Pacific Gas & Electric Co.

Ladies and gentlemen, thank you for standing by and welcome to the PG&E Corporation fourth 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. 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 Patty 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 31st, 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 results. This bumps our 2025 range by a penny to $1.48 to $1.52. There's no change to our EPS growth guidance for 2026 through 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 for 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 four, 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 16 cents 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 reinforce 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 a pond 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 built 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, and I quote, I expect the state to move forward on further solutions as these ever dynamic challenges continue. End quote. 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 or 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 tenants 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 in 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 six PSPS events, all of them executed without safety incidents, and four of which included some of our transmission systems. 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 loads 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 nine. 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 loads. 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 and 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 thousand megawatts of new electric demand from data centers, customers may save between one to two percent 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.