PG&E Corporation

Thank you for standing by. My name is Cheryl, and I will be your conference operator today. At this time, I would like to welcome everyone to the Pacific Gas and Electric Corporation first quarter earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. Matt Fallon, Senior Director of Investor Relations, you may begin your conference.

Good morning, everyone. Thank you for joining us for PG&E's first quarter earnings call. With us today are Patty Pompey, Chief Executive Officer, and Chris Foster, Executive Vice President and Chief Financial Officer. I want to remind you that today's discussion will include forward-looking statements about our outlook for future financial results. These statements are 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 first quarter earnings call presentation. The presentation also includes a reconciliation between non-GAAP and GAAP measures. The presentation can be found online along with other information at investor.pgcorp.com. We also encourage you to review our quarterly report on Form 10-Q for the quarter ended March 31st, 2022. With that, I'll hand it over to Patty.

Thanks, Matt, and good morning, everyone. Thanks for joining us today. I'm happy to report that we earned 30 cents in non-GAAP core EPS in the first quarter. And we're on track to deliver our 2022 non-GAAP core EPS guidance of $1.07 to $1.13. We believe in delivering at least 10% EPS growth for you as investors this year, next year, and the following year. and at least 9% in 2025 and 2026, putting any annual surplus performance to work for important customer needs, a win for customers and investors. We're underway on my second year here at PG&E with a world-class, purpose-driven team focused every day on the triple bottom line, serving people, the planet, and California's prosperity. We'll deliver on our triple bottom line by mitigating physical risk and by mitigating financial risk, as seen here on slide four. We're changing the culture and building new capabilities at PG&E. Our culture is shifting to one of service and performance. We're rebuilding our team's confidence that we will deliver for our hometowns, we will serve our planet, and we will lead with love. We've been enabling our leaders to challenge assumptions they have about how and why we do the work that we do. Our culture is an important ingredient in our turnaround here at PG&E. I'm very pleased with the progress that I'm seeing. For our customers and you, our investors, to believe that things have changed here at PG&E, my coworkers have to believe and experience the change themselves. One way to help people experience a new and improved PG&E on the inside is through building the capabilities of our team through our lean operating system. I learned long ago that the customer experience can be improved while we are reducing the cost to deliver. In fact, they often go hand in hand. Improving our work processes takes all of us every day using our visual management tools, and our daily, weekly, and monthly operating review cadence to manage our performance. We can then identify our gaps and deploy problem solving to address them and set new standards to prevent reoccurrence of the problems. By changing our culture and building our lean capabilities, we're enabling the mitigation of physical risk and financial risk. On Wildfire, we're confident that we have the right tools in place to mitigate this risk through EPSS, and PSPS, as well as making our system safer every day with our extensive inspection program and vegetation management work. And we're ramping up our ultimate solution, our undergrounding program, which is designed to permanently reduce physical risk on our highest risk miles. To mitigate financial risk, we're planning to keep customer costs down even as we invest in our system by utilizing our simple and affordable model. And to further mitigate financial risk, we're also focused on paying down debt and delivering on our five-year non-GAAP core EPS CAGR of 10%. This premium return is driven by our simple and affordable model seen on slide five. There are many opportunities for us in 2022 and beyond that allow us to invest in necessary and high-value improvements to our electric and gas energy system while reducing the cost to deliver. Let me share an example of the simple affordable model in action. At the end of February, we filed an update to our 2023 general rate case. In the update, we've included the additional $7 billion of capital for our undergrounding plan through 2026 and an offsetting $1 billion in expense, resulting in a similar revenue level to what we filed in our initial application last summer. We have confidence in our ability to execute these efficiencies due to the use of our lean operating system. For example, as a result of the first year of using lean to drive our vegetation management work, we achieved a roughly 16% reduction in program unit costs. This is a big deal. We can make our system safe with the right investments and keep customer bills affordable. That benefits both customers and investors. It is not complicated. In addition to mitigating financial risk with our simple and affordable model, we're mitigating physical risk for our customers. As I mentioned, we plan to make enhanced power line safety settings capable on all circuits in our high fire risk areas this year. As a reminder, on the circuits where we enabled these settings in 2021, we saw an 80% reduction in CPUC reportable ignitions. This is the first time we have seen any material reduction in ignition since we have been tracking them. Also, we'll continue to utilize public safety power shutoffs when we encounter dangerous and extreme weather conditions, building on improvements we made in 2021. When we backcast our power shutoff protocols, our analysis shows that we would have prevented 96% of the structure's damage from 2012 through 2020 from catastrophic wildfires. To inform our PSPS protocols, we use billions of data points, including PG&E's 31-year weather climatology study to forecast hourly probability of large and catastrophic fires. In addition, we leverage hundreds of millions of fire spread simulations each day to help inform our PSPS protocols. Our PSPS algorithms use state-of-the-art machine learning models to increase predictive capability. The technology and data science that underpins our PSPS capabilities is extraordinary. We know shutting off power cannot be a permanent solution. Therefore, 2022 is an important and exciting year for us to learn from our experience in the field on undergrounding our lines. There's a lot of support and interest in our undergrounding plans. In fact, both the California State Senate and State Assembly have legislation focused on utility undergrounding this session. Senate Bill 884 and Assembly Bill 2889 were recently passed out of their respective legislative energy and utilities committees. This is good progress. We're optimistic that the legislature will work toward a solid solution that's good for customers and attract the investor capital needed to bury the risk. We actually have a new saying around here. How do you rebuild PG&E? From the underground up. And we are on our way. Turning to slide seven, you and my coworkers have heard me talk about leading with love. Many people wonder, what is that, leading with love? Let me give you an example. At PG&E, my coworkers are responsible for keeping themselves and each other safe on the job. While we improved our DART performance, which is a measurement of injuries on the job in 2020, we knew we could be even safer in 2021. I like to say even after best ever performance, we are still dissatisfied. We found that by utilizing the simple plays from our Clear Sky Lean playbook, we were able to problem solve and prevent injuries with simple and effective action plans every day. We reduced our dart rate by 25% in 2021 relative to 2020. And as you can see here on slide seven, we continue to improve this year, which reflects a 75% injury rate reduction since 2019. Coworker safety is where a culture change must start. Teaching people how to deliver and enabling them to believe in their own capability, that is leading with love. Another example of the culture shift we are causing here involves our permitting team. I will never forget about a year ago at our first undergrounding planning session, we asked our permitting team what would have to be true to bury 10,000 miles of line. Everyone kept saying that permitting would be impossible. Our permits team stood up and declared, we are not going to be the problem. Give us a solid long-term plan and we can get the permits. Come to us a day or a couple weeks before you need the permit and then we have a problem. It is so true. Everything hinges on solid long-term plans and well-designed workflow. We all know great plans deliver predictable outcomes. As we've started to scale the underground program, we've already seen improvements in our permitting process cycle times, something that will set us up for success as we double the miles every year in the next couple of years. Specifically, we've seen an almost 50% reduction in the time it takes to produce and receive approval for detailed design drawings. Our first major underground project took 13 months to design and receive subsequent approval from local agencies. Thirteen months. Through a focus on implementing standard repeatable processes inside of PG&E based on agency feedback and by building associated skills, we've reduced the review and approval time there to five months. That is real progress. We are making it right and making it safe at PG&E. I can't think of a better way to lead with love than that. Before I hand it over to Chris, I'll end with our report card, which you can see here on slide eight. We chose these metrics to show you where our focus is, culture and capability, delivering consistent, predictable outcomes through 2022 and beyond. One metric I want to highlight is our annual CPUC reportable ignitions in our high-fire risk areas. The reason this metric is important is because fires over 100 acres accounted for 97% of the structures damaged in our service area from 2015 to 2021. We have our eyes and our efforts focused on this one. Moving on in the report card, as you can see, as of quarter end, we're on track to hit our annual 2022 targets. Specifically, we're happy to report that we're on track with our miles underground to date target. We've buried 41 miles against a plan of 34 year to date and are picking up speed. Now I'll hand it over to Chris to cover our financial and regulatory items.