PG&E Corp (PCG) 2024 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the PG&E Corporation fourth-quarter 2024 earnings release.

(Operator Instructions)

As a reminder, today's call is being recorded.

I will now hand today's call over to Jonathan Arnold, Vice President of Investor Relations.

Please go ahead, sir.

Good morning, everyone, and thank you for joining us for PG&E's fourth-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.

First, I should remind you that today's discussion will include forward-looking statements about our outlook for future financial results.

These statements are based on information currently available to management.

Some of the important factors which could affect our actual financial results are described on the second page of today's earnings presentation.

The presentation also includes a reconciliation between non-GAAP and GAAP financial measures.

The slides along with other relevant information can be found online at investor.pgecorp.com. We'd also encourage you to review our annual report on Form 10-K for the year ended December 31, 2024.

With that, it's my pleasure to hand the call over to our CEO, Patti Poppe.

Thank you, Jonathan.

Good morning, everyone.

I know last month's heartbreaking fires in Southern California are on your mind, and we will address your concerns about them today.

But first, please allow me to cover our fourth quarter and full year results.

As we like to say, performance is power, and in 2024 was another year of powerful performance at PG&E.

On slide 3 are some of our 2024 highlights.

Our core earnings per share for the fourth quarter were $0.31, bringing us to $1.36 for the year, and 11% growth over 2023.

We've updated our 2025 guidance range with the midpoint up 10% from our actual 2024 result.

This bumps our 2025 range by $0.01 to $1.48 to $1.52.

There's no change to our EPS growth guidance for 2026 to 2028, which remains at least 9% each year.

As you saw from us in both 2023 and 2024, future year growth will continue to be based off our actual results.

With our December issuance, the equity need to fund our $63 billion capital investment plan through 2028 is fully behind us.

In December, we also provided you with clarity on our dividend plans.

Our annual dividend rate for 2025 is $0.10, up from $0.04 in 2024.

We also shared our intent to reach a dividend payout ratio of 20% of our core earnings per share by 2028 with consistent annual increases.

Clearly, this implies a growth rate well in excess of our earnings.

We continue to build our cost reduction muscle, saving 4% in non-fuel O&M costs in 2024 on top of savings achieved in 2022 and 2023.

And we're delivering on our affordability commitments.

In fact, assuming similar usage, combined residential gas and electric bills remain flat for January 2025 compared to January 2024.

Moving to slide 4.

This should start to look familiar to you. 2024 is now our fourth consecutive year of delivering predictable premium results for you, our investors while we are also delivering more for our customers through our simple affordable model.

As you've seen, we've achieved or beaten our earnings guidance each year, and we're building a track record of consistently rebasing future years off our actual results.

The key to our delivery is the PG&E performance playbook coupled with conservative planning.

Of course, there will always be ups and downs within a given year, storms, regulatory outcomes, economic factors.

Our core capability is to weather these ups and downs, delivering consistent, predictable premium results year in and year out.

As Carolyn will discuss in a minute, in 2024, we were able to redeploy $0.16 for the benefit of our customers and deliver 11% earnings growth for our investors.

Even though the recent devastating fires have been outside our service area and our equipment was not involved, they reinforced the importance of our stand that catastrophic wildfires shall stop.

Based on the physical protections we have in place today, our system has never been safer.

And we are working to make it even safer as we continue to implement our wildfire mitigation plan and learn from every ignition.

Turning to slide 6.

In addition to physical safety, we understand that you need to feel safe committing your client's money to California.

We know that they, PG&E shareholders and bondholders, are often Californians, including pension holders, teachers, firefighters and police.

We want them to feel that their money is safe when invested in a California utility.

While the utilities have made significant strides in risk mitigation, it seems clear that timely reforms are needed to extend the AB 1054 framework given evolving views of a worst case fire.

We hear loud and clear the market's concern about risk exposure beyond the $21 billion wildfire fund, as well as implications for the utility liability cap under the current statute.

You can be assured that building and improving upon the core AB 1054 protections already in place is a critical priority for our team.

At the same time, it's important to acknowledge that California's policymakers have established an industry-leading model to meet the needs of investors and victims of catastrophic wildfires.

In 2019, the legislature passed Assembly Bill 1054, which builds upon 2018 Senate Bill 901, and the state continues to prove its resilience and ability to adapt.

As CPUC President, Alice Reynolds said in reference to the Southern California fires at a recent commission meeting, "I expect the state to move forward on further solutions as these ever dynamic challenges continue."

Our model today was created first and foremost to provide important protections for the victims of catastrophic wildfires.

The state wildfire fund assures compensation for victims of utility-caused fires while helping to ensure that utilities can continue to raise capital efficiently and affordably, enabling needed investment in safety and climate resiliency.

For those newer to the story are looking for a refresher, the AB 1054 framework is based around an enhanced prudency standard which supports the recovery of socialized wildfire losses incurred by utilities under California's no fault inverse condemnation strict liability construct.

AB 1054 also provides a cap on utility reimbursements back to the wildfire fund in the unusual event that the utility is found to have been imprudent.

A key statutory requirement for issuance of an annual safety certificate is having an approved wildfire mitigation plan.

These WMPs are subject to approval by the Office of Energy Infrastructure Safety, our dedicated safety regulator.

They're extremely comprehensive and subject to an intense and very public regulatory process.

Getting one approved is no small undertaking and rightly so, since they provide utilities with clarity on what's required of them to establish prudency up front and also a yardstick to measure prudency if later challenged.

This is a 180 degree change from the pre-AB 1054 world where the onus was fully on the utility to establish prudency after the fact.

Importantly, California's prudent manager standard is not a perfection standard.

The model gives the utilities clear alignment with the safety regulator to continually improve upon mitigation strategies, exactly what the industry-leading meteorology and operations teams at PG&E strive to do each and every day.

This model provides clarity around what constitutes prudent operations and a clearly defined framework for quantifying the consequences of failing to perform as required.

You can see the proof points.

Working as intended is the multi-year wildfire mitigation plan process, the issuance of annual safety certificates, and our monthly Dixie liquidity draws from the wildfire fund facilitated through the California Earthquake Authority.

In fact, our latest safety certificate was issued in December and came ahead of schedule.

No other state has such a structure in place today, and California's approach has allowed our utilities to become industry leaders in wildfire mitigation.

At the same time, I appreciate that the financial community is asking important and urgent questions about the resiliency of the California model in light of recent events in Southern California.

I know that our state leaders are hearing your concerns, and we'll keep advocating that key tenets of AB 1054 be upheld and enhanced.

Ultimately, our construct is designed to serve the people of California in the event of loss, and it is this which gives me confidence that we will make the necessary timely improvements to ensure that our utilities remain in a strong position to efficiently finance continued investment in safety, growth, and other key state priorities.

California policymakers have a track record of taking constructive action, especially when Californians benefit, as evidenced through SB 901 in 2018, AB 1054 in 2019, bills to extend operations at Diablo Canyon and support for undergrounding in 2022, and SB 410 supporting accelerated cost recovery for energizations in 2023.

These actions acknowledge the legislature's understanding of the instrumental role that California's investor-owned utilities play in enabling our state's growth and prosperity.

Meanwhile, we are building trust in our communities by continuing to operate the electrical system safely and develop the necessary infrastructure to meet changing climate conditions.

As shown here on slide 7, our foundations of physical safety starts by understanding the risk each and every day.

This situational awareness is propelled by data and experience.

It informs our wildfire mitigation plans and our layers of protection, which importantly cover both our local distribution grid as well as our high voltage transmission system.

I used to call public safety power shutoffs or PSPS, our mitigation of last resort.

In fact, PSPS is our first layer of protection when weather and fuel conditions demand a proactive de-energization of our power system to keep customers safe.

In 2024, PG&E called 6 PSPS events, all of them executed without safety incidents, and four of which included some of our transmission system.

Thanks to our efforts to sectionalize the system, only approximately 50,000 customers were impacted over the course of these events.

We also just completed our third full year of EPSS deployment.

This advanced technology is now in place on 100% of our distribution circuits in high fire threat districts and in select adjacent areas.

As I said, it's upon this foundation of safety that we move forward.

Ultimately, we are here to serve the residents of Northern and Central California, providing safe and reliable power to our customers, both big and small.

As you know, it's not just a bread and butter new energization request we're seeing.

Like others, we're also seeing increasing demand to power data centers and perhaps surprisingly, other large load like warehouses, electric fleet depots, and manufacturing growth in our service area, including in and around Silicon Valley.

Last June in New York City, we discussed beneficial load and said that we expected to provide an update on this call.

Today, we're sharing our progress.

This leads me to my story of the month here on slide 9.

Many of you have asked how much of this demand is real.

As of now, we have formal applications representing 5.5 gigawatts of new potential data center load moving through our pipeline.

This is just the data center load.

As I've said before, there's no one silver shovel.

Ours is a no big bets load growth story.

It's a thoughtful, deliberate process of pursuing load growth, what I call the Goldilocks approach.

Not so little that it doesn't matter and not so much that it results in cost shifts to residential customers.

And we see a clear path to lowering customer bills as a result of adding what we call beneficial load.

We're getting more calls every day as customers learn California and PG&E specifically are open for business.

We too are learning a lot from this process.

As of last week, of the 5.5 gigawatts in our pipeline, 1.4 gigawatts has passed through the preliminary engineering study phase, meaning these potential customers now have preliminary cost estimates and proposed time to power and have agreed to advance to the next phase.

These 1.4 gigawatts come from 15 customers, including hyperscalers and developers, and represent 27 unique sites.

This beneficial load is projected to come online as early as 2026, and we forecast that over 90% will be online before the end of 2030, driven by customer requested time to power and PG&E's responsiveness.

In order to more efficiently and uniformly address these electric service requests and improve our ability to meet customers requested in service dates, last November, we proactively filed an application with the CPUC for approval of Electric Rule 30.

Importantly, in this filing, we have proposed upfront funding from large load customers, something which they also support in the name of accelerating our ability to serve them.

The premise is that the large customer takes the risk if their forecast load does not materialize over an initial 10 year period, protecting our existing customers from having funded a stranded asset.

We estimate that for every 1,000 megawatts of new electric demand from data centers, customers may save between 1% to 2% of their electricity bill, creating the headroom to make our grid safer and more resilient at a lower cost.

This turns my story of the month into our story of the next decade of growth.

We are excited to be partnering with these customers, serving the innovation capital of the world, and doing so in a way that positively impacts the people of California.

This is a simple, affordable model picking up speed.

With that, let me turn it over to Carolyn.

Thank you, Patti, and good morning, everyone.

Today, I am pleased to cover three main topics with you.

First, our full year 2024 results.

Second, a reiteration of our five year capital and financing plans.

And third, how we continue to build upon our foundation of financial safety and execute against our simple, affordable model.

Starting here on slide 10.

We're showing you our 2024 earnings walk.

Our core earnings of $1.36 are up 11% or $0.13 over 2023.

The main driver was higher customer capital investment, which contributed $0.26. This includes the benefit of the higher 2024 ROE of 10.7%, which we previously told you we would redeploy, and we did.

Non-fuel O&M savings contributed $0.07 to our results and included savings achieved for various programs such as improving our inspections, as well as lower contract spend enabled by strategic sourcing.

We are all about the ends here at PG&E, and you can see that with our 2024 results.

We've been very clear about our commitment to share any upside with customers and investors.

Our redeployment for the full year was $0.16 and went towards programs that support risk mitigation, such as inspections, gas line corrosion and mitigation, and distribution maintenance.

Redeployment also results in de-risk in future years, helping us deliver consistent and predictable results for customers and investors.

Turning to slide 11.

There is no change to our five year $63 billion capital plan through 2028, and we still see an incremental at least $5 billion of additional customer investment needs.

As we've discussed before, there's no shortage of customer beneficial work on our transmission and distribution systems.

The second phase of our SB 410 application is still pending, and as Patti discussed, large load demand applications are growing.

Here's how we're thinking about this incremental demand.

First, we could simply add to the $63 billion plan.

Second, we could high grade or prioritize investment tied to new load, which can also improve customer affordability.

And third, we could extend the duration of our sector leading rate-based growth story.

As we get approval for incremental capital, including in 2025 and 2026 through our pending SB 410 filing, you can expect us to revisit the work plan and to carefully weigh up the merits of these three distinct options or a combination thereof.

All three of them offer pathways to make an already strong plan even stronger.

We have also not changed our five year financing plan as shown here on slide 12.

I am pleased to remind you that in November and early December, we took advantage of favorable market conditions to complete a $2.75 billion equity offering as well as equity content junior subordinated notes.

These combined completed the $3 billion equity funding shown here.

With our equity needs through 2028 de-risked, we can focus on providing affordable and resilient power to Northern and Central California.

Our financing plan was built to support achieving investment grade ratings and prioritizing customer capital investment.

Our brand of thoughtful conservatism is also built into this plan.

We maintain flexibility both with our low dividend and our commitment, not obligation, to pay down $2 billion of parent debt.

In terms of financial safety, we've been laser focused on building a healthy balance sheet and reaching investment grade.

Our December equity issuance put us back in compliance with our authorized regulatory capital structure ahead of schedule.

We also benefit from our differentiated dividend payout.

We believe 20% by 2028 is an appropriate sustainable level for us, given our near term balance sheet priorities and need for customer capital investment on our system.

Our robust capital plan contributes to cash from operations, which in turn drives balance sheet health and investment grades supportive credit metrics.

As you can see here on slide 13, we more than doubled operating cash flow from 2022.

The GRC has been a key driver of this improvement as well as the interim rate relief we've seen from the CPUC.

We also reached our target of mid-teens FFO to debt during 2024, and our forecast shows continuing cash flow growth in 2025, consistent with our strong rate-based growth.

Turning to slide 14.

As you know, we're actively pursuing investment grade ratings and expect the recent and continuing improvements in our balance sheet and cash flow just discussed, ultimately to be reflected in actions by rating agencies.

As we consider ways to strengthen the AB 1054 construct, we continue to reinforce with policymakers the role state policy can play in ensuring the financial health of the state's investor-owned utilities, with customers being key beneficiaries.

Our simple affordable model shown here on slide 15 continues to deliver results for customers.

It's how we make our industry-leading capital growth affordable.

As I've said before, it's a no big bets approach.

We work each element, each and every day, O&M savings, where we continue to exceed our annual target, beneficial load growth approached with a competitive mindset and efficient financing opportunities aggressively pursued, all on the behalf of our customers.

You already heard from Patti how we're enabling beneficial load growth, the second element here.

On the efficient financing element, lower interest expense from improving credit quality and other financing opportunities help make our critical customer investments more affordable.

I'll remind you, our five year plan does not assume the savings from the DOE loan nor achieving investment grade.

Turning to slide 16.

I am very pleased to share with you that our 2024 non-fuel O&M savings are a 4% reduction over 2023, again exceeding our 2% target.

We've now saved over $200 million in O&M expense in each of the past three years, including saving over $500 million in 2023 and nearly another $350 million in 2024.

I am now confidently calling this a trend.

In 2024, we achieved savings in our inspection program by utilizing a risk informed checklist to focus on conditions that lead to asset failure.

We also found savings through contract rationalization and optimization, and we continue to save on insurance premiums.

This is a core capability that we've built here at PG&E which can deliver future savings year after year.

I continue to see abundant opportunities in 2025 and beyond.

We will file our General Rate Case application in May this year, and I look forward to reflecting new savings in our forecast and passing future benefits on to our customers.

I see this upcoming filing as another opportunity to do what we say.

By delivering on stabilizing bills, we continue to build trust with our regulators.

Again, performance is power.

In the meantime, customers are starting to see the impacts of our continued efforts to stabilize bills this year.

Assuming similar usage, combined residential gas and electric bills remained flat January 2025 compared to January 2024.

Turning to slide 17.

We have an active filing year on the regulatory front.

In addition to our GRC, this year, we also plan to file our 2026 cost of capital application as well as our 10-year undergrounding plan.

Lastly, here on slide 18 is a reminder of our value proposition, consistent, predictable performance, serving our customers and delivering for our investors. 10% rate-based growth through 2028, 10% core EPS growth in 2025, and at least 9% core EPS growth each year from 2026 through 2028.

With that, I'll hand it back to Patti.

Thank you, Carolyn.

I am confident about this next phase in our story here at PG&E.

What was true about PG&E as we entered 2025 is still true today.

We're building a culture of performance built on solid foundation of physical and financial safety.

In a recent message to my co-workers, I reminded them that the most important thing for us to do today is keep doing our work really well and improving it every day.

Given the previous actions taken by policymakers, affirmative statements from the CPUC Chair, and recognition that utility infrastructure investment is essential for California's future and safety of her people.

I am confident that we, as a state, will reward your trust in California.

We know that when you trust the California regulatory construct and the people who oversee it like I do, you will see that there is no other utility in the sector offering our customer focus, our growth, our operational capability, and our valuation upside potential.

We are a vital piece of California's infrastructure story, and there is no one better positioned to serve our hometowns at this scale than this team.

With that, operator, please open the lines for questions.

(Operator Instructions)

Shar Pourreza, Guggenheim Partners.

Patti, so just starting off on the California wildfire construct.

I mean the fires in the South have created a potential stress for 1054.

Is there a recognition of the wildfire funding problem, or do you think we need to see more progress on investigations and wild fund like payouts to start to get clarity if there's any constructs that need to be changed?

So is the state currently working on any improvements, regulatory or legislatively, or are they taking a wait and see approach?

Yeah.

Shar, thanks for the question.

This definitely has hit the radar of our policymakers and leaders here in the state.

I think we all agree that first of all, AB 1054 fundamentally is a very good construct and it's industry leading and the only state in the nation who has this kind of comprehensive construct.

However, the question about the fund and the longevity of the fund given this new potential of an extreme case fire has gotten the attention of all of us.

And so we're in good discussions with people about that.

I'm not sure.

Maybe you've heard the news, but Ann Patterson has a new role beginning March 3.

Ann's going to be the senior counsel to the governor on wildfire issues.

I think that's a sign that the state recognizes there's importance and has been involved with AB 1054 from the beginning.

We have a lot of confidence in her.

She's a very pragmatic problem solver, and we're grateful for the state's recognition that this issue needs a real leadership.

And then just and you noted on the load expectations for data centers stepping up to 5.5 gigs, but some of that ramp time is in the current decade.

I guess what's driving that?

Is there more investment needed on the grid side to accommodate the load?

And is there any regulatory constructs that could help accelerate some of that interconnection like SB 410 did for distribution?

Yeah.

Great.

This is something obviously we're pretty excited about.

When we talked in June, we had input or interest of 3.5 gigawatts.

We're now up to 5.5 gigawatts.

And that's just the data centers.

We have incremental interest from other types of customers, non-data center related.

The stage that we're at, we've talked about our cluster study we've been doing.

Of the 1.4 gigawatts, 740 megawatts within that are from that cluster study.

Our ability to simultaneously engineer these demands and requests -- the demand and requests allows us to better give indicative pricing, which we've had very positive response from the applicants.

And so as the -- as we continue to fill that request and those -- complete the study, we have moved forward and we're continuing to move forward.

So the only limiting factor right now, particularly on the demand side, is the ability to build up the transmission infrastructure.

We don't see a need for new generation for the first about 4 gigawatts of demand.

We'll be building out that infrastructure.

We have agreed upon timing with the customers.

And so it's really strictly driven by customer demand and their timing and our timing, and it's matching up really well.

So as we complete final engineering, then we move into construction.

We'll have -- a key milestone will be interconnection requests that are signed, but we have signed agreements getting us into this final engineering phase.

And so we're very optimistic and hopeful.

I think it's been a big change for PG&E.

I think customers thought we weren't able to serve this kind of large load and our ability to complete the engineering studies and show our customers what we can do and have good indicative pricing that they like has been a real windfall, I'd say.

And I think we're excited about what it means both for what's in the pipeline today and additional load that will come.

And as we said, we expect about 90% of that 1.4 gigawatts to be online by 2030.

Steve Fleishman, Wolfe Research.

So I guess just following up first on it's great to hear Ann and in that new role.

Obviously, it'd be helpful to get more certainty on dealing with maybe any changes on AB 1054 by the fall.

And I guess the session goes usually till like August.

Can you just talk about legislative process and timing and sense of urgency?

Yeah.

Steve, I -- we are definitely not ruling out improvements before year end.

We know that there are urgent assurances that need to be made.

The reason why I'm optimistic that we can find a forward action here in the state is that the fund specifically benefits those harmed by wildfire.

And so it's important to our policymakers that those who are harmed have access to funds.

I think that is an important piece of the logic.

And the state really clearly understands and demonstrated it by implementing AB 1054 in the first place, that we need to attract a capital to build out the infrastructure.

And so the idea that we would just let it be feels very unreasonable to me.

I think that the idea that furthering and making the necessary adjustments to what's already a strong construct is in the best interest of California.

That's how we attract the infrastructure capital.

So that we can make the system safer.

That is the whole point.

And again, I point to the track record here in the state of all the legislative activity over the several years starting in -- with SB 901 and then AB 1054 and then all the incremental legislative activity that's happened in the last couple of years supporting growth and energization and an extension of Diablo.

These are all things that point to the state's recognition, our policymakers's recognition that the investor owned utilities are an important piece of attracting capital for necessary infrastructure here in California.

Just one other question just related to the Eaton fire.

I mean the circumstances that have occurred seemed to be kind of a bit abnormal set of circumstances if they did happen.

And I guess first of all, it is related to transmission.

It does seem to maybe be also related to an idle line that hadn't been used in a long time.

Maybe you could just -- since we're always so focused on distribution and undergrounding and things like that, just talk about anything that you see related to what you've been doing in your wildfire mitigation that's kind of relevant to know given these circumstances we've seen so far and anything you might change in terms of what you're doing?

Yeah.

Transmission has always been a part of our wildfire mitigation plans and our public safety power shutoffs.

I shouldn't say always, but in the recent years, we've obviously focused on transmission.

We don't know what happened on the Eaton fire yet and we're really not going to speculate about that.

We know what everybody knows, and that's what's in the public domain.

But what we know is that we have transmission safety protocols that we exercise.

We know that in 2024, we had six PSPS events and four of them included transmission.

We know already in 2025, we've had three PSPS events, and they all included transmission.

These are safety protocols that we have had in place and we utilize routinely and we are not afraid to use transmission PSPS as a first line of defense when the conditions warrant.

So for example, in 2025 here, we had 70 kV line and a threshold wind speed of 55 miles per hour.

That's our threshold.

We exercised that PSPS for that reason.

So I think what's important to know is as we look at our systems, our practices, our processes, we do look at idle lines.

We've done extensive grounding of retired or transmission lines.

So we use all of those practices as part of our holistic suite in our layers of protection.

And we have a lot of confidence in that.

All that to say, we are never satisfied and we will not stop being curious about what else we can learn.

And when the investigation is complete, we will learn everything we can from that and implement those.

I'll just close with this point.

AB 1054 is established because it recognizes we can't take risk to zero and we can't take risk to zero overnight.

So in the event of a catastrophic event, that's when the protections of AB 1054 kick in.

AB 1054 is working.

If you point to the Dixie fire, you can see that we had, in 2021, the second largest fire in the state's history, and AB 1054 is working as it's supposed to.

We've had offsetting receivables for every liability.

We've been able to draw from the wildfire fund very routinely.

The construct is working.

And I do want to reinforce that.

I also want to be clear that we understand that investors are concerned about a catastrophic event like Eaton, and we'll learn and we'll make necessary changes to make our existing construct even stronger.

That's really what our focus is, Steve, in addition to all of our layers of physical protection that we continue to implement to keep our stand that catastrophic wildfires shall stop.

Nicholas Campanella, Barclays.

So I just wanted to kind of clarify and follow up on Steve's question there.

Just it does seem like there's some competing interest from the insurance industry which is also suffering losses.

And there is a protracted nature of wildfire drawdowns here.

You mentioned in the meantime, AB 1054 is working exactly how it's intended to.

Just what's the risk of this being like a multi-year legislative effort rather than something that gets done at the end of August?

Could you just kind of frame your confidence level there?

Yeah.

Thanks, Nick.

We're not ruling out.

At least think of it as a stage one resolution here yet this year.

We agree there are bigger issues that I think the state will be grappling with in response to, for example, the Palisades fire, that not all catastrophic wildfires relate to utility equipment.

And so what is the state's posture for people who are harmed in the event of these extreme weather condition driven events?

How do we have a construct that works in California?

And I do believe that's why the state is looking to Ann to think about wildfire -- Ann Patterson to look at wildfire issues broadly.

But I don't think that necessarily -- a bigger issue being reviewed does not necessarily mean that we cannot get an incremental fix here in this calendar year because we know it's important to attract investors in capital.

We know it's important to regain the confidence of those who have concerns about the California construct.

So that's certainly the position we'll be taking and really encouraging our policymakers to have a timely response.

And clearly, just the cost of capital in the state has changed in the last month and I'm just wondering if you can kind of talk about how that impacts your upcoming filing that's expected.

And is there any scenario where that would maybe get pushed out, or do you see yourself still coming in at this point?

Yeah.

Our plan is to continue to file a strong case here in March, and we'll be in line with our other IOUs.

The state has indicated they don't want to have a wildfire adder.

But there's no disputing that interest rates are up and the actual cost of capital is up.

And so we'll be making a strong case.

Obviously, cost of capital is an important proceeding, and we feel like we'll be making a strong and effective case when we make that filing.

Richard Sunderland, JPMorgan.

Thinking more broadly about the fire issues, do you think the firefighting capabilities in the region are sufficient for growing wildfire risks, and are there ways you could invest capital in support of those efforts?

Wildfire fighting is in the same, I would say category with our always commitment to continue to learn.

Our firefighters here in the state are the best in the world.

Our fleet is the best in the world.

And where we fall short, we're going to continue to learn as a state.

I don't think that we need to as a utility invest in wildfire fighting resources, but I do think that continuing to help our communities fire hardened is an important priority.

And you've got -- the risk of ignition is one thing.

The risk of spread is a wholly different thing.

And the risk of spread needs to be mitigated certainly by our situational awareness because we give our AI cameras and our weather stations give early notification to those firefighting resources so they can get on it earlier, which is always an advantage.

But our communities need to be hardened.

Our homes need to be built to codes that are fire prevented.

We need to eliminate the hazards that surround our homes, whether it's vegetation, whether it's fencing, whether it's the roof structure.

I think we here in California need to come to terms that our citizens have an obligation to make their structure safe so that our firefighters can do what they do and do it better.

So we're all in this together and we stand for California being a place where families can prosper and be safe and not be worried about wildfire risk.

And then turning to the data center pipeline update.

Does the $0.5 billion to $1.6 billion of investment per gigawatt framework still hold?

And is that the way to think about the 1.4 gigawatts identified in final engineering?

I guess more broadly, just when do you think you'll have final clarity on the investment needed to support that?

Yeah.

We do think that construct holds.

And let me just remind the rest of the listeners that the $0.5 billion to $1.6 billion is what we've said we could invest and still deliver than residential.

The remaining customer cost savings in the 1% to 2% range, which is what makes us so excited about this as it fits into our simple affordable model.

We can deliver this new large load beneficially for all customers and reduce rates for all.

Now in that construct, we'll have each project gets reviewed to make sure that the costs are appropriately borne by the large load.

And so our Rule 30 filing establishes -- our proposal is to establish and it was supported by the large load customers that large load customers bear the risk of any kind of stranded asset in the first 10 years.

So the load needs to materialize.

They put the money up front now.

Now as it relates to our capital plan, I'll let Carolyn hit on how we're going to fit that new additional capital into our plan.

Yeah.

As we look at these new projects from data centers and the impact on our capital plan, and it's very similar to how we're thinking about any funding that might get approved from SB 410.

One thing to note, as we said this in our earlier remarks, you should not assume that we would just add to our capital plan of $63 billion.

We have options.

That is one option, but we have other options.

And these other options include just thinking about how we would might reprioritize what we call high grade the plan and look at particularly the data center projects.

If they are impacting affordability, we might bring those in instead and replace another project or we could extend the duration of our sector leading rate-based growth plan of 9% to 10%.

So those are the three options.

And then I'll just remind you, on top of that, we have flexibility in our plan because we still have the $2 billion holdco debt pay down in there, which is again not an obligation but just a commitment.

So we've got plenty of flexibility and options.

Julien Dumoulin-Smith, Jefferies.

Maybe to follow up and build off of -- maybe building up off of what's been said thus far, do you want to speak to the prospects of a new fund or recontributing to the fund?

It seems like a very difficult prospect to see, i.e., stand up a new fund anew here.

Can you speak to what other avenues might exist or how you see this coming together?

I mean municipals were not part of the initial conversation.

I'm curious how that fits into the calculus today, especially given the more urban nature of what's just transpired.

But I would love to like tailor in and fixate for a quick second on the fund, and then I got a quick follow up on that.

Yeah.

I think there's lots of options that we'll be looking at on the fund.

I think one thing to remember, and we will continue to advocate strongly, we do not think there's a good case that shareholders should contribute to that fund because it's contrary to the key principles of inverse condemnation that a utility -- when a utility is prudent, these are recoverable costs.

In fact, Alice Reynolds reiterated that at a recent commission meeting.

So I think it's important that is a principle that underpins and the AB 1054 objective was to attract capital to the state.

And so we would argue that having more burden on shareholders will not attract additional capital to the state.

So we'll be taking a pretty strong point of view on that as we consider what happens to the fund.

There are simple things that can be done to the fund as simple as extending the customer payment over a longer period of time.

It's a more complex thing that includes other parties, but all of those things will be considered and we'll be standing for the best outcome for those who have suffered loss because that's what the fund is serves as well as what's in the best interest of investors because we need to attract that necessary capital to build our system.

And don't forget the most important thing that that capital goes to is to make our system safe.

And so when we invest in infrastructure with those capital dollars that our investment community contributes, that's the most -- that's the best use of investors' dollars to make our system safe.

Yeah.

I hear you loud and clear on those points.

Maybe just a quick follow up.

I mean how do you think about your own filings and efforts?

I get that OEIS is involved here too, but how do you think about the totality of the wildfire undergrounding efforts today?

And then in parallel, how do you think about de-risking, shall we say, more urbanized or quasi-urbanized environments, given maybe the nature of this last fire and rethinking your investment plan here?

I get that it's already in play.

Yeah.

The focus of our wildfire mitigation plan is to reduce ignition risk.

We then have situational awareness that helps us identify and support the firefighting resources to get to where an ignition occurs as fast as possible, again, our weather stations and our cameras.

But our primary objective is to prevent the ignition risk.

We've had dramatic improvements in that.

I would argue that we have one of the most industry leading wildfire mitigation plans and execution of that plan.

But we're not finished, and we're going to continue to be curious about how to make it better every single day.

And again, remember, the AB 1054 is not a perfection standard.

It is an expectation that we complete our work as we said and that our practices are in line with standard best practices of a prudent utility operator.

And we stand very firmly that we extend well beyond being prudent.

We would consider ourselves industry leaders in helping to keep our customers safe and reducing ignition risk.

And we'll continue to be curious and implement new technologies.

We've implemented the down conductor device technology and over 1,500 new devices in the system.

We've got additional technology that enables us to see faults even before they happen and failures of our equipment before they happen.

This is industry leading technology we're deploying to keep our customers safe.

And that's a very important part of our wildfire mitigation plan.

And we continue to learn about how best to prevent those ignitions.

Anthony Crowdell, Mizuho.

Just one quick one and then a follow up.

I guess on the IG rating, well, we thought, Moody's typically puts it on a year review and I think it was positive outlook last February.

I'm wondering if you could share any conversations you've had with Moody's following the events in Southern California.

Yeah.

Thanks, Anthony, for the question.

That's one that's top of mind for us, as you can imagine maybe just purely on the merits as we think about our position.

We've seen our credit metrics obviously improve, and we're really proud of our performance and our FFO to debt has also improved.

We did our December equity issuance.

We've made progress on the wildfire risk mitigation.

We have strong growing cash flow.

We have the conservative dividend policy, all extremely supportive of investment grade ratings.

We've had these conversations with the rating agencies.

We've talked about our progress.

And they seem to be taking a very measured approach and don't seem inclined to rush to action, which we appreciate given the circumstances.

They have a lot of the same questions that US investors have and are looking for signals from a policy maker support.

And we still remain confident and after all those conversations that the rating agencies will recognize our progress in time.

We were hoping maybe even for a two notch of grade.

We think that's absolutely off the table, but we do believe that we will be recognized for our performance and the conversations have been productive.

Would it be fair to say that I think of all the questions earlier today are more on the wildfire fund, whether it's a size or a replenishment mechanism that may have to be resolved prior to a credit agency action or I'm really jumping the gun with that?

Yeah.

I'm not sure.

I think we'd need to talk to the rating agencies as to what their signal.

I think they're looking for signals like we are and like you are from the policymakers, not necessarily, I think an end solution.

And we don't want -- this is Patti, Anthony, we wouldn't want to forget though that equity issuance that we executed at the end of last year had significant beneficial impact on our credit metrics.

And so even that, as Carolyn said, stands on its own separate from the wildfire risk.

We continue to be a few notches below other IOUs here in the state.

And so we can close the gap on our financial metrics as the state gets determined -- as the state resolves the issue with the wildfire fund, I think our credit improvement, our balance sheet, health, and our other aspects of performance are being noted by the credit agencies.

Carly Davenport, Goldman Sachs.

Maybe just two quick ones for me.

First just on the O&M reductions.

Those came in again strong north of the 2% that you have embedded in both the long term plan and the 2025 plan.

I guess how would you just think about cadence of potentially revisiting that assumption?

Is that catalyst to GRC filing or anything else that you should be looking out for there?

Yeah.

We expect to update our plans after the GRC filing.

You're absolutely right.

And we expect to continue delivering O&M savings for years and years and years to come, Carly.

And this we hope becomes part of the signature at PG&E.

This is how the simple affordable model works.

We create room in the plan by being more efficient and making sure that we're investing in infrastructure, reducing costs for customers.

Our O&M track record, I would say, is picking up speed because we're getting more and more of our co-workers trained and experienced in seeing.

I'll tell you just a quick story.

We're recognizing a co-worker tomorrow at an all co-worker meeting.

We call her a progress maker because she identified an idea that when we're out doing paving improvements that our team can do the touch up paint on the missed dig marks much cheaper and faster than a contractor.

We saved in her case, just in her service area, $50,000 by doing some work that we were already there on the site and able to do.

When we have 28,000 PG&E co-workers, each coming up with an idea like that, that's when we're really going to be at full speed.

We've got a couple of years before we get into a case where all of our co-workers have that kind of capability.

And that's going to be a key part of how we can serve customers the infrastructure they need at the lowest cost possible.

And we can't wait to reflect that in our GRC filing, which we'll be making here in just a couple of months.

And then maybe just one on the DOE loan.

I know that you got that closed in January, but just kind of how are you thinking about the cadence of disbursements and any potential impacts from some of the aims to sort of pause some of this IRA funding.

Yeah.

We did close that in January.

I'll just remind you that the DOE loan is not in our plans.

We would simply finance with any normal course for first mortgage bond issuance, another option and flexibility that's built into our plan.

Right now, we would expect 2025, we have not -- just to be clear, we have not yet requested or received any advances from the loan.

We do expect 2025 to be fairly slow and really just to pick up later in the later 2026 through 2030 time frame.

But again, it's not included in our plan.

Gregg Orrill, UBS.

Just you talked about the potential to bring CapEx into the plan from SB 410 and related to the load growth that you're seeing.

And sort of the implications around that, extending the runway of growth and high grading the company.

How do you think about that as a possibility of raising the growth rate?

I know it's already industry-leading.

Yeah.

I mean Gregg, I think that's the question.

We think that our current industry-leading growth rate is the right growth rate.

And we -- as Carolyn mentioned, as we include or consider pulling in new CapEx, it would be to extend that for a longer period of time to make it more durable.

We really want to always balance though to make the key criteria that it's affordable for customers and that we've got alignment with our regulators is really essential as we look at growing even further.

And so we're excited about what the growth means to us today, especially the large beneficial load and even EV loads, EV sales people.

I know people are worried about EV sales.

They've been flat year over year and -- but still 28% of the state's vehicle purchases.

That new electric demand enables us to lower costs for customers and helps fund making a grid that is safe and resilient.

And I think we really do look forward to our GRC filing later this year where you'll be able to see that in action.

You'll be able to see our capital plan as well as O&M reductions that enable a real interruption into what has been double digit rate increases for the last several years and requests.

We are very focused on interrupting that pattern and demonstrating how the simple affordable model serves our customers, serves our state, and enables this industry-leading growth rate for investors.

So we'll -- more to come on that.

I will now hand today's call back over to Patti Poppe for any closing remarks.

Thank you, Tamika.

Well, thank you, everyone for joining us today.

We know you have a lot on your minds and it's a busy day, but we do want you to hear that we are very confident in our progress and our momentum.

What was true about PG&E as we entered this year is still true today.

We've got a real catalyst to our growth story, real catalyst to our ability to best serve the people of California with the safest, most reliable system that meets our clean energy goals.

That's our ambition.

And we're here to serve the people of California and we don't think there's another team who can deliver at scale like this team at this time.

So we hope to be in touch soon.

I know the team's looking forward to seeing many of you in upcoming events in the coming week and month or weeks and months, and we'll look forward to talking more as we continue our progress and our journey here at PG&E.

This does conclude today's call.

Thank you for joining.

You may now disconnect your lines.