PG&E Corp (PCG) 2014 Q4 法說會逐字稿

Good morning, everyone. Thanks for joining us. I'm Janet Loduca, PG&E's new Vice President for Investor Relations. I've had the pleasure of meeting some of you earlier this year, and I look forward to working with all of you in the future. Before you hear from Tony Earley, Chris Johns, and Kent Harvey, I'll remind you that our discussion today will include forward-looking statements about our outlook for future financial results, based on assumptions, forecasts, expectations, and information currently available to management.

Some of the important factors that could affect the Company's actual financial results are described on the second page of today's slide deck. We also encourage you to review the 2014 annual report on Form 10-K that will be filed with the SEC later today, including the discussion of risk factors. With that, I'll hand it over to Tony.

Thanks, Janet, and good morning, everyone. 2014 was a strong year for us, and I feel really good about the significant accomplishments that we've had in our operations. There's no question that our system is safer and our customers are experiencing greater reliability now than they ever had in the past, and proof of this is in our customer satisfaction scores. I've always believed that strong operations are the foundation for longer-term financial success, and we're working hard to deliver on both fronts.

Chris will tell you more about our operational results in a moment and then Kent will go through the financials. In addition to the great progress we've made operationally, I want to acknowledge the setbacks we had last year related to communications between the Company and our regulators. As you know, we took quick and decisive action, making it clear to our employees and the public that noncompliance has no place in our organization. And with the help of outside experts, we're establishing a best-in-class compliance program.

I also want to acknowledge that we still don't have a final resolution in the gas transmission OII investigations. With the proposed decision issued last September, we believe the Commission has all the information it needs, and we hope to see a final decision soon. Now, as we look ahead with the resolution of the General Rate Case last year, we are positioned to continue investing in our gas and electric systems. We plan to build on our progress of the past few years by continuing to upgrade our gas and electric infrastructure and leverage technology to enhance performance and modernize the grid.

Over the next few years, we expect our capital spending to be more than $5 billion a year, and we're optimistic about PG&E's growth opportunities. We plan to continue to take advantage of our location near Silicon Valley to help design and build the grid of the future, or as we've been calling it, the grid of things, where distributor generation, electric vehicles, energy storage, and other technologies are integrated into a two-way power grid.

Governor Brown recently set out some ambitious goals for California to significantly reduce carbon emissions by 2030. We believe these policies are in line with our own strategies on clean energy, vehicle electrification, and energy efficiency, and look forward to working with policy makers to develop and implement these new standards. In fact, yesterday we filed an application at the CPUC to invest $500 million over five years in electric vehicle charging infrastructure, which we believe is critical for EV adoption and greenhouse gas reduction.

We're glad the CPUC has recognized that the utilities are important players in the electrification of the transportation sector, and we're eager to get our program approved and under way. So with that, let me turn it over to Chris.

Thanks, Tony. Good morning, everyone. As you can see on slide 4, I'll begin my remarks with an update on our operations and then touch on some additional regulatory developments from the quarter and the year. As Tony mentioned, we had a really strong operational results in 2014.

Starting with safety, we're extremely proud of our performance on key public safety metrics, such as gas odor response time, 911 response, and third-party dig-ins. For example, last year PG&E employees responded to gas emergency calls in an average of less than 20 minutes, which represents one of the fastest response times in the industry. In terms of electric reliability, 2014 was our sixth straight year of record performance for outage duration, and our customers experienced the fewest outages in Company history.

We also opened our first of three state-of-the-art electric distribution control centers last year, integrating leading technology to further improve operations. In terms of electric supply, we continue to make good progress on our goal of 33% qualified renewables by 2020. And last year, our electric supply portfolio was more than 50% greenhouse gas free, making us one of the cleanest utilities in the country.

On the gas side, we're especially proud of the international certifications we received for our asset management practices. Not only did we receive the initial certifications from Lloyd's register in May, but in November, we were recertified after an extensive follow-up audit, which validated the sustainability of our program. We're one of only a few utilities in the world to achieve these certifications. Also in gas last month, we announced that we now completed our system-wide cast iron pipe replacement program, making our gas system even safer.

And you can see on the slide the extensive work we completed on strength testing, valve automation, and pipe replacement. Now, all of this work is being acknowledged by our customers. Our customer satisfaction results in 2014 were the highest we've seen since 2009, which is before the San Bruno accident. While we're proud of all of these achievements, we know we have more work to do, and we'll continue to look for, find, and fix areas that need improvement.

Moving on to our pipeline safety enhancement plan, or our PSEP, we've completed the majority of the planned expense work in PSEP, although a small amount of work will continue into this year, and Kent will cover how this fits into our 2015 plans. On the capital side of the program, the last part of the PSEP has proven to be very challenging. Late last year, we determined that the permitting and routing for a number of the remaining pipeline replacement projects, including some in environmentally sensitive areas, will be more difficult than we previously expected. So we now expect the work to be more costly and will be completed over the next few years, which is longer than we had originally anticipated.

Since the PSEP program has a cap on the recovery of capital, we took a charge of $116 million in the fourth quarter for these higher expected costs. Shifting to regulatory matters, the hearings in the gas transmission and storage rate case started last week and are expected to conclude this month.

The current schedule calls for a final decision in August, with revenues retroactive to January 1st of this year. As a reminder, the final decision on the order to show cause related to ex parte communications in the gas transmission rate case called for a disallowance of up to five months of the increase in the authorized revenue. As you know, we've appealed that portion of the decision.

In other regulatory matters, in December the Commission approved an incentive award for our energy efficiency programs, and our cost of capital mechanism was extended for another year. It will now be in place through the end of 2016. So with that, I'll turn it over to Kent.

Thank you, and good morning. As usual, I plan to go through our Q4 results, and then I'll provide some insights about our 2015 outlook. Slide 5 shows our results for Q4 and full-year 2014. Earnings from operations came in at $0.53 for the quarter and $3.50 for the year. GAAP earnings, including our items impacting comparability, are shown here as well. We've got the details regarding the natural gas item in the table at the bottom in pre-tax dollars.

Our pipeline-related expenses came in at $102 million for the quarter and $347 million for the year, which was just below our guidance range. As Chris mentioned, a modest amount of PSEP-related expense work will spill over into 2015. Next is the disallowed capital write-off for PSEP of $116 million related to the higher costs to complete the remaining PSEP capital work. Because there's a cost cap in place, we wrote off those costs that we anticipate will come in above the cap.

On the next slide, you see that we recorded $12 million of fines, mainly for the gas distribution accident in Carmel last March. We believe that fine is excessive, and we've requested a rehearing. We adjusted our third-party liability claims related to San Bruno down by $7 million as a result of settling the last few claims in Q4. That leaves our total loss at $558 million versus our previous estimate of $565 million.

Finally, we booked $26 million in insurance recoveries in the quarter for a total of $112 million for the year. Slide 6 is the quarter-over-quarter comparison for earnings for operations. You've seen many of these same drivers in previous quarters. The first three items relate primarily to 2014 -- to the 2014 General Rate Case and they total $0.19. I'm just going to go through each of them briefly.

First, as a result of the GRC decision, our expense recovery increased $0.08 quarter over quarter. This represents the impact of recovering higher levels of spend that were not being recovered in 2013. Second, we had a positive $0.06 resulting from tax benefits related to our federal tax deduction for repairs costs. Third, we recorded earnings on a higher authorized rate base. This totaled $0.05. As you see, we also had some smaller positive items in the quarter, a pickup on some regulatory matters, the absence of some project and lease charges experienced in the prior year, and various other items included in miscellaneous.

These positives were partially offset by a $0.14 timing item related to taxes and operating expenses that was driven mainly by the delay in our General Rate Case. You may remember this from last quarter's call. In Q4, this item turned around, as expected, reversing out the impact experienced earlier in the year. Finally, our share dilution came in at $0.02 negative quarter over quarter.

Now, I would like to provide a few thoughts about our future performance. Since we're still awaiting resolution of the gas pipeline investigations by the CPUC, we're not providing guidance today for 2015 earnings. However, we are providing key assumptions for earnings from operations and items impacting comparability to help you understand our profile.

If you turn to slide 7, you'll see some key assumptions for 2015 earnings from operations. First, in the upper left, you see we're assuming capital expenditures of roughly $5.5 billion this year. The breakdown by line of business is included here as well. In the upper right, you see that our estimate of weighted average authorized rate base is about $31 billion. Both the CapEx and rate base assumptions are consistent with ranges we've previously provided, so no real change there. In the lower left, you'll see that there also are no changes to our assumptions regarding authorized return on equity and equity ratio.

At the bottom right of the slide, we list some other factors we believe will affect 2015 earnings from operations. Our objective for EFO is to earn our authorized return on rate base for the enterprise as a whole, plus the net impact of the factors listed here. Many of these should look familiar from last year, and I'll briefly touch on them and reiterate what we've previously told you about them. In terms of the gas transmission and storage rate case, the first bullet is just a reminder that the outcome of the case is not known at this stage, so we have some uncertainty regarding the impact on 2015 results.

The second bullet under the gas transmission case is also a reminder that we've not sought recovery of some operating expenses in 2015 and beyond. These are for certain corrosion and strength testing work. We've previously indicated that these expenses, taken together, should average roughly $50 million annually over the three-year period, although the amount may vary year to year.

Next is the tax benefits associated with the repairs deduction. Last year, the net impact from this item was almost $0.25, and we've indicated that we expect it to be a similar order of magnitude in 2015. The next two factors, incentive revenues and monetizing SolarCity shares, you saw last year as well. In terms of SolarCity, we've said that about two-thirds of the shares were monetized in 2014. As a result, you should expect a smaller impact this year than last.

Finally, like last year, we expect earnings on construction work in progress to be roughly offset by the below-the-line costs, so these include advertising, charitable contributions, environmental costs, and so forth. Before I move on to the next slide, I want to make one more point. We won't receive a final decision in the gas transmission rate case until at least the third quarter based on the current schedule. Because the decision will be retroactive to January 1, the timing should not affect our annual earnings from operations, but it will have an impact on our quarterly results, just as you saw with our General Rate Case last year.

Okay, turning to slide 8, you'll see our assumptions for items impacting comparability in 2015. Our framework for 2015 will have three components: pipeline-related expenses, legal and regulatory-related expenses, and fines and penalties. I'll walk you through each of these. First, we're providing an estimated range for pipeline-related expenses of $100 million to $150 million, which represents a significant reduction from prior years. The majority of the dollars here are for clearing our pipeline rights away.

We are now beginning the third year of that program, which we have estimated to cost up to $500 million from its inception in 2013 through its planned completion in 2017. The range for pipeline-related expenses also includes a smaller amount, roughly $25 million, for the PSEP expense work that was carried over from last year. Second is legal and regulatory-related expenses, which we estimate to be between $25 million and $75 million for the year. Here, we've consolidated all legal and other costs expected to be incurred in connection with litigation and enforcement activities related to either natural gas matters or regulatory communications.

Third, our potential fines and penalties, again, related to either natural gas matters or regulatory communications. For example, this would include resolution of the gas pipeline investigations by the CPUC. It would also include gas transmission rate case revenues disallowed by the CPUC as a penalty for ex parte communications. As has been our practice in the past, we're not providing guidance for fines and penalties in 2015.

Moving on to slide 9, we assume equity issuance of $400 million to $600 million in 2015. That compares to equity issuance last year of $827 million. This range is consistent with the other assumptions I've provided this morning, including our CapEx profile and our items impacting comparability, and assumes we receive a reasonable outcome in our gas transmission rate case. Importantly, the range does not reflect additional fines or penalties in connection with natural gas matters or regulatory communications. Those would be incremental to this range.

Finally, slides 10 and 11 summarize our assumptions for CapEx and rate base through 2016, and these are consistent with what we've shown you previously. Our total CapEx is expected to remain well above $5 billion annually during this period. Our average rate base is expected to grow to more than $33 billion in 2016, representing about a 9% CAGR over 2014. We anticipate providing you with CapEx and rate base numbers beyond 2016 once we file our 2017 General Rate Case this fall. I'll end with that, and we'll open up the lines for your questions.

(Operator Instructions)

Our first question comes from the line of Julien Smith with UBS. You may proceed.

Hi, good morning.

Good morning.

So congrats again on a good and decent quarter here. Just wanted to kick it off with a question on bonus D&A here, if you don't mind rehashing. It doesn't look like the rate base has shifted all that much versus what you'd last projected here. How does that flow through, if you can kind of remind us?

This is Dinyar Mistry, the Controller. As you know, bonus was past all the way to the end of 2014. In our General Rate Case, we have a mechanism that's similar to what we've had in the past. It's called TAMA. It basically provides for us to use that bonus benefit for additional CapEx. Since we got bonus all the way at the end of the year, it really didn't have very much impact, and we factored that into the rate base numbers that you see here.

Got you. So no real negative impact here for 2015 earnings as far as it goes?

No, it should not be. Additionally, we're in an NOL situation, so that dampens the impact.

Great. And then secondly, bigger picture here, as you look at the renewable portfolio standard and the potential shift to 50%, what does that mean near term in terms of spend just broadly speaking, the renewables? And secondly, your specific spend, whether it be directly in renewable technologies broadly or, you know, frankly from a T&D perspective, what does this mean in terms of accelerated deployment?

Well, this is Tony. I'll start off. First of all, there's a long way to go between where we are today and a specific plan for California. The Governor, of course, in the state of the state speech outlined some long-term objectives. The utilities here in California are all working together and want to work with the state to develop what those policies are. Clearly, we'll be going above 33%. We think a clean energy standard that gives us some flexibility going forward makes sense.

But in any event, even assuming we're going to be continuing to develop our renewable portfolio, most of the renewables now are part of our purchase power portfolio. We did do some utility-owned solar early on, decided that wasn't a strength for us. So I would anticipate that in the future as our renewables go up, it just will flow through our purchase power accounts rather than being an investment in capital, although we continue to look at new technologies.

What it will do, as renewables go up, the grid becomes more complex to manage, and as Chris has said in a number of speeches, that's our investment opportunity to invest in going from the traditional one-way flow of power on the grid to multi-flow power that is not as predictable. That's going to be where we think there are growth opportunities.

Great. Could you elaborate just a little bit about the growth opportunity? I mean, what's the timeline here with which you think the 50% move happens, if you will? What could we see the dollars flowing and how do we get from A to Z here, if you will?

This is Chris. First of all, we don't know again, as Tony said, on the timing of what the 50% would look like and, again, we most likely wouldn't be making investments in any of the facilities themselves. But as far as the future of the grid, you know, we've actually already started that and been working on it for the last several years.

You may remember our Cornerstone Project that helped us to start make investments in modernizing the grid and we're going to continue to do that. We don't have projections out there as to what the dollars look like, but those are dollars that we've already started to put in place in some of our projections that you already see here around 2015 and 2016, include some dollars for continuing to modernize.

So as we've continued to move forward with making sure that we're in a position to be able to hook up the solar panels and the batteries and the plug-in vehicles into our system, we've continued to evaluate, not just replacing old wire, but modernizing the entirety of the system and putting more technology into it, and that's what you'll continue to see from us and we'll just continue to build them into our rate base growth.

Great. Thank you.

Thank you. Our next question comes from the line of Greg Gordon with Evercore. You may proceed.

Thanks. Good morning.

Good morning, Greg.

The tax benefits, should we assume that they will repeat but at a lower level in 2016 and then sort of work -- and then be gone post-2016? I don't recall if you've given any guidance with regard to the trajectory post 2015.

Greg, this is Kent. We really just indicated that the tax benefits were really in connection with our General Rate Case, which is a three-year proceeding. So yes, you should expect them through 2016.

Okay, and then you have a rate case in 2016 and rates in 2017, and so that would get--

That would be reflected in that proceeding. That's correct.

Okay. Energy efficiency revenues, you booked, I think you booked $0.04 in FY14. Based on the new scheme, should we expect that you have an opportunity annually to continue to book earnings in that order of magnitude and how should we think about that?

Well, last year we did book in December. The award was for a year and a half. So it was a little unusual. It wasn't just a single year.

And again, it's with significant lags, these awards. So the awards we just got were for 2012, I think, and half of 2013. So I think what we'll be booking this year will probably be for, you know, subsequent to that. The new scheme will be in place after that.

Okay, and then finally on page 8 of your handout, you pointed out there's a placeholder for fines and penalties. Just to make sure I have this right, that's for potential fines and penalties in the San Bruno cases. You also could potentially be disallowed some revenue requirement in the GT&S case.

Then should we also sort of notionally have a placeholder there for the potential for financial impacts from the criminal indictment? Is there anything else out there that I'm missing that would sort of go into that catch-all?

Well, right now it's hard to know what's going to happen with all the ex parte stuff, because there's a lot of stuff that we have filed at the Commission, and we're not really clear, you know, what will come out of that. In addition, we do know that there are investigations related to the regulatory communications by the state attorney general, as well as federal prosecutors, and that's also unclear.

Okay. Thank you.

Thank you. Our next question comes from the line of Dan Eggers with Credit Suisse. You may proceed.

Good morning, guys. Just maybe as a follow-on to Julien's questions, can you maybe, Tony, just give a little more explanation of all the things that are going into the grid of things project that's going on, how much CapEx is going into that right now and kind of the scalability of that, how long you think it would be before that was more broadly deployed on the system?

Dan, we haven't broken out the specific capital investments associated with the grid, but you see our capital budgets next year, about $5.5 billion I think is our spend. We haven't given guidance for future years, but we have said that you can expect comparable levels of capital investment. Now, within that, a big -- there is a big chunk for upgrading the grid. So you go back a couple years and you start with going to virtually 100% smart meters.

We've talked about then automating switches on the system so that we can automatically shift when we have outages. That has paid tremendous benefits. The Napa earthquake and the storms that we had at the end of 2014, in fact just last week, we had some major storms here in California and had really superb results because we're able to immediately detect where the outages are and then automatically reconfigure the system. So we're doing that.

And then the other future investments will be control systems, A, to monitor the state of the grid as you've got all of these renewables dumping into the system at points that we never anticipated when the system was built. So to be able to detect and then to be able to control voltages on those systems. And that's an ongoing program.

Chris, I don't know if you want to comment on the specifics. But I think that's going to be something that's going to be in every capital budget going forward.

I agree. And again, we haven't put out what those dollars look like on a forecast basis, but they are included to the extent we're working on them in 2015 and 2016 and the numbers you see in front of you.

One other point I'll make is our filing this week proposing about $100 million a year investment in charging is also part of that. I mean, our view is that as we go forward, as we renovate different circuits, we ought to be installing EV charging at appropriate places within that renovated circuit because that's what the grid ought to look like going forward.

Tony, just on the charging release, how was the approval process going to work from that and the others who are people trying to do it on a merchant basis who no doubt will challenge you? How do you guys kind of defend this as a utility investment opportunity?

Let me start off with the issue around challenging as a merchant activity. I mean, California for a number of years did not allow utilities to participate in the public charging market. We could build charging stations for our own fleet, but not for the public, on the theory that entrepreneurs would jump in and provide this service. I can tell you not only from our experience here in California, my experience at DT where we had unregulated subsidiaries that at times would look at this.

The entrepreneurial model just isn't going to work. There isn't enough margin in that business. Where it might work is for some of those entrepreneurs that actually produce the charging stations to partner with us and we'll install the infrastructure.

Let me ask Steve Malnight who is here with me to talk about what the regulatory process looks like for -- going forward.

Hi. This is Steve Malnight from the regulatory affairs team. We filed our application, and we will be looking for the Commission to issue a schedule for that proceeding. As you know, Southern California Edison and San Diego also have proceedings that are going on at the same time. So we'll wait to see what that schedule will look like as it comes out.

And the only other thing, Dan, that I would add to that, this is Chris, is that our filing, we are only looking at about 25% of the marketplace. So there's still huge amounts of room for competitors, if they want to try to continue to operate in that market, there's plenty of opportunity for them.

Got it. Just one last question just on I guess your challenge or your appeal to the delayed revenue recovery, because there are ex parte communications on GT&S. Can you just walk through the process and the schedule for that to get resolved? And is this something that could be settled at some other number rather than having to go through a fully adjudicated process?

Let me let Hyun Park, our General Counsel, talk about the schedule for that.

So, Dan, we filed an application for rehearing of that decision. That was filed on December 26th and all the briefings have been submitted by all the parties, so it remains to be seen when the Commission will act on that rehearing and, as you know, the GT&S case is currently going through hearings right now.

Okay. Thank you, guys.

Thank you. Our next question comes from the line of Anthony Crowdell with Jefferies. You may proceed.

Good morning. I guess I won't ask the same question of what does 2017 CapEx look like. So, just moving to a different -- you seem like you've punted on the first two. I guess just two quick questions.

One is you've given us equity guidance in 2015. I mean, any thoughts to doing converts or something else, something other than equity going forward with this large CapEx forecast?

And the second, the GT&S rate case is delayed, but I think there's a GT&S 2 that's down the pipe. When does that get filed?

Anthony, this is Kent. Let me take the first one. In terms of our equity needs, you can see they are more modest this year for our normal CapEx program. The uncertainty that we really have, obviously from a financing perspective though, are when are the gas matters really resolved with the OII. And that's really what's going to drive our financing needs.

And as I've said in the past, depending upon the nature of that, the timing of it, the magnitude, and the various components, that there are alternatives such as mandatory converts that we would consider. It all just depends on the details of the final decision. The second part of your question -- .

This is Chris. To your second one, I'm not sure if there's a specific GT&S Phase 2 that you're thinking of, but the next rate case with GT&S would be filed in 2017 for 2018 because it's a three-year cycle.

Okay. So just in your electric case ends in 2016, new electric rates in 2017, and then new gas rates would be in 2018. Is that correct?

For the pipeline, that's correct.

For the pipeline. Great, thank you. And are you sure you don't want to give us the 2017 CapEx?

Let us think about it.

All right, thank you.

Thank you. Our next question comes from the line of Michael Lapides with Goldman Sachs. You may proceed.

Couple of questions. First of all, I know somebody asked about bonus D&A in terms of what it means for rate base. But can you talk about what it means for cash flow in 2015?

Hi, Michael. This is Dinyar again. So as I mentioned, we are in an NOL situation, so it really doesn't mean much for cash flow.

Okay. Can you talk about expectations, kind of the spread you expect between kind of GAAP and cash taxes, meaning the fact you've got such a sizable NOL, does that imply that you're not really -- you're not much of a federal cash taxpayer this year? How far out in the future do you expect that to extend?

That's correct. I -- we don't anticipate being a federal cash taxpayer in 2015 or 2016. So I think it will extend out into 2017.

Got it. Thank you, guys. And one thing on CapEx -- .

Michael, I just wanted to add that that's already embedded in the equity assumptions that we've given out.

Right, okay. So it already impacts the financing. When we look out at CapEx, can you talk about the variability as part of the GT&S case, meaning how much can the GT&S case outcome swing your expected CapEx in either 2015 or 2016?

Well, you can actually see on slide 7 that we show for gas transmission a couple hundred million of potential variability.

Okay. So that's both for 2015 and for 2016?

Well, we're showing that as the -- as for 2015 because that's the year that we're providing line of business guidance like that. But you could expect probably a similar type of impact in future years, depending upon how the rate comes out.

Got it. Thanks, guys. Much appreciated.

Thank you. Our next question comes from the line of Paul Patterson with Glenrock. You may proceed.

Good morning.

Good morning.

Can you hear me?

Yes, we can, Paul.

With respect to San Bruno, I know you guys were thinking that that was going to be done by the end of the year. I'm just wondering, what do you think has caused the delay? And how should we think about the conclusion of this process going forward?

Well, I think it's fairly obvious that the delay was caused by the issues around the ex parte communications, and then with the departure of President Peevey, getting a new president appointed, and then a new commissioner in, but we now have all of those pieces in place with President Picker there and a new commissioner.

So everything is now in the hands of the Commission. They have got the recommended decision, and so I think it's now in their hands to go ahead and make a decision. We don't think there's anything more the parties need to do in the case.

Okay, but you haven't had any word or anything about how -- of any sort of penciled-in date or anything like that as to we should be thinking about?

No, we haven't.

Okay. And then just in terms of the ex parte stuff, I realize that there's several proceedings going on and we don't know how those are going to necessarily go or how long they are going to take, but is pretty much most of the ex parte communications, to the best of your knowledge, now out there? I mean, is that -- in terms of discovery and stuff, are we sort of finished with that, do you think?

As I've said in the past, we have done a comprehensive search of all of the places where we believe there's some -- there's a possibility that there would be ex parte communications and have disclosed to everyone, every instance that we are aware of. That said, there are multiple proceedings going on. There are lots of requests for more access to Company records and emails. When you put it in perspective, we've got 22,000 employees. If they produce 10 emails a day, that's a million emails every five days.

Yes. I get it.

I get asked all the time, well, have you looked at every email? The answer is no. Have we looked where we think it's likely to have an ex parte communication? Absolutely.

Fair enough, okay. And then just on the criminal case, do we have a schedule now at this point? Or are we still sort of -- where are we in the process?

So this is Hyun Park. So we have a hearing that's scheduled for March 9th. I think the expectation is that's when the motion schedule will be set.

Okay. Then back to sort of Dan's question on the electric vehicles, it looked to me -- from what I've read, it's $654 million and it looked that there was going to be a charge for customers between 2018 and 2022. And that's what I'm piecing together. I haven't actually been able to look at the full filing. Is there some sort of amortization that's unique to this CapEx that would suggest that the recovery would be over that period of time or just to sort of get a flavor for what exactly is going into this. It looks like it would be $26,000 per station. Is that a fair number? Or is that just also all the other stuff that's sort of supporting this kind of effort? Do you follow me?

This is Steve Malnight. The filing, we're anticipating putting that capital into rate base normally as we do with the rest of our capital. And the total costs that we've talked about is for all the costs associated with implementing that program.

Okay, and then the amortization piece, or the collection period for customers that was mentioned between 2018 and 2022 sounds kind of slow, sounds kind of shortened. Is there something about these facilities that would suggest that their recovery should be over a shorter period of time, or is that just how the release came out? Do you follow me?

The period of time that you're looking at wasn't meant to be what the recovery period time is. That's just the expenditures and our implementation of them.

Okay.

So this is Chris. The recovery would just be a normal recovery period of time. And I think that's why it says it's about an $80 million annual revenue requirement stretching out beyond that five-year or that six-year period of time.

And you mentioned the margins were low. Just to clarify this, how much of, if we were talking about the revenue requirement associated with these stations, is being covered by customers versus what quote, unquote, the marketplace would be theoretically covering? Do you have a rough breakdown of that?

Probably not to the level of detail that you're asking for. But what we're asking for what would be included in the cover for the customer charges is just the capital cost of putting the infrastructure in place. Then the meters would go on and the charges off of those meters would all cover the cost of the electricity and everything else.

And we're actually looking at having a third party manage the process. So we're not in the payment processing business. Users would use their credit card and there's a third party would manage that process.

Okay. Thanks so much.

Thank you. Our next question comes from the line of Hugh Wynne with Sanford Bernstein. You may proceed.

Good morning, and congratulations on some of these achievements of the operational side. I just wanted to address an issue that I continue to be concerned about on the regulatory side, which is the OII into the accuracy of record keeping on the gas distribution side of the business as opposed to gas transmission. And I -- I guess I'm still worried that if the Commission really wanted to get [grobby] about this, they could probably find enough inaccuracies in the records to come up with a substantial fine. Can you give us any parameters for how that investigation is going, what likely outcome you see, what financial impact there might be?

Hugh, this is Chris. I wish I had more details for you. But we don't because we don't have information yet on the scope of the investigation. So they haven't -- they have done, just for a reminder for everybody, on November 20th of last year, the Commission issued an OII and an order to show cause to look into the record-keeping around the gas distribution system, and they specifically referenced six incidents from 2010 to 2014 where there were no fatalities or injuries.

But we've done a lot of work on our record keeping over the -- since San Bruno on not just the transmission pipe, but also the distribution pipe, and we continue to do that. But they have not had a scoping meeting or scheduling meeting yet at all. And so we filed our responses, but otherwise, we don't have a lot of information as to where they may go on this. We're waiting for the prehearing conference and that has not even been scheduled yet.

Thank you. The -- as I recall, there was a program of upgrading the gas distribution system that you conducted several years ago, which fell into the items impacting comparability because those expenditures were not recoverable. Is there -- do you foresee the potential for any further unrecoverable capital expenditures on the distribution side of the business such as we've seen with the PSEP on the transmission side?

I mean, obviously, again, we don't know what that record keeping OII would be about, but otherwise, we wouldn't because we just went through our General Rate Case, which addresses our gas distribution side of the business, and we got the results of that and we're going to be operating under that. So we don't see anything on the horizon that would say we believe we're at risk of non-recovery of things that we're doing on our investments in the gas distribution piece of the business.

All right. Thank you very much.

Thank you. Our next question comes from the line of Travis Miller with Morningstar Capital. You may proceed.

Good morning. Thank you. The TO16, I was wondering if you could talk about the key issues where you're the farthest apart, I suppose, in the settlement conference that's coming up. And then second, depending on that outcome, how would that affect the $1 billion plus that you guys have tagged for CapEx and presumably a similar amount in 2016, 2017?

Travis, this is Kent. You know, typically we go through a TO case every year. This isn't going to be any different than the other ones, but we really don't provide much commentary on it while it's under way.

Okay, and then would that affect, if you were to get an unfavorable decision, would that affect the transmission spend material? Are those projects that are kind of in the process, in the ground type of projects?

Well, we've had a pretty good track record in resolving TO cases and we're hopeful that's going to be the outcome this time as well.

Okay.

And this is Chris. Along those lines, as we do with all of our rate cases in regulatory orders, we try to operate within what they rule. So if there was something that wasn't going to be a project that they didn't think we need, we'd have to reevaluate whether we would do that or not.

Okay. I think everybody asked my CapEx questions before. So I appreciate it. Thanks.

Thank you. Our next question comes from the line of Brian Chin with Bank of America Merrill Lynch. You may proceed.

Hi, good morning.

Good morning, Brian.

Just on the slide where you were talking about 2015, what things to think about even though you haven't given guidance, on the SolarCity, monetizing SolarCity shares, can you just give us a general sense of how big that should be? I realize you're not in a position to give full guidance, but at least a sense of scale on that part would be helpful.

Brian, it's Kent. Last year, I believe it was in the third and fourth quarter, we monetized SolarCity -- second, second and third, excuse me, we monetized shares, and I think each of those pickups were about $0.03 for each of those quarters and that basically represents about two-thirds of the total. I think that gives you a pretty good indication of sort of roughly what we'd expect for this year.

Great. And lastly, my second question is when it comes to rights of way and surveying costs, it's been a little while since we've heard you guys talk about that in great detail. Should we be at the level now where we feel relatively comfortable that there aren't going to be unexpected additional costs there? Is there like a percentage of completion that we can think about going forward from here?

This is Chris. I think as we talked about last year, we did experience some delays in the pathway program because of some vegetation issues in some of the cities, but we still at this point in time are reiterating that we don't -- we believe we'll be able to finish the program by the end of 2017, which was the original five-year schedule, and that we still don't expect it to be in excess of the $500 million that we originally have put out there.

Great. Thank you very much.

Thank you. Our next question comes from the line of Steven Fleishman with Wolfe Research. You may proceed.

Hi, good morning.

Hi, Steve.

Hi. So just on the TO case, the transmission case, you're assuming kind of returns similar to what you get in the California regulated business?

Steve, it's Kent. We have filed for 11-26. Over the last few years, we've just been telling people when they think about guidance, particularly given the relative size of electric transmission to the rest of our business, we've been telling people to do an approximation of comparable authorized return as at the PUC. But the proceeding and the ROE is still under way at the FERC.

Okay. And then just going back to the emails and communications, aside from kind of -- I guess, do you still owe anything per the process to anybody beyond the 65,000 emails you already filed? Is there something that you still have to provide?

I'll ask Hyun to answer that. As I said, we get discovery requests in all of our proceedings, but we're pretty much up to date on all the things we owe.

So Steve, as Tony said, the request from various parties for discovery and information is ongoing, so I would say we're current, but I'm not sure that we're completely done with this.

Okay. And then I guess Edison at times talks about kind of other programs that could add to their current rate base plan, things like storage and the like. Do you -- and obviously something like this electric vehicle program you announced. Do you have some of those that are out there that would be kind of additive to the plan as it is now?

Well, we do anticipate that we'll be doing storage. We just went out for bids for proposals on storage, but we also have the opportunity to invest in storage. Quite honestly, we're early on and trying to figure out what technologies make sense and what don't.

We have not factored in any storage investments into our capital plans right now. It's just too early to do that. The other things around upgrading the grid, they're kind of built into our forecasts of -- as we upgrade our system, we'll be upgrading to the newest technologies.

Okay. Thank you.

Thank you. Our next question comes from the line of Michael Lapides with Goldman Sachs. You may proceed.

Hi, guys. Just real quick, on electric transmission, where do you think you are in the cycle in terms of the level of electric transmission capital spending each year? Meaning, do you think 2015 is a normal level and kind of a good run rate longer term? Do you think there's things that could make that number significantly higher going forward or significantly lower going forward? And if so, what would those -- what would those type of drivers be?

Michael, it's Kent. We really only have guidance out to electric transmission for this year. So I can't really give you a view beyond 2015 at this point.

I'm just -- I'm not really looking for a number, more drivers. Like, how do you think about just kind of where in the cycle, and maybe not just for you, but kind of for the industry or for the State of California?

Michael, what I would say is, of course, the major projects are lumpy. They come and go as the needs go. I think you can assume if we continue to build the renewables portfolio in California to support that, there's going to be transmission investments. Whether we make those investments or not depends on a number of things.

There's a bidding process in California. We did win a bid to jointly develop a new project that's under way. In the future, we'll look at opportunities as they come along, but you can't assume we're going to do them, maybe other parties it will build the transmission to support renewables, then we just purchase the services.

Got it. Thank you, Tony. Much appreciated.

Thank you. Our next question comes from the line of Andy Levi with Avon Capital Advisors. You may proceed.

Good morning.

Good morning, Andy.

I think most of my questions were asked, except two housekeeping. I did see that you must have ticked the top on that SolarCity stock when you sold it, so very good on that. We'll have to give you a job here, too. Just two housekeeping things.

Just on the $5.5 billion of CapEx for this year, do we back out any of that that's not recoverable? Like is part of that like PSEP costs or something like that, so it's not -- it doesn't all go to rate base, I guess is the question?

So this is Dinyar. I think if you look at slide 7, you will see the separately funded piece of $100 million for PSEP. That's spending that we will be doing in 2015 associated with the charge we took in 2014. So that would be the component.

And that's the only piece?

Yes.

Like, none of this stuff on page 8 gets backed out? Or are those expense items?

No. So the way the accounting works is you take a charge for costs that you anticipate you will not recover on the capital side. So we haven't yet spent the capital, but we've had to take a charge in 2014. That capital will be spent in the future years.

All right, but that -- for rate base purposes, we should be adding $5.4 billion less depreciation and deferred taxes to our rate base?

You could think of it that way. We've already given you a rate base guidance.

I understand, I understand. I just like to do it myself, too.

Sure, yes.

Okay.

That sliver would not be recoverable.

Okay. And then the second question, just on the insurance recoveries. Kent, is there like -- you've collected 112 in 2014. I don't know what the total amount is since the inception of the recoveries. But is there -- go ahead. I'm sorry.

Andy, the total is $466 million to date.

Okay. $466 million. And what's the maximum you can recover?

Well, we can -- we can recover the full liability, which we have booked at 557 now, I think. 558, excuse me. And then also the litigation costs associated with the third-party liability.

So how much could that potentially be?

That, we haven't separately disclosed.

So it's up to 558, plus whatever litigation costs. And there's no maximum on that litigation cost?

That is our estimate of the litigation costs. Excuse me. The litigation costs, there is no maximum. It's whatever was required to pursue the claims.

I think we have time for one more question.

Okay. Thank you.

Thank you. And our next question comes from the line of Ashar Khan with Visium Asset Management. You may proceed.

Good morning, and great quarter. Kent, can you give us an idea like last year in the equity piece, there was a component which came in because of the late timing of the GRC, so in this year's equity $400 million to $600 million, can you give us some rough estimates, what could be the impact? I'm assuming there's an impact for delayed GT&S rate case which is coming in later than should have come in at the beginning of the year. Is there somewhere you can guide us on that?

Well, I'll say if you actually look at slide 9, we give some of the drivers to walk you from last year to 2015 and the equity need. And you're right. The first item is kind of a timing item related to when during the year you actually do the financings, but also in the case of last year, the fact that the General Rate Case was delayed until fairly late means we had a lot of months during the year where we otherwise had to increase our equity component a little bit in order to manage our overall equity ratio.

What you really asked about is, is there a similar phenomenon in 2015 for the gas transmission case. And there is. That's absolutely true. It's probably not the same magnitude, but there is a similar phenomenon, which otherwise will cause us to have a little more equity this year as compared to the subsequent year when you have the revenues throughout the year.

The other drivers up here, just to quickly go over them, we do have because of rate base growth, we do have higher earnings in 2015. So that slightly reduces the equity need this year. We also have lower unrecovered costs. We've talked about that on the call, similarly reduces the equity need. But we have higher capital expenditures, and that's the one factor that goes in the other direction.

All right. We would like to thank everybody for participating today, and we'll end the call now.

Thank you, ladies and gentlemen, for attending today's conference. This will now conclude the call. Please enjoy the rest of your day.