The PG&E Corporation held an earnings call for the second quarter of 2023, with Patti Poppe, Chief Executive Officer, and Carolyn Burke, Executive Vice President and Chief Financial Officer, present. Jonathan Arnold, Vice President of Investor Relations, reminded listeners that the call would include forward-looking statements about the company's financial outlook and encouraged them to review the quarterly report on Form 10-Q. Core earnings per share of $0.23 were reported for the second quarter, with $0.52 for the first half of the year, which is down $0.03 from the same period in 2022. The benefit of the general rate case has yet to be recognized.

PG&E has a memo account in place to book catch-up revenues from the January 1 2023 effective date once a final decision from the CPUC is received. They expect to deliver annual guidance and have reaffirmed earnings growth rates of at least 10% in 2024 and at least 9% in 2025 and 2026. They have also made progress in mitigating physical and financial risks, such as the CPUC approving over $1 billion of interim rate relief in their 2022 Wednesday proceeding and settling with the Shasta County District Attorney's Office to resolve criminal charges related to the 2020 Zogg Fire.

PG&E recently settled a case and their strategy continues to focus on an affordable model for customers and investors. The Fire Victim Trust has now monetized over 85% of its initial holdings, and the company has a strategy to reduce risk with the 2023 Wildfire Mitigation Plan, which includes installing new hardware in the field. The Office of Energy Infrastructure Safety has identified eight critical issues and PG&E will respond by the August 7 deadline, with a draft decision expected at the end of September.

The CPUC recently held an Annual Board level safety briefing to discuss the progress of the Utility Board's safety culture, performance, and enterprise safety management system. Mark Quinlan, the SVP of Wildfire and Emergency Operations, reminded the leaders of the investments made since 2017, such as 600 high-definition cameras with AI capabilities, 1,400 weather stations, 1,400 sectionalizing devices, 1,300 miles of line hardening, and 300 miles of undergrounding, as well as the removal of 3.3 million trees. These investments have allowed for a shift from reacting and responding to hazards to predicting and preventing them.

PG&E has taken many steps to improve the safety of their system, including staffing a hazard awareness center, implementing operational mitigations, and enabling public safety power shutoffs. The data suggests that these efforts have been successful, as reportable ignitions in high fire threat districts have decreased 53% since 2017 and there has been a 68% reduction in ignitions on EPSS-enabled circuits. The financial risk mitigation due to SB 901 and AB 1054 is also working as planned.

AB 1054 is a construct designed to provide financial assurance to utilities and capital providers while they invest in reducing wildfire risk. It includes access to a state wildfire fund with $21 billion of claim-paying capacity, a requirement for an annual wildfire mitigation plan, a presumption of prudence when seeking cost recovery, and a cap of 20% of electric T&D equity rate base on a three-year rolling basis. In the first half of the year, progress was made in approval of a wildfire self-insurance settlement, a Zogg Fire litigation settlement, and a 2022 WMCE Interim Rate release.

The company has several catalysts on the horizon, such as a GRC decision, legislative engagement on energization, and the nuclear operating license extension application for Diablo Canyon. They are also on track for their 2023 and long-term targets, such as undergrounding 350 miles in 2023 and having a FFO to debt ratio of mid-teens in 2024. In addition, their regional service model, performance playbook, and lean operating system are helping to improve customer experience while reducing waste and cost. This includes cross-functional work bundling which allows crews to do more work under the same planned outage line clearance, thus reducing cost and improving reliability.

In Q2, PG&E's coworkers planned and executed 12 jobs under one planned outage near Willits, saving $0.5 million and 800-plus hours. PG&E is on track to meet their 2023 EPS guidance of $1.19 to $1.23, with a year-to-date result of $0.52 per share. They have also realized $0.04 of favorability from their cost-saving efforts and have redeployed $0.02 back into the business.

The CPUC has approved a standard memo account to record catch-up revenues, which explains the $0.01 of timing in the first half results. PG&E's 10-year capital investment plan is focused on safety and reliability with growth benefiting customers and investors. There are ample opportunities to expand customer investment beyond the $52 billion planned. PG&E is working to keep bills affordable and is making progress on O&M cost reduction and efficient financing developments. They recently launched the marketing for the proposed sale of non-nuclear generating assets.

Pac Gen is pursuing efficient financing options to provide a diversified funding source for its large capital program. The company recently submitted a loan application to the Department of Energy which could result in hundreds of millions of dollars in interest expense savings for customers. If approved, the funds could be drawn down starting in 2024. Pac Gen also expects to reach a cumulative $6.2 billion in non-GAAP core earnings during the third quarter, which could allow for the Board to declare a dividend as soon as the earnings call.

PG&E has committed to restoring a dividend, though it will likely be lower than some estimates. They will prioritize capital investment in order to mitigate physical and financial risks, grow earnings per share, and improve the value proposition for customers and investors. This week, they also released their annual corporate sustainability report and held their inaugural Innovation Summit.

The company has created an innovation research and development team to capitalize on breakthrough opportunities. At an Innovation Summit, they featured an electric distribution energy management system and have a XPrize competition to pinpoint ignitions from space and autonomously suppress wildfires. The company is confident in the protections they have in place for this wildfire season and are looking forward to the restoration of their common stock dividend and the final decision for their 2023 GRC.

The CPUC voted to extend the GRC deadline from June 30 to December 30, and the July 13 order included language that reinforced the timing of the decision being issued in Q3 of 2023. Patti Poppe states that they are working closely with stakeholders to ensure that they get a timely GRC sold so they can do the necessary work for their customers. They plan conservatively and have a plan that is defendable, while also putting in contingency planning to prepare for any potential delays.

In response to a question about the implications of the dividend, Carolyn was clear about its importance. However, the dividend is dependent on regulatory timing and an update will be given on the third quarter call. Patti Poppe then discussed the WMP process, which is an open and transparent proceeding that allows them to align with the regulator and get the best ideas on the table. The OEIS issued a revision notice with eight critical issues and they have until August 7th to respond. The OEIS is asking for additional granularity, such as quarterly data through 2024 on vegetation management targets.

Patti Poppe provides an update on the environmental backdrop of the summer and fire season, noting that the moisture in the first quarter of the year has delayed the start of fire season but has also provided additional fuel in the form of grasses. She states that they will submit a revision on August 7 and expect a draft decision from OEIS at the end of September, with the safety certificate filing date set prior to September 13, 2023.

The Hawk 24/7 365 utilizes cameras and weather stations to monitor conditions and activate enhanced power line safety settings (EPSS) when necessary. This year, their ignitions are 50% less than last year, which was already an extraordinary year of performance. Carolyn Burke mentioned that the two areas with the most potential for additional CapEx opportunities are transmission and new customer connections, and they are currently looking at partnerships to make these opportunities more affordable.

Patti Poppe and Carolyn Burke of Consumers Energy discussed the progress they have made in terms of bringing new customers online and their commitment to ensuring customer affordability. They also discussed the financial impact of the Department of Energy (DOE) funding and how it will be used to fund existing programs, which will not be incremental.

Patti Poppe and Julien Dumoulin-Smith discussed the capital structure of the company and the potential for reinstating the dividend in the third quarter call. Poppe mentioned that the company has a commitment to pay down its parent debt of $2 billion by 2026 and that they are monitoring the waiver that is in place until June 2025. Levine asked if there were any other regulatory items outside of the GRC that could impact the timing of reinstating the dividend, to which Poppe replied that it was primarily the GRC.

Patti Poppe discussed the success of the Innovation Summit, which saw thousands of people from around the world participate. She then spoke about the use of artificial intelligence (AI) which has already been implemented in 2019 with the wildfire spread model and was operationalized in 2021. AI is also being used for asset health inspections and data collection. This technology is helping to automate responses and predict potential failures, thus improving system safety and asset health.

Patti Poppe explains that PG&E is exploring the applications of artificial intelligence, and is taking precautions to ensure customer and company data is safe. She also highlights some of the California initiatives that are helping to mitigate bill impacts, such as the California Climate Credit, CARE program, and the California Arrearage Payment Program. Finally, she mentions the $83 million EPIC program which funds the development of new technologies to make energy safer and more affordable for customers.

The CEO, Ms. Patti Poppe, thanked everyone for joining the conference call and expressed that they were grateful for the time given. She wished everyone to be safe and the Operator concluded the call, inviting participants to disconnect.

This summary was generated with AI and may contain some inaccuracies.