimating a unit cost of approximately $2.9 million a mile and finishing in early December. Using Lean and the principles of waste elimination, my co-workers found opportunities to reduce materials and labor costs by challenging the status quo. They reduce trench depth and width while staying in compliance with county standards and they found additional cost savings during the backfill process. The combination of these solutions brought down the unit cost and they reduced total active construction time, making it safer, faster and reducing the impact on the community. As you can imagine, each project comes with its unique challenges, and this one was no different. What is different now at PG&E is the standard set of tools and the mind-set that my co-workers bring to every job. It’s consistent application of lean and problem solving that drives predictable and in some cases, extraordinary breakthrough results no matter what challenges we face. Sticking with undergrounding, I should note that we currently have more than 2,000 qualified personnel working safely on undergrounding in our service territory every day. Earlier this month, we announced that we had finished 100% of the heavy construction work necessary to complete the 350 miles targeted for this year. We expect to energize an average of 20 additional miles per week through the end of the year, and I could not be prouder of the team for overcoming the significant challenges presented by the weather we experienced earlier this year. Day by day, week by week, we are managing our progress, leveraging visual management and operating reviews, giving me the confidence to affirm that we are right on track with our plan for 2023 and with line of sight running well into 2024. And with that, let me hand you over to Carolyn for our financial highlights.

Patti Poppe:

Thank you, Carolyn. Before we take your questions, I just wanted to take a moment to review our regulatory and legislative time line shown here on Slide 14 and reflect on some of our highlights in 2023, starting with our wildfire self-insurance settlement in January which we see saving customers up to $1.8 billion through this 4-year GRC period. Other milestones include resolving our safety culture OII. Settlements with the CPUC Safety and Enforcement Division for both the Zogg and the Dixie fires and over $1 billion of interim rate relief approved in our 2022 Wenzy [Ph] proceeding. We have plenty to look forward to as well. Key catalysts we can point to include resolving our GRC and achieving base revenue visibility through 2026, approval of our 2023 WMP and safety certificate, resolution of our GRC Phase 2 proposal to implement SB 410. Our 10-year undergrounding plan filing under SB 884, disposition of our cost of capital adjustment advice letter. The proposed decision on Pacific Generation and advancing our DOE loan application. That’s a lot of value to come for customers as well as investors. In addition to regulatory catalysts, we look forward to further progress towards normalizing our financial profile. With the Fire Victim trust completing their sales, restoring our credit ratings to investment grade to unlock significant financing cost savings for customers and reinstating our common dividend. We believe these catalysts favorably differentiate the PG&E investment story anchored in our simple affordable model. Our strategy remains focused and is based on the foundational belief that a financially healthy and well-run PG&E can and will play a leading role in enabling the clean, affordable and resilient energy future to which the state of California and our customers aspire. We trust that you feel the momentum that we do. And with that, operator, please open the lines for questions.

Shar Pourreza:

Hey guys good morning.

Shar Pourreza:

Good morning, Patti. Just on the core drivers in the metric away from on track for FFO by 2024. I mean obviously, Carolyn mentioned in the prepared remarks, did I quote like you have to make some pretty difficult decisions, but most of your spending being somewhat crucial for the state. I guess what difficult decisions were you referring to? I guess, how do you manage this headwind under an assumption that the various rate requests are adverse and don’t work into your planning assumptions? And could we see incremental equity as a result of that as you try to right size the metrics? Thanks.

Shar Pourreza:

Got it, Pat. And then just lastly for me on Slide 7, you pointed out that the APD run you in the bottom half of the rate base guidance. Can you just comment on the cadence of the customer investments that you back that gets you back to the midpoint? What are, I guess, some of the more additive construct? Is it SB 410, is it WMCE? And if like this whole undergrounding issue is reduced I guess, how long would it take you to ramp up to that 10-year plan, especially there seems to be a lot of stakeholders pushing back on the undergrounding costs. Thanks a lot guys.

Shar Pourreza:

Fantastic guys. I’ll jump back in the queue. Appreciate it.

Operator:

The next question is from Steve Fleishman with Wolfe. Your line is open.

Patti Poppe:

Yes, you bet. Yes, it’s a great question, Steve. And I also think it’s something that’s been hard to understand in all of the public comments and advocacy. Look, there’s some catch-up that needs to be done here. And in California, we have this construct where we need to do necessary work and the utility bears the risk of doing all the wildfire preventive work. And so there are some onetime short-term costs that are embedded in the early years of this rate proceeding. But as the years progress, then those things come out of the bill. So for example, as we do the recovery of the 2023 revenues that obviously needs to be captured then. And our proposal is a 12-month capture in 2024. So if you can imagine a customer would be collecting bills in 2024, that we are paying bills in 2024 that reflect 2024 and 2023s revenue. And then that comes off. And then the bills come down significantly. And so what we’re -- the point we’re trying to make is that there is some catch-up in this, but bills can definitely improve, that’s just math. But what I think is really important and the part that people don’t necessarily yet appreciate about the new PG&E model is our simple affordable model. This is not just a slogan, it’s not just a thing we say, this is something that we do every day. And that is funding capital investment through cost savings, cost reduction we have had dramatic cost improvements already on our undergrounding, on our vegetation management. Our next big hurdle is our system inspections. We’ve got major improvements that we can make there. Then we add in the efficient financing. Look, getting our credit ratings in the right place will save customers money, not spreading out the collection of the 2023 revenues over 3 and 4 years will save customers money. We have the ability to reduce costs in the bills, and that’s what we’re focused on every day. I think that’s a new habit, a new pattern for PG&E to be recognized for. And so I can appreciate that regulators and others have questions and wonder if that’s actually what we’re going to do. All I can say, Steve, I think you know my track record, we can do real cost savings that benefit customers while we’re making these very necessary investments in the infrastructure.

Patti Poppe:

Well we’re hopeful, Steve, that November 2 reflects a final decision. But what’s on our mind is we want to make sure that it’s the right final decision. And so -- if -- I think there’s still two meetings, November 16 and November 30. If in fact, they wanted to take more time to get it right. But we’re hopeful that November 2 represents a final decision.

Patti Poppe:

Thanks, Steve.

Nicholas Campanella:

Hey thanks for taking the question. I guess just very clear on the FFO to debt disclosures here, but just can you elaborate on just the agency conversations on the path to IG right here right now? And how we should think about if this PD is adopted your path to get there? Thanks.

Nicholas Campanella:

That’s helpful. And I think you also said in regards to the wildfire fund, you booked like a $400 million and change receivable. Is this the first time the fund has been tapped? And correct me if I’m wrong there, but just what’s the process around actually receiving that?

Patti Poppe:

And this is Patti. I’ll just add in. So no, it hasn’t been done before, Nicolas. And so we’re working through what that process will be. And so that’s not perfectly clear, but I do want to remind everyone that the benefits of AB 1054, there’s -- it’s a fundamental change in California that really helps create the certainty required to number one, prevent a liquidity issue in the event of a significant incident. It allows us if, in fact, we had did have to, in a hurry, get access to that fund, we could access it to pay third-party damages. But as Carolyn said, it’s actually -- it takes time to settle and to pay out those settlements, but the enhanced prudency standard that comes with AB 1054 is another enhancement that will be good to see as we move forward here. And so I think there’s a lot to appreciate about AB 1054 and the protections it provides and the certainty it allows for here in California as we do this necessary safety work to make the system safer faster.

Nicholas Campanella:

Yes. Thank you for the clarification and [Indiscernible] thanks.

Operator:

The next question is from Julien Dumoulin-Smith with Bank of America. Your line is open.

Patti Poppe:

Yes. Well, first and foremost, let me be clear, we won’t do work that the commission didn’t fund. And so our plan right now is the most efficient plan we agree. We have done negotiations with contractors. We’ve developed a workforce. As I mentioned in the script, I’ve got 2,000 people right now today, doing undergrounding and those people are skilled and qualified -- boy, I don’t want to tell them that they have to step off the job. But the reality is we’ve got 350 miles planned for this year, and we’ve got engineering in the hopper to prepare us for next year’s 450-mile target. And then we’re focused on 550 miles in 2025 and 750 miles in 2026, but all of this is contingent upon regulator approval. So if the CPUC decides we should do less undergrounding or to slow down the path, it will cost more for customers, but obviously, we’ll take their direction, and we’ll then file our 10-year plan and make sure that it does its best job of compelling a more favorable decision to get the scale because that’s the beauty of what we’ve observed already, just like the story of the month that I shared on the call, we are finding savings on every job. And scale is essential to realizing those savings for customers. So that’s really what’s on our mind as we move forward. We will be filing that 10-year plan when the OEIS is prepared to receive it.

Patti Poppe:

Yes, exactly. We certainly don’t want to come to a cold hard stop. Like we want to be able to keep moving and keep the acceleration of the benefits for customers rolling every mile buried as another mile of risk virtually eliminated. And so we’re really focused on these very specific miles and getting these specific miles done as soon as possible to protect the people of California, and we think we can do that at a very affordable price.

Patti Poppe:

Yes. We’re very grateful for the legislature and the great work that they did this year in recognizing that when you do a 4-year forward-looking rate making, you don’t -- you can’t perfectly predict the demand that we’re actually experiencing. And so as demand increases, SB 410 allows for an annual true-up of recoveries for the work that needs to be done to enable electric vehicle transition to electrification in the state. And I’m very proud of my team. We’ve been working hard to improve our own process while we get the necessary funding. What’s important is that we are able to do our work more timely. And so here’s some news from this year we delivered a 17% increase in volume of requests this year. So in 2022, we did 7,900 new business connections. We’re up to 9,200 here in 2023. So that’s a 17% increase. Really proud of the team, things all of our lean operating system being put to work, have deployed things like we are estimating, which is our engineering and work preparation is a critical part, but can be a bottleneck in the process. That team has gone to work reimagining how they do estimating, and they’ve reduced their cycle time from 116 days down to 71 days. I mean that’s a 50% improvement in really a 1-year focused effort. So the ability for us to improve throughput and meet the needs of customers is real. We’re starting to prove to people that we can, again, do what we said we’re going to do and the cash flow that’s enabled by SB 410 is helpful because it’s more timely, but there is still a year’s lag. And so again, we’ve got to get these credit ratings back up into investment grade so that we can attract the debt markets at the lowest cost for customers. And this whole -- the plan hangs together extremely well when we are -- when we have a balance sheet to fund all this really important work that we need to do for customers.

Patti Poppe:

Thanks, Julien.

Gregg Orrill:

Yes, thank you good morning. On PacGen [Ph] I know there’s been a lot of support in the process. Could you sort of remind us about what has to happen to close the transaction from here and any sort of risks or concerns you might have around it? Thank you.

Patti Poppe:

And I’ll add. This is Patti. The PacGen the whole purpose of that is for efficient financing for customers. And so this is a good example of how we’re not just counting on others. We’re not just counting on the regulators to fix our balance sheet. There are things self-action that we can take that we are taking that is really intended to help enable customers to get the value that they’re demanding, the value they deserve in this infrastructure that we have the privilege to build for them. And so this is just another example of our simple affordable model, efficient financing as a piece of the puzzle to make sure that we can invest in the infrastructure and save customers money. And so that’s what we’re up to on this transaction.

Patti Poppe:

Thanks, Gregg.

Ryan Levine:

Good morning. As the company engages the CPUC ahead of the November 2 potential decision, is the company open to accelerating or open to committing to accelerate the undergrounding of the top 5% risk lines. And to the extent that permitting is a limitation, is there a political solution that could help advance both the company and key stakeholders’ interest on this front?

Ryan Levine:

I appreciate the response. And then one other unrelated. In terms of the details on SB 410 impact, what is the nature of the 300-plus projects highlighted in the prepared remarks, any color you could share there?

Ryan Levine:

Great. Thanks for taking my question.

Operator:

The next question is from Jeremy Tonet with JPMorgan. Your line is open.

Patti Poppe:

We sure can. Good morning.

Patti Poppe:

Yes. Well, we’ll be working that. First and foremost, we think a revision to the PD will be good and enable us to do more faster, so number one. Number two, though, as we look at the SB 410, that’s going to be driven by customer demand, and that’s good work to be done. Our whimsy proceedings, we’ll continue to file those on a timely basis. Those certainly help with cash flow. It’s a good example of a delayed recovery that doesn’t affect earnings, but it certainly affects our credit metrics and our balance sheet. And so WIMS [Ph] will be important to be resolved in a timely manner. But the 10-year undergrounding plan just provides the pathway to the lowest cost safest infrastructure. And then certainly, FERC transmission, as you saw, we filed our TO filing earlier in October. We’ll continue to leverage the ability to do that at those transmission projects as well as key components of the whole picture. One of the things that is really important to understand is I rattle off all those things, there is so much work to be done here. Work that customers deserve work that customers will greatly value and benefit from work that customers have been asking us to do for some time. And so what’s important to recognize is we always self-regulate the volume of work we do on customers’ ability to afford. That is the simple affordable model. That we can invest in this capital infrastructure as indicated in -- on Slide 7, but we offset it with cost savings for customers every single day. And so those cost savings is what makes it possible to grow rate base like that without putting an undue burden on customers and their ability to pay. So it’s value for customers and cost savings that make up that simple, affordable model, good for customers, good for investors.

Patti Poppe:

No, it’s good bread and butter transmission investment, stuff that helps enable the clean energy transition that’s happening here in California and work that improves both reliability and access to that clean energy.

Patti Poppe:

Thank you.

Patti Poppe:

Thank you, Chris. Well, thanks, everyone, for joining us. We definitely enjoy this time together, but we appreciate certainly your patience on this GRC. It has a long-term impact. And it is worth the way to get it right and to make sure that we are aligned with our regulators. We all want the same thing. We want the safest system as fast as possible that customers can afford. And so we’re working together to get to a good outcome and we appreciate your patience. We will hold a special call once we have a final decision to review the details and share more of our insights when we get to a final resolution. We look forward to seeing you at EEI and please be safe out there.

Operator:

Ladies and gentlemen thank you for standing by. My name is Brent and I will be your conference operator today. At this time, I would like to welcome everyone to the PG&E Corporation Second Quarter 2023 Earnings Release Call. [Operator Instructions] It is now my pleasure to turn today's call over to Mr. Jonathan Arnold Vice President of Investor Relations. Please go ahead.

Patti Poppe:

Thank you, Jonathan. And good morning, everyone. Thanks for joining us on what we know is a very busy earnings morning. We continue to make progress here at PG&E and this quarter is no different. Our core earnings per share of $0.23 for the second quarter bring us to $0.52 for the first half of 2023. While our first half earnings are down $0.03 versus 2022 we have not yet recognized the benefit of our general rate case. As a reminder we have a memo account in place which will allow us to book catch-up revenues from the January 1 2023 effective date once we receive a final CPUC decision. We still expect a final decision in the third quarter and we were encouraged that the CPUC affirmed this timing earlier this month. As we shared at our Investor Day in May 86% of our incremental revenue request is for core safety reliability and maintenance work. All areas where there is strong alignment with state policy goals and stakeholder priorities. While the GRC decision will be an important driver halfway through the year we remain on track to plan and laser-focused on delivering our annual guidance which we are reaffirming today. We are also reaffirming earnings growth rates of at least 10% in 2024 and at least 9% in 2025 and 2026 along with our commitment to no new equity issuance through 2024. Turning to Slide 4. We've continued to make progress in mitigating physical and financial risk. On the physical front we continue to focus on system resilience by reducing wildfire risk and preparing for the grid of the future. We continue to make progress on the regulatory front as well. For example, in the second quarter the CPUC approved over $1 billion of interim rate relief in our 2022 Wednesday proceeding. This accelerates the time line for recovering our legacy wildfire mitigation spend improves our financial metrics and allows us to deliver on needed safety reliability and customer connections work benefiting both our customers and our investors. On the legal front, at the end of May, we were pleased to settle with the Shasta County District Attorney's Office resolving the criminal charges related to the 2020 Zogg Fire. The settlement includes commitments by PG&E to contribute $45 million to various local organizations as part of our ongoing efforts to make it right and make it safe. Our settlement followed rulings by the Superior Court which upheld our long-standing position that there was no evidence showing PG&E's inspections fell below the required standard of care, nor was there any evidence that the risk related to the tree was visible prior to the fire. The court's ruling from April is available on our Investor Relations website. Turning to financial risk mitigation. Our strategy continues to hinge around the simple affordable model, which delivers consistently improving value for customers and investors. Regarding the Fire Victim Trust, we are encouraged that the trust has now monetized over 85% of its initial holding and at steadily higher values for its beneficiaries. After the 60 million share sale earlier this month, the trust now holds just over 3% of our stock. As of the end of June, determination notices have been issued for 97% of all claims with the trustee having indicated a goal to reach 100% and monetize the remaining shares by year-end. Turning to slide five. We highlight our layers of protection strategy along with our anticipated step-up in risk reduction from 90% to 94%, as we roll out our new and expanded programs under our 2023 Wildfire Mitigation Plan. One example is downed conductor detection technology, which involves installing new hardware in the field, supplementing our enhanced power line safety settings. We filed our WMP with the Office of Energy Infrastructure Safety in late March and the OEIS came out with its revision notice towards the end of June. We view this feedback as a constructive part of the WMP process and we embrace the opportunity to drive further alignment with our regulators. OEIS identified eight critical issues and we will file our response by August 7 deadline with the draft decision from OEIS expected at the end of September. The revision notice process will not preclude us from filing our annual safety certificate application by the due date of September 13 with OEIS approval due 90 days later. As a reminder, our existing safety certificate remains in effect pending an OEIS decision on our timely filed new application. Earlier this month, at the Annual Board level safety briefing with the CPUC, our Utility Board Chair, Cheryl Campbell; and our Chief Operating Officer, Sumeet Singh discussed our safety culture, performance and details of our enterprise safety management system. These meetings are an element of our AB 1054 compliance and provide an opportunity to engage with regulators on our improvement strategies. We were encouraged to hear commissioners recognize our significant progress, while acknowledging our challenges including changing climate conditions. It's in moments like this that we step back and reflect on the progress being made. In fact at a recent meeting with all of our top leaders, Mark Quinlan, our SVP of Wildfire and Emergency Operations stood up to address the elephant in the room when he said, I bet you're all watching the weather and thinking back to 2017. Well, let me remind you just how much we've done since then. He went on to remind us all that we have an entirely different readiness posture and physical risk mitigation regime in place. Back in 2017, we were reacting and responding to hazards. The investments we've made since then have enabled a dramatic shift to predicting and preventing. Slide 6 illustrates the mitigations now in place thanks to these important investments in innovation. To name just a few. Since 2017, we have installed over 600 high-definition cameras now with AI capabilities more than 1,400 weather stations and almost 1,400 sectionalizing devices. We've hardened over 1,300 miles of line and undergrounded over 300 more. We've removed 3.3 million trees. We've staffed a hazard awareness warning center 24 hours a day seven days a week 365 days a year and we've hired 130 fire prevention professionals who are on our PG&E team and making us safer every day. We've implemented a host of operational mitigations including enhanced power line safety settings on 44000 miles of line in and adjacent to our high fire risk areas. We've enabled public safety power shutoffs when conditions warrant them and new for 2023 we've deployed partial voltage force out and down conductor detection. Our system has never been safer and yet it will be even safer still tomorrow and every day after that. As we shared with the CPUC during the safety briefing we are making progress and we have more work to do. Safety permeates through everything we do and the presence of controls, including our layers of protection leads to manageable and predictable outcomes. I'm confident that we and our key partners including the state are doing everything we can to cause our stance catastrophic wildfires shall stop. The data tell the story. Through mid-July reportable ignitions in our high fire threat district have decreased 53% from the equivalent date in 2017. Last year, we saw a 68% reduction in ignitions on EPSS-enabled circuits and a 99% reduction in acres burned. The data so far suggests we are on track to see further improvement in 2023. Our hard work over the past five years has dramatically changed our risk exposure and the fundamental safety of our system and we aren't stopping there. Moving to slide 7. We also see profound changes in financial risk mitigation due to the framework put in place by SB 901 and AB 1054. At our Investor Day, you heard Ann Patterson Governor Newsom's Cabinet Secretary talk about how the state Wildfire Fund is working as planned. The AB 1054 construct is designed to give utilities and capital providers the financial assurance they need while deploying the investments required to bring down wildfire risk on the system over time. Let me quickly revisit the key features for those looking for a refresher or who may be newer to our story. For wildfire claims exceeding $1 billion in a calendar year, we have access to the state wildfire fund. This provides $21 billion of claim-paying capacity protecting investors from the risk of a liquidity event. Our annual wildfire mitigation plan is a requirement for receiving our annual safety certificate. So long as we have a valid safety certificate we have access to two additional key features of AB 1054. First, the utility's conduct is presumed to have been prudent upfront when it comes to seeking cost recovery at the CPUC along with the prudency standard modeled on the constructive FERC precedent. Second in the unlikely event of the utility being found to have acted imprudently any resulting obligation to reimburse the wildfire fund would be capped at 20% of electric T&D equity rate base on a three-year rolling basis. This cap is currently around $3 billion for PG&E. This is a much better construct than what was in place prior to SB 901 and AB 1054 and that enables the attraction of the necessary capital to build and operate a safe and climate resilient energy system. Turning to Slide 8. Let's review our regulatory and legislative time line. We've made progress on multiple fronts in the first half of the year including, approval of our wildfire self-insurance settlement, the Zogg Fire litigation settlement and 2022 WMCE Interim Rate release. Looking forward, we have several catalysts on the horizon, starting with a GRC final decision expected in the current quarter; the ongoing legislative session in Sacramento where we have seen constructive engagement on energization, which you've heard us previously refer to as new customer connections, showing the legislature's commitment to California's clean energy transition and then on our 2023 wildfire mitigation plan and safety certification processes. Looking a little further out, at the end of this year, we will file our nuclear operating license extension application for Diablo Canyon with NRC and we remain ready to submit our 10-year undergrounding plan once the OEIS and the CPUC complete their scoping process. On Slide 9, you have our 2023 report card where we're showing on track for each of our 2023 and long-term targets. This includes our plan to underground 350 miles in 2023, double last year's target and our 2024 FFO to debt target of mid-teens. As you can see, we're also projecting on track for our 2% non-fuel O&M reduction target, which brings me to my story of the month. This month's story illustrates how our regional service model together with our performance playbook and lean operating system is helping improve the customer experience while we eliminate waste and cost in our work processes. In the North Coast region field operations teams are improving upon a common sense approach that has worked in a lot of our programs bundling work. What's different now is that the teams are working across various branches of electric gas systems inspections and vegetation management to coordinate many types of work, not just bundling similar work in siloed programs as we've done in the past. Cross-functional work bundling allows crews to do more work under the same planned outage line clearance, reducing the cost of switching and grid operations and improving overall reliability. During Q2, my coworkers planned and executed 12 jobs under just one planned outage near the town of Willits. Rather than impacting 100-plus customers multiple times over the year, we did it all in just one go. That's one outage, one day of traffic lane closures, one batch of notifications and only one visit. This goes to show you what's possible when we put the customer at the center of our operations. So far this year, we estimate savings of $0.5 million and 800-plus hours when we did not have to deenergize our customers. This is just the tip of the iceberg and something we are working actively to scale up across all regions, proving we can deliver an improved customer experience while cutting costs all at the same time. This is all part of the momentum we're building here at PG&E. And with that, I'll turn it over to Carolyn.

Patti Poppe:

Thank you, Carolyn. Before we take your questions, I wanted to take a quick moment to highlight two other pieces of news from PG&E this week. Yesterday, we issued our annual corporate sustainability report which outlines major strides we've made towards the triple bottom-line of serving people the planet and California's prosperity. Using statistics and stories the report details meaningful action we took last year in service of our home towns throughout Northern and Central California. Second as highlighted here on slide 15 we hosted our inaugural Innovation Summit earlier this week drawing over 2,000 in-person and virtual participants from venture capital, technolog, academic and financial world. Risk mitigation in particular wildfire has rightly been Job one and our main priority. At the same time, our California service area is at the very forefront of the energy transition given our state's bold vision for the future. With this in mind, we created our innovation research and development team to capitalize on breakthrough opportunities drawing on the external innovation ecosystem to inspire bold new ideas for safety and our operations. For example, during the Innovation Summit, we featured a first-of-its-kind version of Schneider's electric distribution energy management system operating on the Microsoft Cloud. On the topic of innovation, I'm also pleased to announce that the XPrize competition featured at our Investor Day has already received interest from 120 individual teams out of 32 different countries. Talk about breakthrough opportunities. The objective of this competition is to be able to pinpoint ignitions from space within 60 seconds or less and autonomously suppress wildfires within 10 minutes. I'm excited to see what these brilliant minds produce. I'll wrap up on Slide 16, by saying we feel good about the progress we are making, mitigating physical and financial risk. We're confident in the protections we have in place for this wildfire season. And we see several catalysts ahead for investors including restoration of our common stock dividend and a final decision in our 2023 GRC. We see the progress and feel the momentum. We hope you do too. With that operator, please open up the line for questions.

Shar Pourreza:

Hey, guys. Good morning.

Shar Pourreza:

Good morning. Patti I just wanted to start off with a question on the GRC timing. It seems there's obviously some filing still happening. They're coming through and the PD still isn't issued as you kind of highlighted there. I guess, what's your level of confidence here in getting a PD and what is a potential delay in the PD due as we're thinking about disclosures and when you recognize earnings and update guidance including obviously, enactment of official dividend policy? Thanks.

Shar Pourreza:

Perfect. Fantastic. And then just lastly for me, Patti. Just maybe briefly touching on sort of your expectations for safety certification and the WMP approvals. I mean OEIS and the stakeholders still kind of scrutinize the details of the plan. Are there concerns, that caused you to engage remediating action? Or is that already in plan? And how is the time line shifting as the WMP moves towards PD and you plan to file the 23 certification in September. Thanks.

Shar Pourreza:

Perfect. Big congrats, Patti on the execution. It's pretty -- it's very noticeable. Thanks so much.

Operator:

Your next question is from the line of David Arcaro with Morgan Stanley. Your line is open.

A – Patti Poppe:

Hi, David.

A – Patti Poppe:

Yes. So, a couple of things. One, of course all of that moisture that we got in the first quarter of this year certainly has I would say, delayed the start of fire season. We had a good moisture. But as you've indicated, David, it also provides for additional fuel in the form of grasses and grasses to be managed. The important thing to know, and what we're really trying to convey in our report today and really making the distinction about how far we've come since 2017, we are ready no matter what. We are ready, no matter the conditions. Our Hawk 24/7 365 is utilizing all of those cameras and weather stations we know precisely the conditions and our enhanced power line safety settings went into automatic mode on July 1. We deactivate those when conditions warrant. So there are certain cases where we do know we have high moisture and in particular polygon in our service area. And so we deactivate the EPSS but we have EPSS ready and able every single day of the year. And so for us we're just using this as an opportunity to be wildfire ready no matter the conditions. All that being said we're having great performance. Our EPSS settings continue to be an extraordinary risk mitigation tool for us. In fact this year our ignitions year-to-date are 50% less than what they were last year. And last year was an extraordinary year of performance as well. So we're feeling very good about our posture and we're ready.

Carolyn Burke :

Yes, David I'll take that question. So I would say the two areas that we see the most potential in terms of working our model to see that they're going to be affordable is in the transmission area and new customer connections. So we are looking at partnerships. We are looking at additional new customer -- we've made a significant progress in terms of looking at our overall process of bringing those connections online sooner. And so there's -- I would say those are the two areas that you could expect more insight in over the coming earnings calls.

David Arcaro :

Understood. Makes sense. Thanks so much.

Operator:

Your next question is from the line of Julien Dumoulin-Smith with Bank of America. Your line is open.

Patti Poppe:

Good morning, Julien.

Carolyn Burke :

Julien, this is Carolyn. Thank you for the question. So it is not incremental. We believe that we're going to use this financing to fund the programs that we have already in place. We have a very well laid out plan. We have more than enough to invest into our system. And so this financing is simply going to allow it to be more efficiently financed.

Patti Poppe:

Yeah. I think -- two things just to recall I mean I'll reiterate the no new equity in 2023 and 2024. And we have a commitment to pay down the parent debt of about $2 billion plus by 2026. So in terms of that waiver, we're monitoring that. We're on track. We've made improvements over the last couple of years and we continue to foresee those improvements. And we don't -- if the waiver is in place until we'll be able to make that waiver until June 2025, yeah, I thought it was 2025 sorry. Couldn't it remember it was June or March?

Patti Poppe:

Great. Thanks, Julien.

Ryan Levine:

Hi, good morning everybody.

Ryan Levine:

Hi. In terms of the dividend, are there any other regulatory items outside of the GRC that could impact the timing of reinstating the dividend with the third quarter call or some footnotes in your prepared comments? I just wanted to clarify what was being intended with that statement.

Ryan Levine:

Okay, great. And then on the heels of the Innovation Summit, curious your latest thinking about how artificial intelligence could impact your business both from a cost, capital or risk standpoint going forward and what work streams do you have to incorporate that?

Ryan Levine:

Great. Looks forward to it, I guess in terms of the DOE loan congratulations on receiving that subsidized capital. Outside of federal dollars, are there any state programs that you're looking to tap into to help mitigate bill impact through different California initiatives?

Ryan Levine:

Great. Thanks for taking my questions.

Operator:

There are no further questions at this time. I will now turn the call back over to the CEO Ms. Patti Poppe.

Operator:

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

Operator:

Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the PG&E Corporation First Quarter 2023 Earnings Release Conference Call. Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Jonathan Arnold, Vice President, Investor Relations. Please go ahead.

Patricia Poppe :

Thank you, Jonathan, and good morning, everyone. I'd like to begin by noting that this will be Chris Foster's last earnings call with PG&E. Thank you, Chris, for your commitment and service to our company over the past 11 years. Since we announced our CFO transition in March, Chris has worked tirelessly to ensure an orderly transition to Carolyn Burke, who will formally take over as our CFO later today. So thank you, Chris, for your friendship, your leadership and your dedication to serving our customers and investors. And a formal welcome to Carolyn, who brings a wealth of financial experience to PG&E as we continue on our journey remaking the company as a top-performing regulated utility. You'll all have opportunities to get to know Carolyn at upcoming events, including at our Investor Day in California later this month. We know you have a lot of calls occurring today. And since we've had a strong quarter, and we'll be seeing many of you in just a couple of weeks, we'll be crisp and to the point. Let's get started. Turning to our results on Slide 3. You'll see we reported first quarter 2023 non-GAAP core earnings of $0.29 per share. This result keeps us on track with our plan for the year. One timing item to consider is our 2023 general rate case. As is common with California GRCs, we have a memo account in place, which will allow for new rates to be implemented retroactive to January 1, meaning that after the final decision is reached, we'd expect to begin recognizing the GRC outcome along with the prior quarter's catch-up. The case schedule calls for a proposed decision in the second quarter and a final decision in the third quarter. We continue to communicate with all stakeholders to how important it is to have a timely decision in order to have the resources we need to deliver for our customers. Also today, we reaffirm our full year 2023 core EPS guidance of $1.19 to $1.23, which at the midpoint represents an increase of 10% over 2022. We also reaffirm our previously stated longer-term targets of at least 10% core EPS growth in 2024 and at least 9% for 2025 and 2026. Also unchanged is our plan for no new equity issuance through 2024. As we've said before, we'll work to manage the business through ups and downs like weather, regulatory timing, interest rates and inflation, while delivering the safety and reliability investments that our customers need and the consistent financial results our investors expect. Here on Slide 4, I'll review some of the highlights and proof points as we continue to make progress on mitigating risk, both physical and financial. On wildfire risk mitigation, we filed our 2023 Wildfire Mitigation Plan at the end of March, which further builds on the layers of protection approach from our 2022 plan. Record winter rains and snowfall have left our hydro assets in a stronger position than they've been in for some years. CEMA, our Catastrophic Event Memorandum Account is one of the constructive features of the California regulatory model. It enables us to focus on serving customers when they need us the most, while we track and defer for future recovery much of the costs associated with these historic weather events. We recorded several hundred million dollars of repair and restoration work to the CEMA account between December and March. Meanwhile, our customer restoration efforts and storm response have been well received in our communities, and our performance benefited from the investments we have made in technology, situational awareness and emergency response coordination. We've also continued to see more constructive policy outcomes, building on last year's passage of legislation supporting our establishment of a 10-year undergrounding plan as well as the state's decision to extend the life of the Diablo Canyon nuclear plant. Highlights in the first quarter include our wildfire self-insurance plan, which enjoyed unusually strong support from interveners. We were also pleased to receive the Nuclear Regulatory Commission waiver, allowing our two Diablo Canyon nuclear units to continue operating beyond their current license expiration date, while the NRC is considering the renewal applications. We expect to file our applications with the NRC by year-end. And most recently, in the past week, we were encouraged by the proposed decision issued in our 2022 WMCE proceeding. This would grant our full request for $1.1 billion of interim rate relief while allowing for collection over 12 months, also as requested. The PD could be voted out by the CPUC as soon as the June 8 meeting, and we will be advocating for a timely adoption so that customer benefits can be realized. These benefits include millions of dollars in customer financing savings as well as providing cash funding to accelerate investment. This will facilitate us delivering needed safety, reliability and customer connections work. I'm also happy to report on continued progress mitigating financial risk. Our simple, affordable model and deployment of waste elimination, the fifth play of our lean operating system, enables improving the customer experience while keeping us on track to deliver our 2% annual O&M savings in spite of weather and inflation. Also, in support of customer affordability, we worked with the state to offset commodity price increases on winter bills with an acceleration of the annual California Climate Credit. Overall, during the winter gas commodity price run-ups, our procurement team was able to save customers over $1 billion through a series of thoughtful measures including a diversified portfolio that includes interstate pipeline capacity reaching back to the supply basins, natural gas storage and financial hedging. Turning to Slide 5. We continue to estimate that our layers of protection have mitigated over 90% of wildfire risk through the combination of inspection, physical hardening, our Enhanced Powerline Safety Settings, Public Safety Power Shutoffs and improved situational awareness and response. While 2022 did not bring the typical high-wind events that would trigger PSPS, we did see an increase of over 30% in high fire risk base given the significant drought conditions. Despite this increased risk, our EPSS program resulted in a reduction of 69% in CPUC reportable admissions, along with 99% fewer acres impacted for EPSS-enabled mines versus the pre-EPSS baseline or 2018 to 2020 average. Our 2023 wildfire mitigation plan builds on these core elements and will also see us deploy additional operational mitigations such as partial voltage detection, which leverages our existing smart meters and our down conductor detection with a plan to install over 1,100 new enabled devices on the system by the end of 2023, translating to over 75% coverage of high fire risk areas. Other programs being expanded for 2023 include our transmission pole clearing, our transmission operational controls, and further measures, including EPS sectionalizing to reduce customer impact. We expect to be sharing more with you on the incremental risk reduction associated with these programs at our Investor Day later in the month. Slide 6 is a reminder of our simple, affordable model, which continues to sit at the heart of our customer value proposition. We remain on track to deliver on at least 2% annual non-fuel O&M reduction with our wildfire self-insurance and incremental vegetation management savings, providing line of sight on continuing to offset inflationary pressures this year. That's a good moment to bring up my story in the month, which has to do with revisiting the way we approach our work, and in this case, in our undergrounding program and how we're eliminating waste in our process. Historically, hitting these internal standards had required our underground electric lines to have at least 36 inches of cover. Upon revisiting this approach and reviewing regulations and the practices of other undergrounding utilities, we determined that 36 inches of cover is not required in most places, and there's little evidence that incrementally deeper conduits are meaningfully safer or more reliable than slightly shallower conduits. Therefore, in Q4 of last year, we revised our standard to only require 30 inches of cover, unless, of course, otherwise directed by permitting authority. While these may not seem like much, this 6-inch change in depth reduces the labor hours required to install our underground conduits and reduces the amount of spoils created during our trenching activities by approximately 17%. We're estimating that this change of 6 inches will save at least $25 million in 2023 alone. That's lower cost for our customers for the same ultimate value, getting our electric distribution lines underground and permanently reducing the risk. This is just the beginning of our waste elimination efforts. We're benchmarking with peers and reviewing where it's appropriate to put the conduits 24 inches deep, another 6 inches of potential savings, and we're analyzing the entire undergrounding delivery process through a value stream mapping exercise to identify further opportunities for efficiency, better customer and co-worker engagement and even more waste elimination. So many practices in large organizations like ours get memorialized and standardized into waste. Our fifth play and our focus on it will unlock value for customers in large and small ways for decades to come. Slide 7 recaps some of the key regulatory and policy catalysts we have in front of us for 2023. The one minor change is for Pacific Generation, where the ALJ recently added about a month to the schedule in response to request for additional time from the interveners. This will likely push the proposed decision from late 2023 into early 2024. And the sooner we get a final decision, the sooner we can bring the expected benefits to our customers. We know there is a lot on the plate at the CPUC at this time. We also know that we want what they want, a safer and more reliable system, which has enabled with timely approval of necessary infrastructure investments. In the meantime, we're improving our processes to make every dollar go further and building the case for the right investments to meet customers' expectations. I'll end here on Slide 8, with our report card reflecting on-track status for all of our operational and financial targets. I'm pleased to say we're on track to deliver on our commitments to both our customers and our investors despite the early challenges from winter storms. We are confident we have built a resilient conservative plan, which is designed to absorb the ups and downs of the business and the markets. As I like to say, we'll ride that roller coaster so you don't have to. And before I hand this over to Chris and Carolyn, I'll leave you with two additional notes on the financial front. First, we look forward to being eligible to reinstate our common dividend later this year, which we view as a key step in our return to financial health and essential for attracting the capital we need to deliver for our customers. As we announced on the year-end call, we expect to hit the required earnings level in the third quarter. Second, we've been encouraged to see the Fire Victim Trust continuing to monetize their stockholding and at growing values. The trust now owns around 6% of our stock, and as of last week, had distributed over $9 billion to their beneficiaries. And now I'll hand it over to Chris for some financial highlights.

Carolyn Burke :

Thank you, Chris, and good morning, everybody. At the bottom of this slide, we're highlighting some milestones and next steps of the two key pieces of state legislation passed last year. In addition to the DOE confirmation that Diablo Canyon is eligible for federal funding through the Civil Nuclear Credit Program, we were also granted a waiver by the Nuclear Regulatory Commission to continue operating the units beyond their current license expiration dates, while we work through the full relicensing process. Also during the first quarter, the California Energy Commission in consultation with the CAISO and CPUC issued a needs determination, supporting extended operations at Diablo Canyon to provide electric system reliability in the state. Finally, in terms of the undergrounding, I'll remind you that the pending 2023 general rate case includes our request through 2026, as does our recently filed 2023 Wildfire Mitigation Plan. We will be prepared to file our 10-year plan later this year, dependent on the guidance from the Office of Energy Infrastructure Safety. Once we file, OEIS will have nine months to review before going to the CPUC, who will also have nine months for their review. Now as many of you know, California is my new home. As shown here on Slide 13, I'm quickly and happily learning that California's regulatory construct makes this a great place to do business. In addition to the protections provided for under Assembly Bill 1054 and the CEMA tracker Patti and Chris discussed earlier, PG&E also benefits from decoupled rates and a three-year cost of capital set independently from a four-year forward-looking rate case. And this is just to name a few. Our strong regulatory environment is an advantage that we will never take for granted. As Chris mentioned, performance is power, and we know we must perform. We understand that affordable customer bills help us not only mitigate financial and regulatory risk, but also importantly, help us as we continue to build trust with our customers, our regulators and our policymakers. As the incoming CFO, I intend to continue to build upon the sector-differentiating simple, affordable model that Patti and Chris put in place. The implementation of our lean operating system is helping PG&E improve the customer experience, reduce O&M, enhance capital work plan throughput and quite simply, making PG&E a more enjoyable place to work for and with. This year, as part of engaging our co-workers on a lean method of waste elimination, we've established our waste elimination center. We are already tracking over 200 projects across the enterprise, and we're finding common themes throughout the business. First, there's a whole lot of over-processing. And second, there's a whole lot of defects requiring rework. That means a whole lot of opportunity. My co-workers are excited about tackling these issues and projects and driving improvements for the benefit of our customers. We're going after big and small opportunities, some simple and some complex. Take this simple example of customer mailings. U.S. postage rates are expected to increase about 7% this year. While we have no control over these mailing rates, we do control what we send to our customers. This waste elimination project is looking at what communications we can digitize or eliminate altogether. If we just eliminated one mailing per household per year, that's approximately $4 million in saved postage. As you can imagine, we're not stopping with just one mailing, and this elimination project saves more than just postage. As Patti mentioned earlier, we're going after large waste elimination projects, too, including in our undergrounding program. The team is excited to show you more examples out in the yard during our Investor Day in May, where we'll demonstrate waste elimination driving real unit cost savings and making permanent risk reduction affordable for our customers. I'll end here on Slide 14 by saying that our value proposition is strong, and it's improving every day. We are progressing towards meeting the common stock dividend eligibility threshold later this year. As a reminder, before declaring a dividend, we will first need to recognize a cumulative $6.2 billion in non-GAAP core earnings since our emergence from Chapter 11, starting from the third quarter 2020. For this purpose, non-GAAP core earnings means GAAP earnings adjusted for certain noncore items as described in our plan of reorganization. Our plan currently shows us reaching eligibility during the third quarter, although this remains subject to assumptions, including the timing of regulatory decisions. I'll remind you that regardless of timing, we plan to recommend to the Board that we start with a small dividend initially, feathering in growth over time. I'll leave you with this

Patricia Poppe :

Thank you again, Chris, and welcome, Carol. In closing, we are solidly on track for another year of consistent performance in 2023. We look forward to sharing more details with you on our progress and our confidence in the outlook at our California Investor Day on May 24 and May 25. While we do have a virtual option for the main slide presentation, for those of you wondering whether to make the trip, there will be a lot more for you to see and experience outside of that webcast window. We'll be showcasing some of our key technology, including wildfire risk reduction, EPSS and undergrounding. We also want to give you a better understanding of why we're confident we can execute our plan, including our 10,000-mile undergrounding program. At our in-person event, you'll also get to hear directly from key California stakeholders, including policymakers, customers and other critical partners as we continue writing the next chapter of the PG&E story. We really hope to see you here in this great state of California at the end of the month. With that, operator, please open the line for questions.

Steven Fleishman :

So just first, any color in thinking on the situation going into this fire season just with all the rains and et cetera, just how you're thinking about how things stand versus the last few years?

Steven Fleishman :

Okay. Good. And then second question, just I have to ask again on the Fire Victim Trust, any sense on their kind of strategy or timing from here? In theory, I guess, you're close to the end? Any sense on that?

Steven Fleishman :

Makes sense. Great. And then just lastly on the GRC and the proposed decision. Just are you getting any sense of the timing within the second quarter and just the likelihood that it will actually come out in the second quarter and not get delayed?

Operator:

We'll move next to Shar Pourreza at Guggenheim.

Carolyn Burke :

Yes. Sure. This is Carolyn. I'll take that question. So we've been pretty consistent, as you know, that we would -- we do expect to meet that eligibility in the third quarter. Our current plan suggests -- continues to suggest that. On the adjustments, so our plan of reorganization has a very specific calculation for the dividend eligible earnings. And it is different from what we report as non-GAAP core earnings. There are some very specific line item adjustments. And our IR team would be happy to walk through that methodology with you separately. But I just want to make sure that you know that it is separate. It is different. On a practical matter, we want to have our audited financial statements to be able to support the eligibility of that calculation. So the earliest our Board would have the opportunity to declare a dividend would be with our third quarter earnings call. So that's the expectation at this point in time. Of course, it is subject, I will just say, to the GRC decision, some various regulatory decisions that we're expecting in the third quarter.

Shahriar Pourreza :

Got it. And then just on the -- now that the undergrounding program is in place, PMO is engaged. I guess, how are your thoughts evolving around longer-term undergrounding plan? Any expectations for that filing? And do you see any constructive variances versus the last update in the GRC.

Operator:

And we'll go next to Julien Dumoulin-Smith at Bank of America.

Patricia Poppe :

Well, Julien, we take great pride in giving you multiple years' forward expectations on earnings. I would suggest that there are some -- especially with the GRC coming out late after Investor Day that it's unlikely that we'll forecast any further than 2026, but we're pretty proud of the fact that we're giving you guidance through 2026.

Carolyn Burke :

Yes. No, I'll take that. This is Carolyn. We've actually seen pretty robust inbound interest in the asset. And so we do expect a fairly competitive process. I will say that the opportunity seems to be most interesting to those long-term infrastructure investors, but we have seen a wide range of interest. The portfolio, obviously, is pretty unique in that it offers exposure to the full cost of service, regulated clean generation in California and without the direct risk of wildfires. So it's pretty attractive. And timing, as we've already mentioned, I mean it's really -- we do -- we've updated that. We're going to be going to market with investor -- with our process coming up in June is the expectation, so early summer. And then we would still expect that process to go forward through the balance of the year, simultaneous with the regulatory process and wouldn't expect to be closing until the first half of 2024.

Anthony Crowdell :

Just hopefully two quick questions. One on the cost of capital triggering mechanism. I believe that utility is going to file if rates stay where they are for an increase in cost of capital for 2024. Do you expect parties to follow for a waiver, similar to, I think, what the utility sale for a waiver for in 2022 for the mechanism not to get reset lower? Is there an expectation that you do get parties also filing for a waiver?

Anthony Crowdell :

Great. And then lastly, Patti, it's on your, I guess, story of the month, I think you framed it as -- or savings a month of the undergrounding. And I understand the savings that you get by not having to bury the conduit, whatever, 36 inches and now you're at 26, but if I think of the -- probably a large component of the cost of undergrounding, maybe labor. And if I think of PG&E is probably on their gas side has been burying gas pipe for 100 years. Like I don't -- can I expect any efficiencies in the digging trenches and putting a conduit down, that great considering you've been -- you probably have mastered the trenching of a conduit from the gas side of the business?

Operator:

And we'll take the next question from Ryan Levine at Citi.

Patricia Poppe :

Yes. Well, the scale is really massive, Ryan. It starts -- I think the book ends of the mailing, which is $4 million of potential savings with just 1 mailing, all the way up to the story that I shared about the undergrounding, that's all borne out of waste elimination. Some other important focus areas for us in the waste elimination center are things like our new customer connection process improvement. I know that's an area of interest for a lot of people, and we've been making significant progress there in identifying waste in that process that we can eliminate and make a better outcome, a faster outcome for customers at a lower cost as well as other things like just bundling work. We have work often done in silos. So on one week, a crew might go out and change a cross arm and two weeks later, they might go out and change that very same pole. And so bundling work so that we get out there once and do it at the lowest cost possible and least disruptive for customers. The potential here, Ryan, I cannot describe is almost infinite. And when we get 26,000 of my co-workers all being proficient in being able to see waste for what it is and then eliminate it on a daily basis, this thing just runs itself. That's a -- it's a great future that lies ahead for this team and therefore, our customers.

Chris Foster:

Sure. Just to help give you a feel for that. What we had filed earlier, Ryan, was a little over $300 million in impact so far. I will offer to you that's early. That number is going to go up. I would assume we're going to be in total -- if you look at all the storm impacts, we're talking about 13 atmospheric rivers of impacts here, this is probably going to be over $500 million in impact. The CEMA related account, though, is a very consistent recovery mechanism. But as you go forward, we would typically complete the work, audit the work, make that filing, and you typically get around an 18-month to two-year time line for resolution but been used really here in California for many years.

Patricia Poppe :

Thanks, Audra. And we really wanted to be mindful of everyone's time today and keeping this call short. So I'll just wrap with one -- couple of thoughts. One, our best wishes to Chris as he embarks on his next professional step. We're going to miss him, but we're excited and proud of everything that he's achieved and what he's going to achieve next. And thank you, everyone, for joining us today. We look forward to seeing you at our Investor Days on May 24 and 25. We're excited to see that many of you have already registered, high demand for this event. So we're excited about that. There will be much for you to see live. It will not be possible on the webcast. And so we still have room, if you'd just like to join us, just make sure you register. We are definitely seeing progress here at PG&E. And we want to be able to share that with you at our Investor Day. We want you to know that an investment in PCG is an investment in serving people, the planet and prosperity of many millions. And we're very proud of the progress that the team is making here. I want to share that with you at Investor Day. So we look forward to seeing you there. Please be safe out there, everyone. Have a great day.

Operator:

Good day, and welcome to the PG&E Corporation Fourth Quarter 2022 Earnings Release. Today's call is being recorded. [Operator Instructions]. I would now like to turn the call over to Jonathan Arnold. Please go ahead.

Patricia Poppe:

Thank you, Jonathan. Good morning, everyone, and thank you for joining us on what I know is a busy earnings morning. As you'll see on Slide 3, this morning, we reported full year 2022 core earnings of $1.10 per share, right on guidance. This was my second year with PG&E with results delivered on plan. No more, no less. As I like to say, we sweat the details so you don't have to. Our simple, affordable model is designed to maximize work for our customers and deliver on our commitment to you, our investors, each and every year. Our $1.10 EPS for 2022 was up 10% from 2021 as planned. We're also reaffirming our 2023 core EPS guidance range of $1.19 to $1.23, up 10% at the midpoint, along with our previously stated longer-term targets of at least 10% EPS growth in 2024 and at least 9% for '25 and '26. Also unchanged is our plan for no new equity through 2024. As you know, our sector-leading EPS growth is supported by robust capital investment and ongoing efficiency gains for the benefit of the 16 million Californians we serve. In fact, in 2022, we invested $9.6 billion of capital into our system for the benefit of our customers. Our system has never been safer, and we continue to make it safer every day. I want to thank you, our investors, for your part in making that possible. The simple, affordable model underpins our confidence in reiterating our financial outlook today despite the very real challenges faced by most businesses in today's inflationary and uncertain economic environment. Turning to Slide 4. We've made strong progress mitigating physical and financial risk. So here are some high points. On wildfire mitigation, we saw a 99% reduction in acres burned in 2022 relative to the average of the 3 years directly before implementation of Enhanced Powerline Safety Setting. As we reported last quarter, we were able to successfully navigate extreme summer heat conditions. And in January, our system was put to the test again with an unprecedented series of winter storms, which were met with truly historic levels of performance from the PG&E team. In addition to addressing physical risks, 2022 was a big year for our financial risk mitigation. We delivered our earnings guidance as well as non-fuel O&M cost reductions of 3% net of inflation. This was ahead of our 2% plan and was achieved in the face of the most challenging inflationary backdrop many of us have seen in our careers. In our GRC, we added undergrounding while removing vegetation management expense, delivering long-term safety while keeping cost neutral for customers. We closed our $7.5 billion rate-neutral securitization and worked with California policymakers over the summer as they passed constructive legislation supporting our 10-year undergrounding plans and to extend the life of our Diablo Canyon nuclear power plant. We view both as beneficial to customers and evidence of the greater trust we are building day in and day out with our stakeholders. On the regulatory front, we appreciate the CPUC resolving both the 2022 and 2023 cost of capital proceedings last year. And in terms of customer savings, the Net Energy Metering 3.0 decision was a win for customers. We estimate it removes about $1 billion of cost shift through 2030 relative to NEM 2.0. On Slide 5, we show some highlights on our historic January storm response. I want to emphasize that this story is about more than numbers on a page. This was us delivering for our hometowns, and our coworkers are at their best when put to the test. During the first 2 weeks of 2023, hit by historic back-to-back to back-to-back atmospheric river storms, our electric team restored over 2.8 million customers through multiple waves of outages, and we had 95% back online within 24 hours during each of those events. January ranked as the top 5 storm in PG&E history and involved the largest contingent of resources we have ever mobilized, including around 7,200 dedicated personnel from 10 states. The strength and speed of our response also resulted in us seeing improved customer satisfaction scores compared to prior storm-related outages. We've also adopted the standardized emergency management system and Internet command system. And with the support from California's Office of Emergency Services, we've been aligning training of our emergency center staff with our first responder public safety partners. When the time came, our team and an army of partners acted with skill and tenacity, protecting and serving each other and our hometown, and we couldn't be prouder of them. On Slide 6, I'll recap our layers of protection against wildfire risk, which start with our core system hardening, vegetation management, inspections and repairs. When conditions warned, we supplement these with our Enhanced Powerline Safety Settings and our Public Safety Power Shutoffs. We calculate these layers of protection, including improved situational awareness and coordination with first responders, as delivering over 90% overall wildfire risk reduction. We've already hardened more than 1,200 miles since 2019, and we expect our overall risk reduction to further increase as we pursue our 10,000-mile undergrounding program. In the meantime, we continue to look for innovative new technology solutions such as partial voltage detection and down conductor technology to keep reducing that remaining 10%. On Slide 7, we take a closer look at our 2022 wildfire risk mitigation performance. Historical data show that from 2012 to 2020, that's before we implemented EPSS, 95% of the acres and 100% of the structures burned were related to ignitions at times when conditions were at R3 or higher. While we were fortunate that 2022 didn't bring significant wind events for the year, there were still 31% more R3 or higher days than in 2018 to 2020. Despite this significant increase, we saw a reduction of 99% in the number of acres impacted by utility ignitions in 2022 over the same time period. Slide 8 illustrates our simple, affordable model, which includes driving efficiency to make room for customer investment. You've heard us talk a lot about the lean operating system and our 4 basic plays. In 2023, we're rolling out a fifth play, my personal favorite, waste elimination. And we see this as key to continuing to deliver our plans for both customers and investors. Our primary constraint is customer affordability, on which we are laser-focused through our newly established bill ownership center led by Carla Peterman. The entire team is looking at the whole customer bill for savings, including energy supply costs, which we know are top of mind. We have a lot of opportunity to eliminate waste, improve our customers' experience, make our system cleaner and more resilient all the while reducing cost. We can do more for less. The examples keep piling up. So I felt I needed to bring back my story of the month. So here we go. This month's story is about work we are doing to improve efficiency in our new business area. Presently, our new customer connections take too long from start to finish. As I recently told a group of California builders, we can, and we will do better. In fact, it's another perfect application for our lean operating system, and specifically, waste elimination. The team invited our developers and builders to come in and work with us to redesign our processes and share their pain points. We conducted a design thinking workshop. And through rapid prototyping, we can see the path to taking the cycle time down dramatically, improving our ability to both do the hook up on time and in less time. Imagine the rework, the waste, the frustration, the delays we can eliminate. One challenge is that 64% of the new connection requests we receive today end up being canceled for a variety of reasons. We do too much engineering before we are sure it will even be used. This wastes both time and money, and it also is demoralizing for our talented engineers when much of their work never sees the light of day. We can dramatically improve how we show up for our new customers. And by doing that, we can free up more time and resources to reinvest back into the system. This is just one of the areas where we are delivering more for customers with every dollar spent. Now that's what I call enabling California's prosperity. Turning to Slide 9. You may recognize this chart, which shows how we executed in 2021 and 2022. In 2021, we faced headwinds early in the year. Our recovery work then put us ahead of plan. This is all part of the playbook we're running now at PG&E. We plan conservatively, and we remain nimble, protecting investors from the downside. And when there's upside, we will redeploy it for the benefit of customers, which, in many cases, means pulling work forward and protecting future years. Consistency is the name of the game. You can see it play out again in 2022. We faced headwinds, including a possible cost of capital reset. We have planned conservatively, though, and we're able to more than offset this and other pressures, allowing us to redeploy again on behalf of our customers and still deliver 10% EPS growth. Employing the simple, affordable model, we plan to consistently manage the work and deliver our earnings targets, no more and no less. And when we can, we will redeploy favorability in the business on behalf of customers and look to derisk future years with a view to delivering our consistent growth trajectory. Lots of people say to me, "Patti, what if this happens or what if that happens?" This is what we manage at PG&E. Come what may, we have the capability to be nimble and adapt to those challenging and changing conditions. It's a capability that can be taught and learned. As I've said many times, we ride the roller coaster so you don't have to. You can expect to see more of this in 2023 and beyond. Moving to Slide 10. You can see the progress we made in 2022 as we continue on our journey to build trust with policymakers while creating the stability necessary to attract capital to invest on behalf of customers. Already, in 2023, we're pleased with the expedited resolution of our self-insurance settlement reached as part of our General Rate Case. This innovative approach enjoys intervenous support and most importantly, can result in up to $1.8 billion of savings for customers over the 4-year GRC period with as much as $300 million expected in 2023. We also have a number of important catalysts on the horizon. Each of the 4 items you'll see here in blue contain important benefits for our customers and for California. We'll continue to work every day toward timely and constructive outcomes, but we don't do big bets here at PG&E. And I want to remind you that we continue to plan conservatively even as I look forward to seeing more green check marks on this slide. Turning to Slide 11. Let's take a look at our 2022 report card. While the material fire did not result in any serious injuries and the estimated liability is well within our available insurance, it did cause us to miss our goal of 0 CPUC reportable admissions of 100 acres or more. We put 180 miles of lines underground last year, exceeding our 175-mile target. And we chose to redirect capital investment to maximize risk reduction during the year, which changed our plans for gas main replacements. We exceeded our 2% annual O&M cost reduction, offsetting inflation and delivering net savings of 3%. Yes, that is net of inflationary pressure. We see plenty of potential to continue 2% net O&M reduction for many years ahead by working smarter and maximizing value for our customers and investors. Core EPS came in right on plan at 10%, while we delivered 6% rate base growth in what was the final year of our GRC cycle. Lastly, we were pleased that Moody's recognized our significant progress on mitigating risk and improving relationships in the state when they revised our credit outlook to positive earlier this month. On Slide 12, we introduced our 2023 report card. One key change is to our headline wildfire metric, where we're sticking with a target of 0 and resulting a new OEIS metric for catastrophic wildfires. This measure lines up with our future wildfire mitigation plans, and we think it's a better one for capturing events that are of real significance from both a customer and investor perspective. We remain committed to our 10,000-mile undergrounding goal and to achieving our unit cost targets. We'll be filing our 10-year plan later this year with more details. Our 2% O&M reduction plan shouldn't be a surprise either, and there are no changes to any of our previous financial targets through 2026. We're excited to be adding another year, 2027, to our rate base and CapEx as we look to give you more visibility into our long-term plan. Our headline 5-year rate base CAGR of 9.5% remains the same, but it's now based off 2022 actuals and runs through 2027. We're feeling really good about what we accomplished in 2022, and we look forward to delivering for you again in 2023. With that, I'll hand over to Chris, who will discuss our financial and regulatory items in more detail.

Patricia Poppe:

Thank you, Chris. Let me close by emphasizing we've made a lot of progress in 2022. And yet, we are long away from being done. We have plenty more for you to look forward to in 2023 and beyond as we continue to write the next chapter in the PG&E story. For our current investors and for those of you still taking a look, we hope you'll consider joining us in California for our 2023 Investor Day on May 24 in the Bay Area followed by undergrounding site visits in and around Napa County on May 25. We're excited to share more details of our longer-term financial plan and our investment opportunities. We'll roll up our sleeves to show some of our risk reduction tools and technology with you. And we'll also give you the chance to hear about our progress from some of our key California stakeholders. We can't wait to see you. And with that, operator, please open the lines for questions.

Shahriar Pourreza:

Just real quick, Patti. In terms of the process and maybe establishing some framework around the Pac Gen equity sale, I mean, obviously, there's been some early stakeholder comments, and the CPUC narrowed down and issues list this year. I guess do you feel there could be an expedited resolution via some form of a settlement, partial settlement to move this process along faster?

Shahriar Pourreza:

And then obviously, you guys put out a mid- to high teens credit metric target. Is that -- just remind us, is that inclusive of the Pac Gen equity sale or not?

Shahriar Pourreza:

Got it. And then just lastly, Patti, I mean, obviously, one of the key messages for you on this call is like the bill impact is going to be sort of modest, let's just say, right? But some of the offsets and levers that you guys have been able to utilize and plan, which is a really good message. But there's still like, for instance, over $800 million in deferrals that are pending approval right now. I guess how does that kind of play into the equation?

Operator:

We'll take our next question from Steve Fleishman with Wolfe.

Patricia Poppe:

Yes, Steve. And we're proud of that, and I'm proud of the team for the hard work that they did, and we're just getting started, Steve. That's what's so exciting about this waste elimination and our story of the month about the new business. There is so much opportunity here, and the team is so hungry to learn. I'm so proud of them. I actually was in our waste -- our new business center just the other day where we're highlighting our waste elimination efforts. And that team was smiling for the first time in a long time, because they're realizing that they can, in fact, have the tools. People need to learn these techniques to actually reduce cost while they're doing more work, and people are really learning fast. I'm super proud of the team.

Patricia Poppe:

Well, it definitely enables us to deliver that 2% and all the inflationary pressures. So we call it 2%, but it's inflation plus 2%. And so that's what waste elimination delivers. And that, again, as we have ups and downs that come at us, that roller coaster I talk about, this is the capability that we can build into the team to turn on that capacity to reduce waste and absorb inflation and still deliver the 2% plus.

Patricia Poppe:

Yes. So we've hit the stage where settlement is not really an option at this juncture. We've settled pieces and parts like the insurance because it was so valuable for customers to get that settled early and deploy those savings here in '23. And so as we follow the timetable that the commission has laid out, we're looking for a proposed decision and final decision in the third quarter. And we know that the commission has a lot on their plate, but we also know that this rate case is really important to customers and our ability to deploy all of the infrastructure investment that we've been talking about for the benefit of customers. So we expect timing to maintain the schedule that the commission has laid out.

Patricia Poppe:

Yes. No, we haven't really heard anything new. We know that the fire victim's trust is aligned with our interest of delivering safety for customers. As the company succeeds, it enables them to provide for the victims that are included in that trust. And so -- but no new information on timing on that front.

Julien Dumoulin-Smith:

Listen, I wanted to kick it up first on a question related to '27. I know you guys rolled forward the 9.5% rate base CAGR at 2027, held back on commenting on EPS. I know you had this conversation about 10% or 9% in the past. You bifurcated that very clearly. I also appreciate the timeline of the current GRC and what that means for '27. But just asking the question, how do you think about '27 EPS growth and rolling forward the EPS CAGR as well, if you will?

Julien Dumoulin-Smith:

Right. I would imagine, given the GRC and also, over time, kind of a normalization of the growth trajectories between rate base and EPS, perhaps the bias seems closer to 9 than 10?

Julien Dumoulin-Smith:

Fair enough. Fair enough.

Julien Dumoulin-Smith:

Absolutely. Understood. Listen, Patti, actually, since you mentioned this in the prepared remarks on the interconnections and your story, I thought it was very relevant given some of the feedback we're hearing. I'm curious to get your perspectives on what kind of load growth you're seeing. Where are you trending within that 1% to 3%? And can you comment maybe on some pent-up load growth that maybe because of those interconnection delays may not have been realized yet, if you will. But I also appreciate that the transportation electrification figures into that 1% to 3%. But overall, where are you trending against that prospectively, given some of these tailwinds?

Operator:

We'll take our next question from Nicholas Campanella with Credit Suisse.

Patricia Poppe:

Great question. Of course, we're very excited about our undergrounding plan. And just a couple of good important clarifications for everyone. Number one, we reduced our mileage as a result of conversations with our key stakeholders. We have to earn the right to do that underground. We have to prove that we can, in fact, do it at the unit cost that we've described. Happy to report in 2022, the 180 miles we delivered was at a unit cost lower than we had forecasted. So the team is definitely improving on efficiency. And I feel like we're just getting started and really having the scope and scale of program that will consistently deliver the unit costs that we're forecasting. Our 10-year plan comes out later this year, and that will clarify mileage and unit cost targets. And I also want to remind everyone that, look, this undergrounding program is very important from a risk reduction and a customer satisfaction, but it's not a big bet. The undergrounding program is less than 20% of our total capital plan. It is flexible and dynamic in nature. We're going to be working with our regulators and those stakeholders to make sure that we do undergrounding at a pace that they support. I remind myself, the Golden Gate Bridge wasn't built in a year. It was built over time, and it's beloved, and that's what our undergrounding program is going to be. It's going to be built over time, and it's going to be beloved. And we have to earn the right to grow those miles year after year after year. And so we're very focused on doing that well. We've got a program structure set up that's delivered real savings in our wildfire mitigation through vegetation management inspections. The same leadership team is leading the undergrounding program. So we're expecting big things from Peter and the team as they build out our undergrounding program to the benefit of customers. I hope that helps.

Christopher Foster:

Sure thing. Nick, I think it's -- in Moody's really reaffirmed this too that our financial metrics as we look at them are really already in that investment-grade territory. So I think really across the agencies, their emphasis is really shared on the physical risk reduction progress we're making. Patti hit the year-over-year improvements in our Enhanced Powerline Safety Settings and just the clear results of that delivers. And then I think also it's the desire to see continued progress and data points with our policymakers. Last year, we clearly made progress on some key customer-friendly programs, both the undergrounding program and the Diablo Canyon operating life extension in terms of new policy. And I think we just want to continue that progress this year. And that could be across wildfire-related recoveries at the CPUC, certainly our General Rate Case as well as the Pacific Generation filing there at the CPUC as well.

David Arcaro:

I was wondering if you could speak a little bit to the upside CapEx opportunities, the $5 billion that you laid out in terms of the transmission investment distribution. What could be kind of the timing of getting more concrete numbers around that? When -- could it hit the 5-year plan? Is it potentially kind of elongating the CapEx runway from here? And are there any like milestones that we might track as you evaluate some of those upside opportunities?

David Arcaro:

Okay. Understood. That's helpful. And then I was wondering your fire risk mitigation strategies, they're broad. There are a lot of different components of that. I was wondering if you could speak to innovation that you're working on with regard to fire risk reduction in terms of technologies or new applications that you're exploring right now that could be layered on to the current risk mitigation programs?

Operator:

We'll take our next question from Jeremy Tonet with JPMorgan Securities.

Christopher Foster:

Rich, happy to take it. I would take the second part first and say there is a larger opportunity set. But again, as Patti mentioned, keep in mind, our focus is absolutely on that overall simple, affordable model, which includes that affordability constraint for customers, right? So we've always got to keep that in mind as we go. As we look at the opportunities themselves, I really think that what we were mentioning earlier about the electrification growth is very unique for us. And so as we look at that, the EV penetration opportunity you explicitly see us call out in that $5 billion opportunity capacity-based investments. And that's really where we see targeted investments that we can make that will benefit the areas where you're seeing not just need for wildfire risk reduction, but also in some of those suburban communities where we're seeing a pretty dramatic EV uptake. So the opportunity there, I would say, do start to come in the medium term and only increase as we go further out.

Christopher Foster:

Sure. I think I'll have to offer this to you. Come on out and see us. We do certainly plan on intending to give you more insight into that longer-term capital plan. But come on out, and we'll be able to share more at that time.

Gregg Orrill:

What in the Diablo Canyon extension process should we be watching for in the NRC and state levels?

Operator:

We'll take our next question from Ryan Levine with Citi.

Patricia Poppe:

Yes, we're looking at changes every day to the process. Look, we've got to be easier to do business with. And I've had a couple of different sessions with our builders here in California. They are a key to California's prosperity. And therefore, we power them and they power California with new housing. And we're very much aligned with them. We're working with them to find accelerated tools and methods. And it's really amazing to see our new business process map and simple changes that can be made right away so that we don't have to make choices about who we're going to energize and who we're not. The question is about how do we energize people faster and streamline that process. And so as I shared, that example of these jobs, they get canceled for a variety of reasons, maybe the customer decides they're not going to do their project after all, having nothing to do with us. And we've done the full engineering. So we're looking at ways of doing a lighter engineering touch upfront just to give people the estimate that they need and making sure that we're only doing the engineering on the jobs that are going to get finished. That's a huge cost savings in hours and dollars. And it enables us to get the work done on time for the builders that are going to finish their projects. And so both capacity and new business are really exciting load growth opportunities for us, and the progress that we've made in a very short order is pretty impressive. We look forward to demonstrating that progress this year and continuing forward.

Patricia Poppe:

Yes. I mean, I think we're seeing increased demand, which is great. There's building happening in California. People are talking about the exodus of California. I can tell you, I'm not feeling it. We're seeing a lot of growth here in customers and capacity. So the -- obviously, the additional electric vehicles that I pointed to is -- requires capacity investments at a substation level, but we also have transmission forecast of additional load. And we're continuing to see the opportunity to build more homes in broader spaces in California. And we're going to keep up with our building and our progress here at PG&E. And that's what this lean operating system provides for us, the foundation to have visibility into our demand and our ability to eliminate the waste so that we can meet that demand. It's pretty exciting times here at PG&E.

Unidentified Analyst:

Great. To start with, I was hoping to maybe get a little bit of an update on the Zogg trial. I guess the trial's due to begin in June. How long should we sort of expect before there would be a final decision reached in that proceeding? And in the past, I think you've indicated that the liability estimates could triple. Is that still sort of your view in terms of how much the liability could go up if you were found liable?

Unidentified Analyst:

So the trial would take 6 weeks, but the judge issuing a decision could take up to a year after that or...

Unidentified Analyst:

In terms of disallowed interest, can you sort of break out the liabilities or the disallowed rate base items that -- at the utility that go into that calculation?

Operator:

And that concludes the question-and-answer session. I'd now like to turn the call back over to Patti Poppe for any additional or closing remarks.

Operator:

And that concludes today's presentation. Thank you for your participation, and you may now disconnect.

Operator:

Good morning, everyone, and welcome to PG&E Corporation's Third Quarter 2022 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the call over to Matt Fallon, Director -- Senior Director, Investor Relations. Mr. Fallon, you may now begin.

Patricia Poppe:

Thank you, Matt. Good morning, everyone. Thanks for joining us. As you can see on Slide 3, we are on track to deliver our commitments to you. We've narrowed our non-GAAP core EPS range for 2022, to $1.09 to $1.11 per share. As Chris will discuss, we performed well in the third quarter, providing room to reinvest for our customers in the fourth quarter and deliver at the midpoint of our non-GAAP core EPS guidance. No more, no less. In addition, we're initiating 2023 non-GAAP core EPS guidance. You probably won't be surprised, 2023 is in line with our projected 10% growth in a band of $1.19 to $1.23. We're also reiterating our at least 10% EPS growth for 2024 and at least 9% in 2025 and 2026. No change there. As you know, to fund growing important capital investment for our customers, we've been working on more efficient financing plans like the minority interest sale Pacific Generation. We've been working on plans like this for some time within our five-year planning process. As a result, we're happy to report that we forecast no equity issuance for the remainder of this year, nor in 2023 nor in 2024. There will undoubtedly be ups and downs in that time frame as we continue to resolve legacy legal matters and regulatory investigations and proceedings. We want you to know that we work hard to provide flexibility for the unknowns with an eye toward maximizing the resources available to serve the needs of our customers. Our goal is to be proactive, handle the ups and downs so that you don't have to. Our priority will always be to deliver the highest value investments for customers and deliver consistent financial results for you, our investors. Your capital is essential to our ability to make our system safer, faster and to deliver for our customers. Moving to Slide 4. We continue to be focused on Mitigating Physical Risk and Mitigating Financial Risk. I want to highlight a couple of major accomplishments for the team during the third quarter. First, we experienced a historic 10-day heat wave starting in late August, with all-time record high temperatures and all-time demand on September 6, PG&E and the people of California rose to the challenge. We avoided rotating power outages and we restored 97% of impacted customers within 12 hours. This response is a wonderful example of the PG&E team in action, partnering with the state, our fellow utilities, the California ISO and our customers, mitigating physical risk for our hometowns. Second, this quarter, on our vegetation management, our efforts since 2021 are recognized in the CPUC draft resolution recommending us to exit Step 1 of enhanced oversight. You may remember that we entered into this additional regulatory oversight as a result of our evolving vegetation management program and inconsistent risk model application in 2020. Our customers have benefited from the constructive feedback of our regulators, and we thank them for their transparency and engaging oversight. Another highlight of the quarter came as a result of the policymakers of California working hard through the legislative session to enable us to better serve our customers by passing two historic legislative packages, one for Undergrounding and another to support the extension of our Diablo Canyon Nuclear Power Plant. As I mentioned, we continue our focus on mitigating financial risk for our customers through our simple, affordable model and mitigating financial risk for our investors by delivering consistent, predictable results and a stronger balance sheet. Turning to Slide 5. We continue to add layers of protection that we estimate have mitigated 90-plus percent of the wildfire risk on our system today. Our layers start with our Wildfire Mitigation Programs such as system hardening and Undergrounding, vegetation management and enhanced inspections and repairs. We leverage Enhanced Power Line Safety Setting Technology and our Public Safety Power Shutoff tools to keep people safe when conditions require it. We extend that protection by engaging with first responders when an ignition does occur to make sure that we are using our collective knowledge and experience to minimize the impact of fire spread. And of course, we continue to evaluate innovative solutions to move above the 90-plus percent wildfire risk reduction with a specific focus on low energy faults, which are typically not currently mitigated by EPSS. To address these faults, we're using partial voltage force out and downed conductor detection capabilities. We've implemented partial voltage detection through our smart meters across the high fire risk areas and we've had 33 partial voltage force out since the program initiation in June, with 10 potential hazards identified that could have led to potential ignition. For downed conductor detection, we've installed protection on over 5,000 miles of our overhead electric distribution lines in the high fire risk areas, and we've experienced nine downed conductor detection outages to date, any one of which could have led to a potential ignition. We'll continue to innovate and push to further increase our wildfire mitigation above the estimated 90-plus percent in place today. Here on Slide 6. You'll see our systematic approach that enables our 90-plus percent wildfire risk mitigation today. We've implemented our enhanced power line safety settings across 43,000 miles of high fire risk areas and select adjacent areas. With this systematic approach in place in 2022, we've seen a meaningful reduction in both the number of ignitions and size of fires when ignitions do occur. While ignition count alone is a primary indicator of wildfire risk, not all ignitions are the same in terms of consequence, which is why we've developed this new metric, the Ignition Impact Measure. It's simply the sum of acres burned by CPUC reportable ignitions on primary distribution assets in high fire risk areas. This measure proves to us that EPSS works. Due to our efforts in 2022, despite 36% more R3 risk days in 2022 relative to the 2018 through 2020 average, we've seen a 99% reduction in the ignition impact measure. Turning to Slide 7. We're committed to earning trust with policymakers in California, utilizing the simple, affordable model. The legislation on Undergrounding and the Diablo Canyon extension fit right into the simple affordable model, reducing financial risk by delivering safe, reliable, clean energy affordably to our customers. The benefits of the Undergrounding and Diablo Canyon extension bills are shown here on Slide 8. For Undergrounding, the major benefit versus the prior construct is the longer-term work plan, which leads to real cost savings for customers. The new law allows us to provide certainty to our workforce, create longer-term partnerships for material and equipment and inform our home counts about when they will benefit from their lines being buried. This long-term certainty is critical to accelerate permanent risk reduction of physical and financial risk for our customers. For the Diablo Canyon Power Plant extension, the new law is a key step to allow us to provide California with a large source of non-GHG emitting baseload power for another five years. The alternative would have been for us and other load-serving entities in California to procure more expensive baseload clean power to replace what is today over 8% of all of California's energy consumed, provided annually by Diablo Canyon. Replacing this power has proven challenging given clean energy supply constraints, and we estimate that this law will save customers several hundred million dollars relative to other potential baseload solutions. In addition to clean energy that provides savings to California electric customers, extending Diablo Canyon provides local jobs to over 1,000 PG&E coworkers and is a big boost to local businesses and the Central Coast economy. Moving to Slide 9. We are early on our journey with policymakers, earning trust and establishing the stability necessary to attract capital to invest on behalf of our customers. It started in 2019 with the passage of AB 1054. AB 1054 provides a framework to keep California utilities financially healthy while we do the work necessary to mitigate wildfire risk. Building on the AB 1054 Foundation, the two pieces of legislation passed in 2022 create the right outcomes for customers, mitigating physical risk and financial risk further enhancing the California regulatory construct. Looking ahead to 2023, we'll file our 10-year Undergrounding plan, informed by feedback we received from our various stakeholders and we've proposed to finalize our potential sale of a minority interest in Pacific Generation, an example of our continuous effort on efficient financing. Earning trust also requires that we fulfill our regulatory requirements and meet our standards. When we identify a shortcoming, we own that outcome, communicate transparently and take appropriate corrective actions. This week, we're doing just that. We filed a self-report with the CPUC for a pole inspection standard gap that was identified by a team of my coworkers. Our standard did not match the CPUC standard. We found it and are on track to remediate all of the highest risk polls in question by the end of the week. I've talked a lot about how we're using Lean here at PG&E. Our performance playbook is empowering our workforce and enabling us to make gaps to standards visible and allowing us to close the gaps, making us a better operator. This is an essential part of the turnaround and culture change here at PG&E. We need to have the will to change and the skills to execute. Our performance playbook enables both. Closing on Slide 10, our report card slide. You can see here how we're tracking on our goals for 2022 and beyond. We added the mosquito fire to our CPUC reportable ignitions greater than or equal to 100 acres. Though the investigation is not complete, we can see that the fire started near the base of our 60 kV steel pole. As Chris will discuss, we booked a liability for the mosquito fire of $100 million, which is well within our range of insurance. We will miss our gas main miles replacement as we reallocated some funding to other higher risk capital spend this year. This is a good example of our Lean operating system, making visible the best choices for our customers. We are comfortable making that visible to you too. You may also notice that we increased our annual rate base growth from 9% to 9.5% through 2026. Our customers expect us to make the right infrastructure investments and this investment reflects that. We will continue to do that and manage the affordability with our simple model. The other metrics are all on track, and we feel great about our progress. With that, I'll hand it over to Chris, who will discuss our financial and regulatory items.

Patricia Poppe:

Thank you, Chris. As I wrap up our prepared remarks, I want to take a moment to thank Matt Fallon for his dedicated service to PG&E during a very difficult time. We wish Matt, our very best, and I know you do, too. By mitigating physical and financial risk for our customers and investors, we continue on our path toward making PG&E a premium utility, and we've made tremendous progress in 2022. We know we are rebuilding this utility in a way that can last. We are turning the page on our history, focused on the new PG&E story. We trust that you feel the momentum too. With that, operator, please open the line for Q&A.

Shahriar Pourreza:

Hey guys. Good morning.

Shahriar Pourreza:

Good morning. So just maybe starting off with the new 9.5% rate base CAGR you put out there. I guess, what are some of the moving pieces that caused you to tick up by that 50 bps? Is it just confidence around the prior range that was provided by Undergrounding? Is it some of the investment opportunities from Diablo Canyon baseline CapEx up? Is it all the above? And I guess, can you just help bridge the driver of that increase? And is there any near-term opportunities that could further be incremental to that plan? Thanks.

Shahriar Pourreza:

Got it. Perfect. And then just Patti, looking at sort of your early outlook for financing, you guys reduced equity to 24 down to 0 and now you're targeting about $2 billion more in debt paydown. I guess what are some of the moving pieces and being able to get the offset? And just to confirm, you're now embedding the proposed equity sale of Pacific Generation. What are you assuming there since this process is, I guess, in more infancy stages still? Thanks.

Shahriar Pourreza:

No it does. Fantastic. I'll jump back in the queue. So you guys [indiscernible] and congrats Mr. Fallon. Thanks guys. Bye.

Operator:

Our next question comes from Steve Fleishman from Wolfe Research. Please go ahead. Your line is open.

Chris Foster:

Sure, Steve. As you can imagine, we remain in continuous contact with the Fire Victim trust as given they are a large shareholder of the company. But at this point, it's definitely a very explicit decision in terms of execution of any kind of financing. Most recently, certainly, all of the saw in the market, roughly 35 million shares, just over, I think, about a month ago. So at this point, as you can imagine, it's tough for us to predict any future explicit transaction there.

Chris Foster:

Sure, Steve. I think it's very limited is the way to think about it. You'd look at it and probably see about $0.03 total change. But that's in terms of our overall plan, that's pretty easy for us to manage here over that time frame. So really for us, it's about the efficient financing that this opportunity provides which is why this is really about the focus here over the next couple of years.

Chris Foster:

That's correct. We'll be not explicitly pull it out. Yes, thanks for the clarifying question.

Chris Foster:

Yes, they definitely are embedded. In fact, we were able to update our general rate case here recently, which really showcased the next four years of IRA impacts. So really, you could see that no material impacts in terms of the overall plan itself in the five year plan. What I would offer is kind of two different points. So one, the customer benefits that can come here from the IRAs passenger substantial. We're talking probably over $0.5 billion over the next 10 years, just purely in customer savings from reduced pricing on the renewable energy contracts and PPAs that we pursue. Then in the near term, as we look at interest rate pressure, we've already assumed that rates continue to go up. And just as a reminder for us, in terms of a rule of thumb, you can probably look at a 100 basis point move for the company's up or down is roughly $0.02 up or down. So we've already managed roughly $60 million in impacts this year and are comfortable, again, managing that going forward.

Patricia Poppe:

Thanks Steve.

Julien Dumoulin-Smith:

Hey, good morning team. Thanks for the time and congratulations on the continued success here really, really impressive. Just if I can clarifying a couple of things thus far. Your '23 outlook here. I mean, given the step-up in rate base, one might have thought there might have been a bigger jump in earnings here. Can you elaborate a little bit on the moving pieces here? Clearly, the front-end impact of a sale here of rate base, you said $0.03 a moment ago. What would be one of potentially a plurality of items here. But can you talk about it outside of just the conservatism in your plan? About the bigger step up in rate base versus earnings? And then separately, I'm just showing a quick second question at the same time. The '25 and '26 bio mission, are you saying that there's still kind of an equity balance sheet?

Julien Dumoulin-Smith:

Got it. On '25 and '26, there? Maybe a Chris question.

Julien Dumoulin-Smith:

Yes. No, you give some. We want more right always.

Julien Dumoulin-Smith:

Indeed, congratulations and nice [indiscernible] Patti on bringing the conservatism back into the plan that we know you for.

Operator:

Our next question comes from Michael Lapides from Goldman Sachs. Please go ahead. Your line is open.

Patricia Poppe:

Okay. Chris, why don't you take the first two, and then I'll take number three.

Patricia Poppe:

And then I'll go on to question three on the labor availability. Michael, it's a great question. And I'm really -- I just need to give a shout out to our labor partners, the ESC and the IBW have been extraordinary partners for us as we've been really turning around the company. And just one example, we felt like we were -- we could do a better job serving the Bay Area, specifically San Francisco and the City of Oakland, and we had a challenge staffing those communities. And we worked with our union. And in fact, we challenged ourselves to add a 100 new line workers for the city of San Francisco and Oakland. And we weren't sure we would be able to find those resources. And in fact, we have. And the beauty of that is, as we hired those line workers to work here at PG&E, we were able to actually save money because we were paying premiums for contractors and we ended up saving over $8 million by in-sourcing 100 new line workers. So it's really an incredible opportunity to work with our labor unions. People want to work at PG&E and we're able to attract that talent.

Chris Foster:

Thanks Michael.

Nicholas Campanella:

Hey good morning everyone. I dropped, so hopefully, I'm not repeating a question here. But I guess just since you kind of announced this minority interest sale and the strategy around Pacific Generation, have you had incomings of interest on the assets? And can you give us any kind of detail on how those conversations have been? And just overall interest in the assets would be helpful.

Nicholas Campanella:

Got it. That's helpful. That's helpful. And then just on the credit side, a lot of positive data points across the board this year. The credit rate neutral securitization and you seem to be on the path to achieve the FFO to debt targets that you've wined out. Just what are the conversations with the agency has been? How should we just kind of think about timing to get back to investment grade at the holdco? Thanks.

Nicholas Campanella:

All right. Thanks so much team and Matt. Pleasure working with you.

Operator:

Our next question comes from Gregg Orrill from UBS. Please go ahead. Your line is open.

Patricia Poppe:

Good morning, Gregg.

Chris Foster:

Sure. Hi Gregg. I think there's a few steps that I can lay out there for you. So specifically, this would relate to the charges we've taken on the Dixie Fire, where the implication would be a roughly -- very small, but a roughly $150 million impact to the wildfire fund. So the way to think about this is -- we'll work our way through now with various legal claims themselves. Traditionally, takes -- you really don't get your arms around really the totality of the legal claims for roughly two to three years. Then we embark upon settlement and resolution or litigation of those claims. At that stage, you then move forward with a review at the CPUC of roughly 12 to 18 months, right? So you've got three years, then you add another 18 months for our filing related to prudency under the new AB 1054 improved construct. Only after that, once we've resolved and I believe the wording in the law is substantially resolved, most of the claims only then would you be knocking on the door of the wildfire fund for those recoveries. And so as you've seen at this stage in terms of our both -- the charge we took and the offsetting receivables, we are confident at this point that in terms of our actions at that location as a prudent operator to be able to have both recoveries above insurance at the CPUC and FERC as well as recoveries at the wildfire fund, but it will be a few years ahead of us.

Chris Foster:

So we recognize -- thank you, Gregg. We do recognize those tax benefits. You'd see those on a quarterly basis as we update each quarter because any time there is a sale, both the Fire Victim Trust enjoys the tax benefit as well as the company. So we would -- you would see that updated as the three sales have happened this year directly into our financials in the subsequent quarter.

Chris Foster:

Thank you, Gregg.

Operator:

Our next question comes from David Arcaro from Morgan Stanley. Please go ahead. Your line is open.

Patricia Poppe:

Good morning, David.

Patricia Poppe:

It's a great question. We definitely are seeing inflation in our actual spend. We see that. But I think what's really important to think about as we look at our filings and our GRC and the inflation update, is our commitment to affordability for customers. And so as we look at the -- our bills here in California, we do have the benefit of mild weather in most parts of our state. And so that's one piece of the puzzle here that we're aware of that our energy bills are a lower percent of wallet than in many parts of the country. However, there are parts of our state where they are more energy intensive. And so we have a very important focus on affordability, and that's what the simple affordable model is all about. We know that our customers have been really anxious for us to invest in our infrastructure, make it more resilient, make it safer, make it more reliable and yet make it affordable. And so as we do our O&M cost reductions as we do efficient financing through things like our [indiscernible] sale, we have ways of offsetting the capital investment to the benefit of customers and customers will start to experience that in the coming years. And just -- here's one example. I was -- I'm sort of famous for a story of the month. So here's our story this month. In fact, it was a story of the week, if you will, because it seems like we're finding lots of opportunity all across the company. But we had an update this week from our vegetation management team and our sourcing team. We've come a long way using our lean performance playbook to standardize and improve many aspects of our business, but especially our vegetation management, which is a very important part of our safety measures here at the company. So we added visibility to the training and the safety standards for all of our contractors. We did a thorough review and removed outdated quality standards. We standardized unit rate contracts versus time and equipment contracts. We reduced our contractor count from 24 to 14 regionalizing them to better serve our hometowns. That -- this is going to be resulting for 2023 in a better customer experience, less repeat visits. I've talked about this on previous calls where we visited customer's home on multiple times to do our vegetation management work. So in this case, with all the improvements the team has made, we'll make less repeat visits to a customer's home at a lower cost. This is our performance playbook in action. The bottom line savings is going to be over $300 million just from standardizing smarter contracting and utilizing our performance playbook. That's the play we're running at PG&E. That's what's happening here. We're going to find ways to do better work for customers at a lower cost. So we are very zeroed in on making sure that we have an affordable service.

Chris Foster:

Sure. I think in short, you can imagine this is exactly what we were mentioning earlier, is that we're constantly looking at internal cash management levers, regulatory levers to manage any variability for you. So I think that it wouldn't necessarily change anything. I think that's our point is that we're putting ourselves in a position with a more conservative plan to be sure that we can have the most efficient financing possible. And that's why this filing makes good sense.

Patricia Poppe:

Yes. So we're in the process of building out our tender plan as a result of that legislation and kudos to our legislators, for making a big decision and supporting that underground -- drafting and supporting that undergrounding legislation. That 10-year plan allows for better savings for customers. Fundamentally, we can have better workforce planning. We can have better equipment, we can have better long-term contracts, and we know that all of that results in savings for customers. We're seeing good progress this year. We've completed 165 miles of civil construction already. We'll do the final buttoning up of that work and expect to meet our target of 175 miles this year, which -- you'll remember, we did about 72 miles last year. So this is a huge improvement year-over-year. And many of those miles are coming in closer to the $2.5 million a mile than the original $3.7 million a mile. So we're really seeing progress. We continue to improve, and we're looking forward to being able to publicly file that 10-year plan in 2023, so we can share what the whole outlook looks like, including the cost forecast that go with it.

Chris Foster:

Thank you.

Ryan Levine:

Hi everybody.

Ryan Levine:

I appreciate the updates around. Good morning, Patti. I appreciate the updates around your equity issuance plan. Curious how you're currently thinking about your dividend policy, recognizing you need board approval. But in the context of the ability to return capital to shareholders -- how are you thinking about that given the pending transaction or potential transaction when closed until after a dividend decision would be made?

Ryan Levine:

Appreciate the color. Thank you.

Patricia Poppe:

Thank you, Julianne. Thank you everyone for joining us. We are looking forward to seeing you at EEI in just a couple of weeks, and we just hope that you are safe out there, and we look forward to seeing you in November.

Operator:

Hello and thank you for standing by. My name is Regina and I will be your conference operator today. At this time, I would like to welcome everyone to the PG&E Second Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Matt Fallon, Senior Director of Investor Relations. Please go ahead.

Patti Poppe:

Thank you, Matt. Good morning, everyone. Thanks for joining us. I will focus on three key areas today

Patti Poppe:

Thank you, Chris. As we move through 2022, we’re focused on minimizing physical and financial risk. Our layers of protection start with system inspections, repairs, vegetation management, overhead hardening and our 10,000-mile undergrounding program, which provide long-term sustainable climate-resilient infrastructure. In the near-term, additional layers of protection are provided by engineered enhanced power line safety settings when fuel risk is high and our public safety power shutoff program during high wind events. Our coordination with local and statewide agencies and situational awareness and fast response continues to strengthen and reduce our physical risk and provide a final and essential layer of protection. To mitigate financial risk for customers and investors, we will continue to fully deploy our simple and affordable model. I’m pleased with the progress as I see our relationships and trust growing with policymakers and stakeholders here in California. PG&E is an essential contributor to California’s prosperity. We will keep an eye on the horizon and ensure we’re making the right investments to deliver California’s clean energy future. Something really exciting is blossoming here at PG&E. We feel the momentum, and we hope you do too. Operator, please open the line for Q&A.

Jonathan Arnold:

Yes. Good morning, guys.

Jonathan Arnold:

Hi, could I ask as just a – could we get an update on the EPSS effectiveness you’re experiencing in ‘22? I know you spoke to the overall 90% risk mitigation, but are we still seeing that kind of 80% reduction that you talked about at the Analyst Day or is that – has that evolved somewhere?

Operator:

Our next question will come from the line of Shar Pourreza with Guggenheim Partners. Please go ahead.

Chris Foster:

Good morning, Shar.

Patti Poppe:

Yes. Thanks, Shar. Well, it’s great because undergrounding and affordability go hand-in-hand. Undergrounding is a great example of our simple and affordable model at work, where we’re going to be able to transition from a highly expense-intensive vegetation management program to more permanent corrective action, which is undergrounding the lines. As you may remember, when we filed our modification to the GRC, we added $7 billion of capital first couple of years of the undergrounding plan, and offset with $1 billion of expense reduction, resulting in a flat – no modification essentially to the rate increases of that ask. And so – we think it’s an important combination. I’ll just say we’re really pleased with the progress on the undergrounding bill. I think it shows a couple of things. Number one, our customers have been demanding that we invest in our infrastructure. I’ve seen so many quotes and headlines about PG&E, underinvested in its infrastructure. This is our pathway to investing in the infrastructure to keep our people safe and have a climate resilient energy system. Our legislators see the same thing. And they are working with us. Senate Bill 884 is making progress. We like the current draft. There is still – it’s still a live ball, I would say. There is still modifications that can be made, and so we’re continuing to work closely. But we like the idea that there is clarity to a long-term plan and clarity that the legislature expects us and will hold us accountable to completing this undergrounding plan. We want that, too. And so that accountability then translates into a 10-year plan and the OEIS and the CPUC are directed to review and approve that in a timely fashion, which allows us to save the most dollars for our customers. It allows us to do that massive infrastructure project at the most affordable price. It gives us the opportunity to better long-term contracts, better access to equipment at a lower cost, Staffing up a labor workforce to deliver that incredible infrastructure project. And so I just feel like undergrounding is such a perfect example of the simple affordable model at work and making the system safe.

Chris Foster:

Hi, Shar, it does. I think if you look at equity, what we’ve said is that really looking forward to getting some of these important legacy items behind us, which we were able to make progress on including this quarter. That helped us refine and really narrow our equity guide for the year. And that’s really ultimately about a good financing plan that’s looking a couple of years out at any point. We also got, as you mentioned, the rate neutral securitization completely done here by midyear, which was nice because, ultimately – we’re initially unsure if we could get it all done at this point or if it was going to take us to the end of the year. And then on the debt side, ultimately, you’ve got a couple of things there, right? They are going to help us further simplify. First, we’ve got an 80 10 54 securitization. That’s really our next one coming up that we’re hoping to execute later this year or early next. And then along the same time frame, we’re probably going to be looking at ongoing needs for long-term debt which really just finance our rate base growth, and that’s consistent with our base financing plan.

Patti Poppe:

Thanks, Shar.

Operator:

Your next question comes from the line of Julien Dumoulin-Smith with Bank of America. Please go ahead.

Patti Poppe:

Thanks, Julien.

Chris Foster:

Absolutely, Julien. And I think you said it that ultimately, our focus is going to be uncertainly where we’re trading at this point to have to make the best economic decision we can. And so obviously, looking at the 5-year plan at this stage, and really the focus is consistently on making sure that we’re putting these legacy items front and center because they are a driver for us. Specifically, you saw us resolve or make substantial progress and able to bound the securities claims right at $145 million. We’re making progress on the Kincade related claims. And so we’ve got a much better focus now with the increase we had there quarter-over-quarter on where that will land as well. And as you can imagine, those are two key drivers. As you look in future years, we are going to have fewer implications on that front. We are going to have – obviously, the odd fire is completely covered by insurance at this stage. So you can imagine, Julien, that really our folks is going to be on making it right with these communities where we need to. That’s going to be the core focus of the company. At the same time, we’ve got to actively manage our financing needs, which is I think what you’re seeing in the results of this year and bringing down the range from $1 million to $400 million down to $0 to $250 million this quarter.

Patti Poppe:

So Julien, obviously, Diablo Canyon is very much on our minds. And so if we step back and just think about what is being discussed here and what the path forward is, first of all, it’s – we continue to remind all engaged parties that the clock is ticking here. we’ve got a real sense of urgency in order to transition from being in a decommissioning posture to a life extension posture. So the most important thing to us right now is that we get certainty on the decision-making. We have to secure tasks. We have to order fuel. There is some very near-term items that – actions that we would need to take if, in fact, we changed the posture of the plant. And so with that, we’re working very closely with the state first to understand what are the needs and what do we need to do to forward. This is not an easy option. Legislation will have to be passed. The permitting and relicensing of the facility is complex. And so there is a lot of hurdles to be overcome in order to move forward. However, we like the fact that, that plant’s value is being recognized by the state that there seems to be kind of a shift in the attitude about the role that nuclear can play in a GHG-free economy. And so obviously, our team at Diablo continues to do great work and earn the respect of the citizens of California and the policymakers as well. We do think that the DOE funding is a possibility. And certainly, the state has expressed interest in maximizing that and making sure that Diablo Canyon gets included in the DOE’s program to extend the life of nuclear. Again, nationally, I think there is been a real shift in attitude about the value of these baseload nuclear facilities. And so given that, we’re just going to continue to work through the financials, and that will be second to making sure that the plant is ready and safe and able to operate for the state.

Chris Foster:

That’s accurate, Julien. At this stage, that was part of our prior agreement with the CPUC to fully depreciate the assets by the end of – we are talking in light of the second unit in 2025. We are also watching certainly the different pieces are moving on the state level. Patti did well that we are looking at the federal level. The state also has a resiliency fund that they are looking at. And additionally, you mentioned the specific piece of the legislation, including customer [indiscernible]. And certainly, I think that that’s a good example of the legislature acting on behalf of our customers and helping to lower cost. And so certainly, there is a financing advantage for – in that for us as well.

Patti Poppe:

Thanks, Julien.

Richard Sunderland:

Hi, good morning. Thanks for the time today. Maybe a quick follow-up on Diablo Canyon, you spoke to some of the hurdles there, but could you speak to the timing at all in terms of if there is a red line when you need to address a few of those items in switching from decommissioning to life extension?

Richard Sunderland:

Got it. Thank you. And then switching gears here, I am curious you could speak to the timeline and achievability of addressing the residual wildfire risk that’s on top of the 90% estimated mitigation today? Are these items that you are focused on in the near-term or sort of longer term aspirations as technology evolves?

Richard Sunderland:

Great. Thank you for the color.

Operator:

Your next question will come from the line of Michael Lapides with Goldman Sachs. Please go ahead.

Chris Foster:

Michael, happy to take it. I think that there is that potential. At this stage, as you know, we recorded $1.15 billion total impact. And so that would imply that the $150 million here could interact with the wildfire fund itself. I just have to emphasize this could take some time. I think in the interim, what we are very focused on, including with an accelerated claims process in the community is making sure that we have impacted families paid quickly. So, at this point, we have got over 100 claims that have come forward in that way and that have allowed us to compensate impacted local communities quickly. So, that’s the near-term. Over time, there is really the way to think about this is we have got our insurance layer itself, CPUC recoveries above that of roughly $360 million. You have got then FERC related recoveries of roughly $100 million. And then ultimately, the remainder will be tapping the wildfire fund. So, there could be time here before we really get to the stage of tapping the fund because the statute actually requires that you are substantially completed with your claims themselves before you move forward to the fund. I think in terms of the fact pattern and our operational prudency as it related to Dixie Fire, I think we have been quite clear that in terms of vegetation management, in terms of the management of our assets and the appropriate response. I think all of those things position us well for the recovery themselves at the various jurisdictions, including at the wildfire fund.

Chris Foster:

Sure thing. So, there is two to keep in mind. The first would be personal injury statute of limitations, which runs from 2 years from the incident. And then property damage, which is 3 years. Those are the two primary drivers of claims and claims timing.

Operator:

Your next question will come from the line of Nick Campanella with Credit Suisse. Please go ahead.

Patti Poppe:

Yes. We feel good about the current draft. Some of the things that we did not like about the previous drafts have been removed. I think it was important for our legislatures – legislators and the authors of the bill to understand how important it was that the financial mechanisms be in place, so we can attract the high-value capital to fund the program. We know it’s important to you to have certainty for your clients to make sure that those moms and pops who invest their money in a utility can count on a predictable return. And so I think that was a really good understanding that we formed there. So, the language is good about cost recovery, the permitting assistance as well as especially the legislative direction to OEIS and the CPUC to support a 10-year plan, which would be outside the general rate case. An infrastructure project of this scope and scale is so important, it would be longer term. So, we can get the labor force ready, we can get the equipment ready, we can get the long-term contracts. That will save our customers the most money. We can do the program at the lowest total cost when we have that longer term plan. And so having visibility transparency and frankly, accountability to – for us to do what we said we are going to do and to get the unit cost where we want the unit cost. I think it’s in the best interest of everyone to have this kind of legislative direction to provide the certainty that we need. And just to remind you on timing, August 31 is the deadline for bills to be passed and sent to the governor. And then September 30 is the last day the governor can sign a bill. And so that will be the timing of that legislative activity.

Patti Poppe:

Yes. In fact, Nick, I was in Washington, D.C. 2 days ago, in fact, with a small group of CEOs focused on this climate package, encouraging its inclusion in this new program. And it’s amazing to me how much can happen in two days. And so we are excited about clean energy components of the package. We think that it will allow us to continue to grow the clean energy assets here in California by a variety of owners, not just the utility, but making sure that we have got that clean energy transition at the most economic and lowest societal cost. We are excited about the inclusion of hydrogen and the standalone storage credits. We are studying the implications for the EV credits, but it looks like the cap is being proposed to be lifted, which would be good and important here in California because EVs are such an important part of our future. Of course, like I would suppose most businesses, we don’t love the corporate minimum tax. For us, it is a pass-through, which is why we don’t like it. It puts affordability pressure directly on our customers. And so there is obviously a lot of discussion about that. We will continue to work our simple and affordable model, however, and we will ride that rollercoaster so you don’t have to. We will make the necessary adjustments to continue to build our funding, our infrastructure for our customers as they would wish and lower costs in a variety of areas, if, in fact, that additional cost gets borne by our customers.

Patti Poppe:

Yes. Nick, thanks for asking the question. I had a very productive conversation with the new administrator, Cathy Yanni. She is a professional. She has been in this business for many – well, her whole career, and she was very impressive to me. I was happy to have a chance to talk with her. We clarify – I clarified for her that we want what they want. We want to maximize the value of this agreement that was made on behalf of victims. And obviously, our stock price has an impact on that and their actions with the volume of shares that they own have an impact on the stock price. And so we talked about that, and we talked about how working together could be very beneficial to the victims and that’s our sole focus. And again, we want what they want, to make it right. And we obviously think working together with them is more productive than working independently. However, they have been clear that they want to make sure that they get certainty around the dollars that they will have available to distribute to victims. And if you check their website, you can see they have made a significant progress in disbursing funds. She is very focused on doing that efficiently and effectively, and so certainty helps them. Bottom line, we want what they want, and we will look forward to continuing to work with them.

Patti Poppe:

Thanks Nick.

Gregg Orrill:

Yes. Hi. Good morning.

Gregg Orrill:

So, maybe following up on Nick’s question, are you looking at additional ways to provide certainty to the fire victims?

Gregg Orrill:

Okay, got it. And then just on the wildfire-related cost recovery, the $5.2 billion, could you tie that back to recoveries timeline and how that sort of quantify the improvement in FFO to debt? Would it tie back to the credit measures?

Operator:

Our next question will come from the line of David Arcaro with Morgan Stanley. Please go ahead.

Patti Poppe:

Good morning David.

Patti Poppe:

Yes. So, we are continuing to look at that. We definitely see continued load growth. It’s lower at this early part of our 5-year plan. At the latter part of the 5-year plan and then going into the 10-year plan, we see significantly more forecast. It will be interesting to see if the additional incentives on EVs accelerate adoption here in California. But as we have said, 1% to 3% is in our long-term forecast.

Patti Poppe:

Well, the partial voltage detection through our smart meters is deployed. That is deployed as we speak. And so, we are learning a lot as we get those partial voltage alarms. We have a 60-minute response time. We are trying to narrow that into even less than that, so we can get out and observe the situation and find out if it is in fact unsafe. And so in the coming months, you will get more – we will share more insights with you on what we are learning there. Again, that’s an infrequent occurrence, but it is an occurrence. And then the down conductor, I think has a ton of potential. It does require new hardware. Some of the hardware that we have on the system can be reprogrammed and so we are doing that as we speak, but there is new hardware that needs to be deployed, and some of that is caught up in the supply chain constraints globally. And so we are continuing to work to accelerate the implementation of these particular controller boxes and we look forward to sharing news on progress on that as well. We definitely have already experienced down conductors that have been identified by this equipment and de-energized automatically. We are seeing the benefits of it. But it’s on a smaller scale than EPSS where we have it 100% deployed. So, in the coming months, we will share more about the deployment and the completion of the installation of that hardware.

Patti Poppe:

You’re welcome. Thank you.

Ryan Levine:

Good morning. Throughout the call, you highlighted that the AB 1054 and the August 31st deadline for pending legislation within the state, given that we are nearing a deadline, are there any other processes or legislation, legislative bills that could be introduced at the last minute here as we work towards the deadline?

Ryan Levine:

Okay. And then on the undergrounding effort, what progress has the company made on RFPs and other contracting efforts for undergrounding packages over the last few months?

Ryan Levine:

And then last question for me. In terms of the engagement with Victims Trust, you highlighted your recent meeting, but in terms of the overall cadence or pace of engagement has it started to pick up with the change in leadership of the organization, or have things been relatively consistent over the last six months to nine months?

Ryan Levine:

Appreciate it. Thank you.

Patti Poppe:

Thank you, Regina. Well, thanks, everyone. We know it’s a busy day for you. And as I said in my prepared remarks, something special is happening here at PG&E, and we can feel the momentum. And I really hope you are feeling it, too. Have a great afternoon. Be safe out there.

Operator:

Thank you for standing by. My name is Cheryl, and I will be your conference operator today. At this time, I would like to welcome everyone to the Pacific Gas & Electric Corporation First Quarter Earnings Release Conference Call. [Operator Instructions]. Matt Fallon, Senior Director of Investor Relations. You may begin your conference

Patricia Poppe:

Thanks, Matt, and good morning, everyone. Thanks for joining us today. I'm happy to report that we earned $0.30 in non-GAAP core EPS in the first quarter, and we're on track to deliver our 2022 non-GAAP core EPS guidance of $1.07 to $1.13. We believe in delivering at least 10% EPS growth for you as investors, this year, next year and the following year and at least 9% in 2025 and 2026, putting any annual surplus performance to work for important customer needs, a win for customers and investors. We're underway on my second year here at PG&E with a world-class purpose-driven team focused every day on the triple bottom line, serving people, the planet and California's prosperity. We'll deliver on our triple bottom line by mitigating physical risk and by mitigating financial risk as seen here on Slide 4. We're changing the culture and building new capabilities at PG&E. Our culture is shifting to one of service and performance. We're rebuilding our team's confidence that we will deliver for our hometown. We will serve our planet, and we will lead with love. We've been enabling our leaders to challenge assumptions they have about how and why we do the work that we do. Our culture is an important ingredient in our turnaround here at PG&E. I'm very pleased with the progress that I'm seeing. For our customers and you, our investors, to believe that things have changed here at PG&E, my coworkers have to believe and experience the change themselves. One way to help people experience a new and improved PG&E on the inside is through building the capabilities of our team through our lean operating system. I learned long ago that the customer experience can be improved while we are reducing the cost to deliver. In fact, they often go hand in hand. Improving our work processes takes all of us every day using our visual management tools and our daily, weekly and monthly operating review cadence to manage our performance. We can then identify our gaps and deploy problem solving to address them and set new standards to prevent reoccurrence of the problems. By changing our culture and building our lean capabilities, we're enabling the mitigation of physical risk and financial risk. On wildfire, we're confident that we have the right tools in place to mitigate this risk through EPSS and PSPS as well as making our system safer every day with our extensive inspection program and vegetation management work. And we're ramping up our ultimate solution, our undergrounding program which is designed to permanently reduce physical risk on our highest risk miles. To mitigate financial risk, we're planning to keep customer costs down even as we invest in our system by utilizing our simple and affordable model. And to further mitigate financial risk, we're also focused on paying down debt and delivering on our 5-year non-GAAP core EPS CAGR of 10%. This premium return is driven by our simple and affordable model being on Slide 5. There are many opportunities for us in 2022 and beyond that allow us to invest in necessary and high-value improvements to our electric and gas energy system while reducing the cost to deliver. Let me share an example of the simple affordable model in action. At the end of February, we filed an update to our 2023 general rate case. In the update, we've included the additional $7 billion of capital for our undergrounding plan through 2026 and and an offsetting $1 billion in expense, resulting in a similar revenue level to what we filed in our initial application last summer. We have confidence in our ability to execute these efficiencies due to the use of our lean operating system. For example, as a result of the first year of using lean to drive our vegetation management work we achieved a roughly 16% reduction in program unit costs. This is a big deal. We can make our systems safe with the right investments and keep customer bills affordable that benefits both customers and investors. It is not complicated. In addition to mitigating financial risk with our simple and affordable model, we're mitigating physical risks for our customers. As I mentioned, we plan to make enhanced power line safety settings capable on all circuits in our high fire risk areas this year. As a reminder, on the circuits where we enable these settings in 2021, we saw an 80% reduction in CPUC reportable ignitions. This is the first time we have seen any material reduction in ignition since we have been tracking them. Also, we'll continue to utilize public safety power shutoffs when we encounter dangerous and extreme weather conditions, building on improvements we made in 2021. When we backcast our power shutoff protocols, our analysis shows that we would have prevented 96% of the structures damaged from 2012 through 2020 from catastrophic wildfires. To inform our PSPS protocols, we use billions of data points including PG&E's 31-year weather climatology study to forecast hourly probability of large and catastrophic fires. In addition, we leveraged hundreds of millions of fire spread stimulations each day to help inform our PSPS protocols. Our PSPS algorithms use state-of-the-art machine learning models to increase predictive capability. The technology and data science that underpins our PSPS capabilities is extraordinary. We know shutting off power cannot be a permanent solution. Therefore, 2022 is an important and exciting year for us to learn from our experience in the field on undergrounding our lines. There's a lot of support and interest in our undergrounding plans. In fact, both the California State Senate and State Assembly have legislation focused on utility undergrounding this session. Senate Bill 884 and Assembly Bill 28 89 were recently passed out of their respective legislative energy and utilities committees. This is good progress. We're optimistic that the legislature will work toward a solid solution that's good for customers and attract the investor capital needed to vary the risk. We actually have a new thing around here. How do you rebuild PG&E? From the underground up and we are on our way. Turning to Slide 7. You and my coworkers have heard me talk about leading with love. Many people wonder what is that? Leading with love. Let me give you an example. At PG&E, my coworkers are responsible for keeping themselves and each other safe on the job. While we improved our DART performance, which is a measurement of injuries on the job in 2020, we knew we could be even safer in 2021. I'd like to say, even after best-ever performance, we are still dissatisfied. We found that by utilizing the simple plays from our ClearSky lean playbook, we were able to problem solve and prevent injuries with simple and effective action plans every day. We reduced our DART rate by 25% in 2021 relative to 2020. And as you can see here on Slide 7, we continue to improve this year, which reflects a 75% injury rate reduction since 2019. Coworker safety is where a culture change must start. Teaching people how to deliver and enabling them to believe in their own capability that is leading with love. Another example of the culture shift we are causing here involves our permitting team. I will never forget about a year ago at our first undergrounding planning session, we asked our permitting team what would have to be true to bury 10,000 miles of line. Everyone kept saying that permitting would be impossible. Our permits team stood up and declared. We are not going to be the problem, give us a solid long-term plan and we can get the permits. Come to us a day or a couple of weeks before we need the permit and then we have a problem. It is so true. Everything hinges on solid, long-term plans and well-designed workflow. We all know great plans to deliver predictable outcomes. As we've started to scale the underground program, we've already seen improvements in our permitting process cycle times, something that will set us up for success as we double the miles every year in the next couple of years. Specifically, we've seen an almost 50% reduction in the time it takes to produce and receive approval for detailed design drawings. Our first major underground project took 13 months to design and receive subsequent approval from local agencies, 13 months. Through a focus on implementing standard repeatable processes inside of PGME based on agency feedback and by building associated skills, we've reduced the review and approval time there to 5 months. That is real progress. We are making it right and making it safe at PG&E. I can't think of a better way to lead with loves than that. Before I hand it over to Chris, I'll end with our report card, which you can see here on Slide 8. We chose these metrics to show you where our focus is, culture and capability delivering consistent, predictable outcomes through 2022 and beyond. One metric I want to hit is our annual CPUC reportable ignitions in our high fire risk areas. The reason this metric is important is because fires over 100 acres accounted for 97% of the structures damaged in our service area from 2015, 2021. We have our eyes and our efforts focused on this one. Moving on in the report card. As you can see, as of quarter end, we're on track to hit our annual 2022 targets. Specifically, we're happy to report that we're on track with our miles underground to date target. We varied 41 miles against a plan of 34 year-to-date and are picking up speed. Now I'll hand it over to Chris to cover our financial and regulatory items.

Patricia Poppe:

Thank you, Chris. As we move through 2022, you can see how we are squarely focused on minimizing physical risk and financial risk. System resiliency, including our 10,000-mile undergrounding program provides long-term sustainable wildfire risk mitigation. In the near term. We continue with our engineered enhanced power line safety settings where fuel risk is high and our public safety power shutoff program during high wind events. Ultimately, we are investing in a hardened system that is resilient to the effects of climate change. To mitigate financial risk for our customers and our investors. We will continue to make the right investments affordably. We're focused on creating the culture and the capability we need, allowing us to execute on these operational and financial imperatives. We'll keep an eye on the horizon and ensure we're making the right investments to deliver California's safe, reliable, resilient and clean energy future. That's the way we serve customers and you, our investors. On a final note, many of you came to see us last August in California this June, we're coming to see you. We hope you can join us at our Investor Day on Friday, June 10, in New York City. We look forward to seeing you there. With that, operator, please open the line for Q&A.

Shahriar Pourreza:

Patti, just a question on undergrounding. I know you obviously highlighted the legislative initiatives that are out there. zeroing in particular to 884, there's obviously some questionable constructs proposed like earnings deferral. I mean, we appreciate that it's kind of early in the session. But do you see a need for legislative improvement? And is this Senate bill in palatable would you even spend capital with this bill? And if the bill makes it out of the chamber at all, do you see that as a setting sort of a bid ask for negotiations or some sort of a construct later on? So just maybe more specific thoughts there.

Shahriar Pourreza:

Okay. Perfect. And then just one last one on the wildfire victims fund. I mean, obviously, we saw the fund going to market with shares twice this year. there were some perceptions of need for maybe improved alignment after the first tranche was sold, which obviously didn't happen. Do you get a sense that the fund doesn't see a need to align a coal market with PG&E maybe from a political standpoint after these deals. I mean, at this point, do you think it's fair to assume continued selling when we see positive news from PCG post lockup periods. And have there been any like opportunities for refreshed conversation or feedback with the fund?

Operator:

Your next question is from Steve Fleishman of Wolfe Research.