Pacific Gas & Electric Co.

Ladies and gentlemen, thank you for standing by and welcome to the PG&E Corporation first quarter 2024 earnings release. 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 that time, press star followed by the number one on your telephone keypad. If you would like to withdraw yourself from the queue, press star, then the number one again. As a reminder, today's call is being recorded. I will now hand today's call over to Jonathan Arnold, Vice President, Investor Relations. Please go ahead, sir.

Good morning, everyone, and thank you for joining us for PG&E's first quarter 2024 earnings call. With us today are Patty Poppy, 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 quarterly report on Form 10-Q for the quarter ended March 31, 2024. With that, it's my pleasure to hand the call over to our CEO, Patty Poppy.

Thank you, Jonathan. Good morning, everyone. I'm pleased to report another quarter of solid progress. With our core earnings per share for the first quarter coming in at 37 cents, we're also reaffirming our 2024 guidance range of $1.33 to $1.37, up at least 10% from 2023. And we're reaffirming our longer-term earnings per share growth of at least 9% each year starting in 2025 and continuing through 2028. In addition, we remain firm in our commitment to no new equity in 2024. We're also pleased to share with you our five-year financing plan, which Carolyn will discuss in more detail. What I want to emphasize is that our financing plan does not include the proposed sale of a minority interest in Pacific Generation. As you may have seen, we continue to advocate for the PacGen sale with the CPUC. We see the minority sale as an efficient financing alternative, one offering significant benefits to our customers, and it would further strengthen our plan. However, as you can come to expect, we plan conservatively, so the sale is not currently in the plan. The key takeaway is that we're comfortable reaffirming our earnings guidance and our $62 billion capital plan with or without Pac-10. Our plan also enables us to grow our dividend payout to a level closer to our regulated utility peers with $2.5 billion included in the plan through 2028. Consistent with our conservative approach, the plan assumes up to $3 billion of equity starting in 2025, likely through a routine utility ATM program. Moving to slide four. What I want to impress upon you is this. California, and PG&E specifically, have a favorable risk profile given significant changes made following catastrophic wildfire events we experienced in our state back in 2017 and 2018. California did the hard work to address challenges to the investor-owned utility model. Policymakers passed key legislation. Assembly Bill 1054 provides access to liquidity through a wildfire insurance fund with $21 billion of claims paying capacity. Cost recovery under the presumption that the utility's conduct is reasonable with a valid safety certificate. and a cap on shareholder exposure if a portion of our requested cost recovery were to be disallowed by the CPUC. These protections afforded to PG&E under AB 1054 are further complemented by our self-insurance model, which limits shareholder exposure to a deductible of only $50 million. Paired with our proven progress mitigating wildfire risk and significant actions the state has taken to strengthen fire prevention and response in our communities. California stands out as a model for all states that have wildfire risk, and PG&E's operating system delivers the physical risk reduction which further differentiates our story. In fact, we've reduced our wildfire risk by 94% and are working every day to reduce that further. As one additional proof point of our wildfire risk mitigation efforts, I'll remind you here on slide five that in 2023, we reduced ignitions by 68% compared to 2017. And through the end of the first quarter of 2024, on a rolling 12-month basis, our weather normalized ignition rate remains at 0.93, more than a 70% reduction from 2017. As well as our differentiated wildfire risk reduction framework, we also have a differentiated approach for how we intend to grow our customer capital investments while keeping bills affordable. Here on slide six is our simple affordable model. Since its introduction, we have exceeded our annual non-fuel O&M reduction target every year, reducing O&M by 3% in 2022 and 5.5% in 2023. This is new for PG&E, and it will take repeated performance for our customers and policymakers to believe in the benefit of our new capability and what it delivers for customers. As I like to say, performance is power. When we perform, when we keep our commitments, we have the power to influence the perception of PG&E with our customers and investors. We are differentiated in our potential and our system to deliver on these annual non-fuel O&M savings. Time will prove this out. One exciting element of our Simple Affordable Model is the opportunity for load growth in our service area. Our electric load growth opportunities are not just electric vehicles and data centers, but an eventual and necessary decarbonization of our entire economy with clean electricity as the primary energy of the future. PG&E is vital to our state's ambition and the need to heal our planet. One to 3% load growth per year in the near term, with upwards of 70% load growth over the next 20 years, will be required as California moves to carbon neutrality by 2045. California is not afraid to set ambitious targets and has proven repeatedly that we will innovate our way to achieving them. Cost savings and load growth, coupled with continued efficient financing options, are how we can execute on our commitment here on slide 7 to control average annual bill increases to 2% to 4%. We appreciate that near-term bill pressure due to consolidated years of GRC recovery and catch-up recovery of wildfire mitigation expense is difficult for some of our customers, and I look forward to the day when we can announce that customers' prices are coming down. At the same time, we stand by the need for the near-term increase, as this GRC is funding critical work which is making our customers and communities safer than ever before. Here on slide 8 are just a few examples of important safety and reliability work funded by our GRC. Installation of more than 10,000 devices for situational awareness, system hardening, automation, and reliability. Repair or replacement of over 175,000 units on our distribution lines. inspection of 2 million and replacement of over 60,000 poles, replacement of more than 160 miles of gas distribution pipeline, and undergrounding of 1,230 miles of distribution lines in high-fire risk areas. As we perform this work, it is our responsibility to ensure every customer dollar is put to maximum use, which brings us to my story of the month here on slide 9. You may recall that last year I shared a story on work bundling. Specifically, I highlighted an example of cross-functional bundling where we planned and executed 12 jobs under one planned outage. I also left you with a little teaser saying, this is just the tip of the iceberg. Well, my coworkers are now rolling out our next generation of work bundling with something we refer to as mega bundles. Using breakthrough thinking and our lean operating system, we've identified over 9,000 individual scopes of work and converted them into 20 bundled projects. With megabundling, we're looking at an entire circuit as one project. In the past, we'd plan and execute work at a granular level. For example, we'd roll a truck to replace a single pole or just one switch. When we look at an entire circuit, we may find 100 poles that need to be replaced. In Stockton, for example, we have one circuit with nearly 1,000 poles that will be completed this year. Bundling these poles into a single project improves safety, the customer experience, quality, cost, delivery, and coworker morale. Imagine assembly line style production, the potential for one permit for hundreds of poles rather than hundreds of separate permits as it is today. Digging multiple pole holes per day in a specific region resulting in significant fuel savings and less hazardous drive time for our coworkers. Framing hundreds of poles at a time using manufacturing-style production off-site rather than one-by-one on-site. And customer outreach to entire neighborhoods, reduced outages and lane closures versus one job at a time. This approach also allows us to negotiate better contract pricing and reduced overhead costs. Overall, with mega bundling, we expect to see cost savings of at least 20% compared to historical all-in cost, which will result in at least $20 million of our customers' dollars saved just this year, freeing up resources to do even more safety and reliability work for our customers. When I joined PG&E, you may have heard one of my early observations. We're very good at engineering equipment, but we're not very good at engineering our work. Well, that's changing, thanks to our performance playbook. We're delivering improved performance every day, which serves both customers and investors. With that, let me turn it over to Carolyn to walk you through the financial details.