Pacific Gas & Electric Co.

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

Good morning, everyone. Thank you for joining us for PG&E's second quarter earnings call. With us today are Patty Poppe, 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 in the second page of today's second quarter earnings call presentation. The presentation also includes the reconciliation between non-GAAP and GAAP measures. The presentation can be found online along with other information at investor.pgecorp.com. We also encourage you to review our quarterly report on Form 10-Q for the quarter ended June 30th, 2022. With that, I'll hand it over to Patty.

Thank you, Matt. Good morning, everyone. Thanks for joining us. I'll focus on three key areas today. First, our financial results. Second, our continued work to build trust with policymakers and play our role as an enabler for California's prosperity. And third, I'll provide an update on our wildfire mitigation progress. Our results through the first half keep us on track to deliver our full year 2022 non-GAAP core EPS guidance of $1.07 to $1.13. We've got the system in place to manage the inevitable pluses and minuses, The system provides confidence that will deliver our commitment of at least 10% non-GAAP core EPS growth through 2024 and at least 9% in 2025 and 2026. As a result of further progress on legacy items, our rate neutral securitization, and good cash management, we are lowering and narrowing our equity guidance. We are projecting a need of $0 to $250 million for the remainder of the year. We're on the right path to mitigate financial risk and deliver the consistent results you can expect from PG&E. We're continuing to build trusting relationships with policymakers and work with them on outcomes that are good for our customers and allow us to deliver the energy they want safely and reliably. Earlier this year, Governor Newsom reached out to ask us to evaluate keeping Diablo Canyon open beyond its scheduled retirement in 2024 and 2025. to support the capacity and reliability of the state's electric supply system. We're exploring the possibility of keeping this plant open for California's benefit. It is not an easy option, and it will require much coordination between the state, multiple regulatory bodies, and PG&E, as well as many others impacted by the outcome of this decision. We, of course, are motivated to be of service to the people of California and our policymakers and will continue to work with the state regarding the future of the Avila Canyon and to ensure reliability. I am very thankful to our team at the plant for continuing to remain focused on safe and excellent operations as the conversation and decisions move forward. We're also continuing to work with legislators on Senate Bill 884. The amended language in the undergrounding bill provides a supportive framework for PG&E to file a long-term undergrounding plan, which is good for customers and investors because it allows us to build a more robust plan for labor, the lowest cost contracts, and provide the fastest path to eliminating the highest risk and improving reliability at the same time on our power lines. I'm pleased with the relationships we're building with these key policymakers in California. We're proud to be recognized as essential to California's safety and clean energy goals. Our ability to continue to demonstrate the turnaround of PG&E enables long-term relationships built on mutual benefit and prosperity. Just this week, we filed our final responses in the review of our 2022 Wildfire Mitigation Plan. We welcome the healthy dialogue with the Office of Energy Infrastructure Safety, and we believe our responses address their concerns make our plans stronger, and make our communities safer. We look forward to a draft decision on our wildfire mitigation plan by the end of September. Given the dry conditions we've seen in our service area in 2022, I thought I'd spend some time discussing our wildfire mitigation tools described on slide five. As a result of the significant work that we've completed since 2019, combined with the protocols we've implemented for our EPSS and PSPS programs, we estimate that we've mitigated more than 90% of the wildfire risk in our service area. Our approach to catastrophic wildfire mitigation is driven by multiple layers of protection, starting with vegetation management, enhanced inspections, and our longer-term system hardening work, anchored by our undergrounding plan. While we continue to make progress on our longer-term mitigations, we layer in EPSS and PSPS to mitigate risk today. Our situational awareness capability, which we've built over the past three years, including installation of our high-definition cameras, the use of enhanced technology in our hazard awareness and warning center, and the expertise of our safety and infrastructure protection team, allow for better coordination and faster response should an ignition occur, providing our final layer of protection. The 90% risk mitigation today is informed by the results we're seeing in operations. For example, on the circuits where we've implemented our EPSS program, we've observed significant reductions in reportable ignitions, and the acres impacted per ignition this year are significantly lower, despite very dry conditions. We're continuing to pursue opportunities to improve beyond the 90% risk mitigation with additional innovative technology solutions, such as partial voltage smart meter alarms and bound conductor capabilities. We anticipate that additional opportunities, including undergrounding, will provide us with greater long-term protection while reducing the customer impact. As you can see on slide six, the Fire Potential Index guides our wildfire mitigation effort. Most of the damage in recent years has occurred under R3 and higher conditions. In recent years, we've experienced more acres and structures damaged due to fire spread driven by fuels and terrain. To mitigate the fuels and terrain-driven risk, in 2022, we've enabled EPSS for all fire potential conditions across all our high fire risk areas, except under conditions of heavy fog, high humidity, and precipitation. Historically, nearly all of the acres and structures burned during extreme wind events. For these conditions, categorized as R5 and higher, we rely on our PSPS programs. I've talked a lot about mitigating physical risk today. As I know, this is a key area of concern given the impact of climate change across California and the rest of the world. As you've heard, we have the right system in place to keep our coworkers and our customers safe from physical risk and a mindset that has us continuously improving that system every day. Please be assured that the team and I are also continually focusing on mitigating financial risk. We know our customers are experiencing major inflationary impacts outside of utility bills. And at PG&E, we're planning to keep costs down, even as we invest in our system by utilizing our simple and affordable model. I'm going to focus on the non-fuel O&M cost reduction line you see here on slide 7. I'm never short on stories, and this quarter is no different. Here's a simple example of an opportunity we came across in our inspection work. People often think it will cost more to do high-quality work. I beg to differ. Last year, due to multiple verification methodologies between our vegetation management pre-inspectors and our work verification team, we had a 40% rejection rate on tree inspections, resulting in a crew coming back out to correct the miss. We cut that rejection rate by half already this year by adopting a uniform, technology-driven inspection process. saving almost $100 million. Better first-time quality is more affordable. One example of many such opportunities. We are just getting started here, and there's a long runway of opportunities across the entire enterprise that the team is learning to uncover. On the financing front, we successfully completed our rate-neutral securitization bond issuance in July, using the proceeds to pay down temporary utility debt to strengthen our balance sheet. Importantly, S&P moved our outlook to stable after the rate-neutral issuance. We're following through on our commitment to you, our investors, to de-lever our balance sheet and reduce financing costs for our customers, a real-time demonstration of our simple and affordable model in action. Finally, let's turn to our report card, which you can see here on slide 8. We chose these metrics to show you where our focus is, delivering consistent outcomes through 2022 and beyond by building on our culture and our capabilities. One metric I want to highlight is our CPUC reportable emissions greater than or equal to 100 acres in high fire threat areas. Fires this size are a small percentage of ignitions, but account for more than 90% of the acres burned and more than 95% of the structures damaged from 2015 to 2021 in our service area. We have zero CPUC reportable admissions over 100 acres so far in 2022. You'll recall that in early June, PG&E filed an electric incident report on the old fire, which was 570 acres with no reported serious injuries, fatalities, or structural damage. We filed the EIR as required because CAL FIRE collected our equipment and there was media attention. However, we are not recording this as a CPUC reportable ignition at this time, as we are not aware of any damage to our equipment at CAL FIRE's suspected ignition point. CAL FIRE is continuing their investigation on the cause of the fire and will review the file and report when it's available and the associated recordability accordingly. In addition, Last week, the Oak Fire started in Mariposa County. After the time of the reported ignition, we de-energized lines for firefighter safety at the request of CAL FIRE. Based on our review of our data, we are not aware of any information suggesting our facilities were involved in the ignition. We have not filed an EIR, and CAL FIRE continues their investigation into the cause of the fire. We do want to take this opportunity to thank our firefighters and the broader first responder community for working so hard to keep our community safe. Physical and financial risk reduction are the building blocks that enable predictable results for customers and investors. I feel good about progress to date. With that, I'll hand it over to Chris to provide a deeper dive into our financial and regulatory items.