Pacific Gas & Electric Co.

Good day and welcome to the PG&E Corporation fourth quarter 2022 earnings release. Today's call is being recorded. 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 the time, you can press star 1 on your telephone keypad. To remove yourself from the queue, that is star 1 again. Thank you. I would now like to turn the call over to Jonathan Arnold. Please go ahead.

Good morning, everyone, and thank you for joining us for PG&E's fourth quarter and year-end 2022 earnings call. With us today are Patty Poppe, Chief Executive Officer, and Chris Foster, 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 that could affect the company's actual financial results are described on the second page of today's fourth quarter and four-year earnings call presentation. The presentation also includes a reconciliation between non-GAAP and GAAP financial measures, and the slides, along with other relevant information, can be found online at investor.pgecorp.com. We would also encourage you to review our annual report on Form 10-K for the year-ended December 31, 2022, which was released earlier this morning. And with that, it's my pleasure to hand the call over to our CEO, Patty Poppe.

Thank you, Jonathan. Good morning, everyone, and thank you for joining us on what I know is a busy earnings morning. As you'll see on slide three, this morning we reported full-year 2022 core earnings of $1.10 per share, right on guidance. This was my second year with PG&E with results delivered on plan, no more, no less. As I like to say, we sweat the details so you don't have to. Our simple, affordable model is designed to maximize work for our customers and deliver on our commitment to you, our investors, each and every year. Our $1.10 EPS for 2022 was up 10% from 2021 as planned. We're also reaffirming our 2023 core EPS guidance range of $1.19 to $1.23, up 10% at the midpoint, along with our previously stated longer-term targets of at least 10% EPS growth in 2024 and at least 9% for 2025 and 2026. Also, unchanged is our plan for no new equity through 2024. As you know, our sector-leading EPS growth is supported by robust capital investment and ongoing efficiency gains for the benefit of the 16 million Californians we serve. In fact, in 2022, we invested $9.6 billion of capital into our system for the benefit of our customers. Our system has never been safer, and we continue to make it safer every day. I want to thank you, our investors, for your part in making that possible. The simple affordable model underpins our confidence in reiterating our financial outlook today, despite the very real challenges faced by most businesses in today's inflationary and uncertain economic environment. Turning to slide four, we've made strong progress mitigating physical and financial risk. So here are some high points. On wildfire mitigation, we saw a 99% reduction in acres burned in 2022. relative to the average of the three years directly before our implementation of enhanced power line safety settings. As we reported last quarter, we were able to successfully navigate extreme summer heat conditions. And, in January, our system was put to the test again with an unprecedented series of winter storms which were met with truly historic levels of performance from the PG&E team. In addition to addressing physical risk, 2022 was a big year for our financial risk mitigation. We delivered our earnings guidance, as well as non-fuel O&M cost reductions of 3% net of inflation. This was ahead of our 2% plan and was achieved in the face of the most challenging inflationary backdrop many of us have seen in our careers. In our GRC, we added undergrounding while removing vegetation management expense, delivering long-term safety while keeping costs neutral for customers. We closed our $7.5 billion rate-neutral securitization and worked with California policymakers over the summer as they passed constructive legislation supporting our 10-year undergrounding plans and to extend the life of our Diablo Canyon nuclear power plant. We view both as beneficial to customers and evidence of the greater trust we are building day in and day out with our stakeholders. On the regulatory front, We appreciate the CPUC resolving both the 2022 and 2023 cost of capital proceedings last year. And in terms of customer savings, the net energy metering 3.0 decision was a win for customers. We estimate it removes about a billion dollars of cost shift through 2030 relative to NEM 2.0. On slide five, we show some highlights on our historic January storm response. I want to emphasize that this story is about more than numbers on a page. This was us delivering for our hometowns, and our coworkers are at their best when put to the test. During the first two weeks of 2023, hit by historic back-to-back-to-back-to-back atmospheric river storms, our electric team restored over 2.8 million customers through multiple waves of outages, and we had 95% back online within 24 hours during each of those events. January ranked as a top five storm in PG&E history, and involved the largest contingent of resources we have ever mobilized, including around 7,200 dedicated personnel from 10 states. The strength and speed of our response also resulted in us seeing improved customer satisfaction scores compared to prior storm-related outages. We've also adopted the standardized emergency management system and incident command system, and with the support from California's Office of Emergency Services, We've been aligning training of our emergency center staff with our first responder public safety partners. When the time came, our team and an army of partners acted with skill and tenacity, protecting and serving each other and our hometowns, and we couldn't be prouder of them. On slide six, I'll recap our layers of protection against wildfire risk, which start with our core system hardening, vegetation management, inspections, and repairs. When conditions warrant, we supplement these with our enhanced power line safety settings and our public safety power shutoffs. We calculate these layers of protection, including improved situational awareness and coordination with first responders, as delivering over 90% overall wildfire risk reduction. We've already hardened more than 1,200 miles since 2019, and we expect our overall risk reduction to further increase as we pursue our 10,000-mile undergrounding program. In the meantime, we continue to look for innovative new technology solutions, such as partial voltage detection and downconductor technology to keep reducing that remaining 10%. On slide seven, we take a closer look at our 2022 wildfire risk mitigation performance. Historical data show that from 2012 to 2020, that's before we implemented EPSS, 95% of the acres and 100% of the structures burned were related to ignitions at times when conditions were at R3 or higher. While we were fortunate that 2022 didn't bring significant wind events for the year, there were still 31% more R3 or higher days than in 2018 to 2020. Despite this significant increase, we saw a reduction of 99% in the number of acres impacted by utility ignitions in 2022 over the same time period. Slide 8 illustrates our simple, affordable model, which includes driving efficiency to make room for customer investment. You've heard us talk a lot about the lean operating system and our four basic plays. In 2023, we're rolling out a fifth play, my personal favorite, waste elimination. And we see this as key to continuing to deliver our plans for both customers and investors. Our primary constraint is customer affordability. on which we are laser-focused through our newly established bill ownership center, led by Carla Peterman. The entire team is looking at the whole customer bill for savings, including energy supply costs, which we know are top of mind. We have a lot of opportunity to eliminate waste, improve our customers' experience, make our system cleaner and more resilient, all the while reducing costs. We can do more for less. The examples keep piling up, So I felt I needed to bring back my story of the month, so here we go. This month's story is about work we are doing to improve efficiency in our new business area. Presently, our new customer connections take too long from start to finish. As I recently told a group of California builders, we can and we will do better. In fact, it's another perfect application for our lean operating system, and specifically waste elimination. The team invited our developers and builders to come in and work with us to redesign our processes and share their pain points. We conducted a design thinking workshop, and through rapid prototyping, we can see the path to taking the cycle time down dramatically, improving our ability to both do the hookup on time and in less time. Imagine the rework, the waste, the frustration, the delays we can eliminate. One challenge is that 64% of the new connection requests we receive today end up being canceled for a variety of reasons. We do too much engineering before we are sure it will even be used. This wastes both time and money, and it also is demoralizing for our talented engineers when much of their work never sees the light of day. We can dramatically improve how we show up for our new customers, and by doing that, we can free up more time and resources to reinvest back into the system. This is just one of the areas where we are delivering more for customers with every dollar spent. Now that's what I call enabling California's prosperity. Turning to slide nine. You may recognize this chart, which shows how we executed in 2021 and 2022. In 2021, we faced headwinds early in the year. Our recovery work then put us ahead of plan. This is all part of the playbook we're running now at PG&E. We plan conservatively and we remain nimble, protecting investors from the downside. And when there's upside, we will redeploy it for the benefit of customers, which in many cases means pulling work forward and protecting future years. Consistency is the name of the game. You can see it play out again in 2022. We faced headwinds, including a possible cost of capital reset. We have planned conservatively though, And we're able to more than offset this and other pressures, allowing us to redeploy again on behalf of our customers and still deliver 10% EPS growth. Employing the simple, affordable model, we plan to consistently manage the work and deliver our earnings targets, no more and no less. And when we can, we will redeploy favorability in the business on behalf of customers and look to de-risk future years with a view to delivering our consistent growth trajectory. Lots of people say to me, Peg, what if this happens or what if that happens? This is what we manage at PG&E. Come what may, we have the capability to be nimble and adapt to those challenging and changing conditions. It's a capability that can be taught and learned. As I've said many times, we ride the roller coaster so you don't have to. You can expect to see more of this in 2023 and beyond. Moving to slide 10. You can see the progress we made in 2022 as we continue on our journey to build trust with policymakers while creating the stability necessary to attract capital to invest on behalf of customers. Already in 2023, we're pleased with the expedited resolution of our self-insurance settlement reached as part of our general rate case. This innovative approach enjoyed intervener support and, most importantly, can result in up to $1.8 billion of savings for customers over the four-year GRC period, with as much as $300 million expected in 2023. We also have a number of important catalysts on the horizon. Each of the four items you'll see here in blue contain important benefits for our customers and for California. We'll continue to work every day toward timely and constructive outcomes, but we don't do big bets here at PG&E. And I want to remind you that we continue to plan conservatively, even as I look forward to seeing more green checkmarks on this slide. Turning to slide 11, let's take a look at our 2022 report card. While the Mosquito Fire did not result in any serious injuries and the estimated liability is well within our available insurance, it did cause us to miss our goal of zero CPUC reportable emissions of 100 acres or more. We put 180 miles of lines underground last year, exceeding our 175-mile target. And we chose to redirect capital investment to maximize risk reduction during the year, which changed our plans for gas main replacement. We exceeded our 2% annual O&M cost reduction, offsetting inflation and delivering net savings of 3%. Yes, that is net of inflationary pressure. We see plenty of potential to continue 2% net O&M reduction for many years ahead by working smarter and maximizing value for our customers and investors. 4EPS came in right on plan at 10%, while we delivered 6% rate-based growth in what was the final year of our GRC cycle. Lastly, we were pleased that Moody's recognized our significant progress on mitigating risk and improving relationships in the state when they revised our credit outlook to positives earlier this month. On slide 12, we introduce our 2023 report card. One key change is to our headline wildfire metric, where we're sticking with the target of zero and adopting the new OEIS metric for catastrophic wildfires. This measure lines up with our future wildfire mitigation plans, and we think it's a better one for capturing events that are of real significance from both a customer and investor perspective. We remain committed to our 10,000-mile undergrounding goals and to achieving our unit cost targets. We'll be filing our 10-year plan later this year with more details. Our 2% O&M reduction plan shouldn't be a surprise either, and there are no changes to any of our previous financial targets through 2026. We're excited to be adding another year, 2027, to our rate base and CapEx as we look to give you more visibility into our long-term plans. Our headline five-year rate-based CAGR of 9.5% remains the same, but it's now based off 2022 actuals and runs through 2027. We're feeling really good about what we accomplished in 2022, and we look forward to delivering for you again in 2023. With that, I'll hand over to Chris, who will discuss our financial and regulatory items in more detail.