PG&E Corp (PCG) — Q3 2024 Earnings Call Transcript

Good morning, everyone, and thank you for joining us for PG&E's Third 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 result 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 September 30, 2024. And with that, it's my pleasure to hand the call over to our CEO, Patty Poppe.

Thank you, Jonathan. Good morning, everyone. We've seen another quarter of solid progress, and I'm pleased to share our third quarter results and some updates to our guidance and financial plan. Our core earnings per share for the third quarter were $0.37, bringing up to $1.06 for the first nine months. We're narrowing our 2024 guidance range, lifting the low end by $0.01 and firming up our 10% growth over 2023 at the midpoint. Our 2024 range is now $1.34 to $1.37. Reflecting growth in current customer demand, we're also adding $1 billion to our five-year capital plan, which is now $63 billion through 2028. Previously, we said we'd grow earnings per share at least 9% in 2025. With this additional capital, we're now raising 2025 guidance from 9% to 10%. And we're initiating our formal 2025 EPS guidance range of $1.47 to $1.51. In addition, we're reaffirming our longer term earnings per share growth of at least 9% in 2026, 2027 and 2028, and that's now from our new 2025 guidance midpoint. We remain firm in our commitment to no new equity in 2024. Our equity guidance of $3 billion from 2025 through 2028 is also unchanged. We still expect this to be issued ratably over the period, likely through a routine utility at the market or ATM program. What you're seeing in these numbers is growing customer demand for electrification in California, from housing developments to electric vehicle charging stations, data centers, commercial projects and local infrastructure. Much of this is beneficial load growth, meaning it will help us achieve our affordability goals once completed. Consistent with what we've told you, we're able to add this new capital to the plan because it meets our criteria. One, it's been approved by regulators. Two, it's affordable for customers. Three, it's beneficial for investors, meaning accretive to EPS. And four, we were able to finance it efficiently with our recent holdco offering of junior subordinated notes. This is the same disciplined approach you can expect from us going forward. Moving to Slide 4 and our power pyramid. Let me reiterate that it all starts with safety. Our layers of physical and financial protections are working as intended. Our simple, affordable model is how we can make critical infrastructure investments affordable for our customers. And building on these first 2 layers, we intend to deliver a growing and decarbonized energy future in California. As you know, our stand here at PG&E is that catastrophic wildfires shall stop. We are laser focused on doing just that every day. And days like tomorrow, which is the anniversary of the 2018 Camp Fire further reinforce what's at stake. Our strategy starts with understanding the risk each and every day. We innovate and implement layers of operational protection. We operate with a mindset of continuous improvement, keeping safety at the heart of every decision. We leverage our technology to partner with first responders to speed up and improve response to emissions from any source. And we advocate for climate resilience, long-term infrastructure solutions such as undergrounding the highest-risk miles on our system, all of which create a fundamentally safer California for citizens and investors. Wildfire risk was elevated this year, and the ignition count is up as a result. As shown here on Slide 5, the ignition rate in high fire-threat areas under R3 plus conditions is standing at 1.44 for the rolling 12 months through November 4. This is notably lower than 2017 and 2018, demonstrating that even under higher risk conditions, California is safer. Incidents affecting 10 acres or more for California, predominantly nonutility-caused ignitions, have also increased more than threefold this year versus 2023, given the more challenging weather conditions. Despite this backdrop, here's the metric that matters, a multiyear trend of no major fires due to PG&E equipment. While we're never satisfied, this summer was one more proof point that our physical risk mitigations are working. While our operational mitigations have proven effective, they do come with a reliability trade-off. That's why we continue to believe that strategic undergrounding in the highest-risk locations is the right solution for our service territory. Turning to Slide 6. Related to the Dixie Fire. We were pleased to share last month that the state Wildfire Fund has paid our first set of claims for $39 million. Our second monthly request for $34 million was paid out on October 28, and we intend to continue submitting our claims on a monthly cadence going forward. This is another proof point of Assembly Bill 1054 working as designed. As you know, we're also working every day to execute on our simple, affordable model shown here on Slide 7. The simple affordable model is how we plan to keep customer bill growth at or below assumed inflation as we continue to invest in critical infrastructure. This is a proven winning model supported by our lean operating system and bolstered by California's leadership in the transition to clean energy. We have a strong existing plan, as shown here on the left. And as we announced today, we're pulling some additional capital into the plan to better serve our customers while maintaining balance sheet health. We continue to see opportunities for further amplification through incremental O&M reductions and electric load growth. We're working each element of this model every day with no big bets approach, as Carolyn will discuss. But first, let's dive deeper into the PG&E performance playbook in action as we turn to Slide 8 and my story of the month. Our Dublin Innovation Center was created to drive better outcomes for our customers. Last quarter, I shared how one team was reinventing the inspection process, identifying the right work, completing it 50% faster than our previous standard and delivering cost savings, which we look forward to passing along to customers in our next rate case. With the incremental energization capital spend top of mind, I thought I'd share how our service planning and design team is using our performance playbook to rapidly implement regulatory decisions and deliver for our customers. Following the CPUC approval of our initial SB410 energization filing and an incremental $1 billion of funding, the team immediately mobilized. Looking across a number of factors, including customer readiness, permitting agency timelines, and materials availability, the team quickly identified over 3,000 incremental customer requests that can be completed this year. The team is also implementing process improvements that lead to labor and cost savings for our customers. For example, we reimagined the application process, which we estimate will reduce our customer cancellation rate by 70%. And we updated the job package preparation and estimating standards, cutting processing time for electric design work by 40%. These are classic examples of waste and rework that we're eliminating to the benefit of customers. I could not be prouder of this and all the other examples I see of coworkers using the tools of our performance playbook to cause better outcomes for our customers and predictable growth for our investors. With that, let me turn it over to Carolyn.

Thank you, Patty and good morning everyone. Today, I'm looking forward to covering three main topics with you. First, our results for the first nine months of 2024; second, our growing capital plan and strong financing plan; and third, how we continue to execute against our simple, affordable model. As you know, performance is power. And our path to investment-grade and constructive regulatory outcomes depends on consistently delivering against our targets. Starting here on Slide 9, we are showing you our earnings growth. For the first nine months through September, our core earnings of $1.06 are up $0.30 over the same period last year. Remember that last year, our general rate case was not approved until the fourth quarter, and that is when we booked the revenue catch-up for all of 2023. Adjusting the first nine months of 2023 for the GRC timing, our results were up $0.19 year-over-year. The main driver of our year-over-year increase continues to be higher customer capital investment, including the change in ROE from 10% in 2023 to 10.7% for 2024. We continue to drive nonfuel O&M savings throughout the business. This performance is contributing four sets to our results and the achievements for various programs such as profit improvement per inspection as well as lower contract spend through new strategic sourcing. We also remain committed to reinvesting new savings and orderly upside back into the business to support incremental customer investment. This drove $0.07 of redeployment, including into programs which support risk mitigation, such as conversion maintenance and emergency preparedness and response. As a reminder, we redeploy as a way to derisk future years and deliver consistent performance year in and year out. Turning to Slide 10. As you saw earlier, we pulled an incremental $1 billion of CapEx into our five-year plan as a result of the SB410 funding for new energization projects approved during the third quarter. This increases the five-year compound growth in our rate base from 9.5% to 10%. Our share of rate base already authorized picks up to 93% in 2026, including the additional $1 billion for energization spend and $900 million accrued for our Open General Office. Also, we are still signaling an incremental at least $5 billion of additional customer investment opportunities. There is no shortage for customer beneficial work on our transmission and distribution systems. And even after pulling in $8 billion of capital, we still see at least $5 billion in potential. I'll remind you that incremental transmission work would fall under our FERC formula rate. Back in July, the CPUC issued a decision in the second phase of our general rate case, implementing provisions of Senate Bill 410. The commission encouraged us to request incremental funding for 2025 and 2026, if necessary to address customer energization needs. In response to the demand, we're seeing from customers, we filed a supplemental request on October 4, proposing to add $3.1 billion of work for 2025 and 2026. Including timing adjustments, this would amount to a further net addition of $2.8 billion. This represents another proof point of the growing revenue demand we see in California, and we stand ready to serve this demand. The commission's decision will call for a proposed decision in the first quarter of 2025. Once we have the final decision, we will expect implications both for our workplace and for our financing. As I discussed last quarter, we'll make this evaluation in the context of our financial guideposts, namely the incremental capital investments must be beneficial and affordable for customers, accretive to earnings per share, and also helpful to our balance sheet. Here on slide 11, you can see that our updated five-year financial plan now reflects $63 billion of CapEx over the period. Of note, no change to our dividend and equity component, no change to our commitment to reduce $2 billion of corporate debt by the end of 2026 and no change to flexibility that we built into this plan. Our updated financing plan continues our commitment to achieving investment-grade ratings and prioritizing customer capital investment. On the slide, you'll see the comparisons plan that we shared with you on our second-quarter earnings call. We've increased utility long-term debt issuance and the corporate debt hybrid and other bucket, each by $0.5 billion. These changes reflect the impact of the $1 billion in junior subordinated notes issued in September. I'll remind you that the JSM received 50% equity credit from S&P and Fitch and are an example of our commitment to pursuing the most efficient financing possible. Proceeds from hybrid instruments were used in part to pay down $500 million on our term loan base, resulting in a transaction that is neutral to credit rate metrics. The remaining $500 million of JSM proceeds will fund the equity portion of the capital addition to this plan. Lastly, our plan still calls for $3 billion of equity from 2025 to 2028, which we expect to issue on a ratable basis under a normal utility ATM program. This amount is easily achievable for a utility of our size and is in line with many of our industry peers who also utilize ATM programs. As we've indicated before, this equity need is already factored into our multiyear earnings per share guidance of at least 10%, now extended through 2025, and at least 9% each year in 2026, 2027, and 2028. Turning to slide 12. As Patty mentioned, our simple affordable model assumes a no-fee-based approach, and we are laser-focused on executing it every day to make our industry-leading capital growth affordable for all our customers. Here's why I consider this a no big bets model and why we see further opportunities for amplification. First, in terms of O&M cost savings. We are currently working nearly 200 initiatives to reduce material contracts and other costs to more efficiently plan, execute, and automate our work. Our statements are not dependent on any one initiative, as we are reducing waste across the enterprise. We have ample runway to improve our capital to expense ratio, such as reducing annual repairs or ongoing true trends and placing these activities with durable, long-lasting capital improvements, which also benefit customer rates. And we exceeded our O&M reduction goal two years in a row, reducing operating and maintenance expense by 3% in 2022 and 5.5% in 2023. These projects fuel the excitement and momentum you can feel, whether you're out in the field, at our Dublin Innovation Center, or in one of our command centers here in Oakland. We are seeing a way of thinking that is grounded in improving customer experiences at a lower cost. We're proving out the philosophy that this philosophy is well-placed at PG&E and is delivering meaningful results. With year-end insight, I'm confident that in 2024, we will meet or exceed our 2% target. Second, load growth. Our load growth will come from electric vehicles, data centers, and building electrification. It's not dependent on one mega customer or a project. And state policy and decarbonization goals are driving increased electrification. I'm also excited about the innovations taking place that will help us leverage new load in ways beneficial to the grid. Take, for example, our partnership with the Open School District and Zoom to deploy the nation's largest bidirectional electric school bus fleet. This EV fleet is equipped with groundbreaking vehicle-to-grid technology, enabling the buses to return up to two or more gigawatt-hours of energy back to the grid when not in use. Lastly, efficient financing. In addition to our recent convertible and JSM financing, future opportunities could include other hybrids, DOE loans and grant programs, working capital improvements, and credit rating upgrades. Turning to Slide 14. In terms of credit rating, I'll remind you that we're just one notch below investment grade at both Moody's and Fitch and on positive outlook at both. With our strong performance, especially through this challenging fire season, we continue to demonstrate the effectiveness of our layers of physical risk mitigation. Coupled with improving financial metrics and maintained strong governance, we see a near-term path to achieving investment-grade credit at the parent company. Growing cash flows drive balance sheet health and support our credit rating improvement, further helping to make our critical customer investment affordable. As you can see here on Slide 15, we grew our operating cash flow by $1.8 billion in the first nine months of 2024 compared to the first nine months of 2023. And we're on track to deliver over $3 billion more operating cash flow for the full year, consistent with prior forecasts. Of course, the general rate case is a key driver of this improvement, as well as the interim rate release we've seen from the CPUC in our 2022 WMCE and the 2023 WGSD applications. Turning to Slide 16. We continue to work well with policymakers and stakeholders. We saw constructive final decisions in our first SB 410 filing, our open headquarters purchase, and our request for interim rate relief for our 2023 WMCE, all in the third quarter. I’ll end here on Slide 17 with a reminder of our value proposition. It's one fueled by differentiated performance, a constructive operating environment, and placing the customer at the heart of everything we do. And it's allowing us to deliver 10% rate base growth through 2028, at least 10% core EPS growth in 2024 and now through 2025, and at least 9% core EPS growth each year from 2026 through 2028. With that, I'll hand it back to Patty.

Thank you, Carolyn. I'm excited about our differentiated story here at PG&E. Our power pyramid is the path forward. It starts with the foundation of physical and financial safety. That foundation gives us permission to focus on our simple, affordable model. When we saw you in New York in June, we talked about our model and how it can be amplified. Today is another step towards that being realized. Ultimately, we share California's aspiration for growth and a decarbonized economy at a lower societal cost. We are proud to be leading the way and delivering results for our customers and for you, our investors. We're looking forward to seeing you in just a couple of days at EEI. With that, operator, please open the lines for questions.

Hey, guys, good morning. Obviously, congrats on the quarter. Just starting on the incremental CapEx, $1 billion is obviously accretive to plan. Was that the core driver of the 10% EPS growth as implied by the 2025 guidance? And how should we think about the level of CapEx upside in the context of the improved customer connection cost caps? Is there more to come as you fully utilize that construct?

Yeah, Shar, great question. The $1 billion definitely was the key driver for our increase to 10%. This is this disciplined approach we're talking about to make sure that we get the CapEx approved. It's affordable for customers. It's accretive to EPS, and then we can finance it efficiently. So we were able to meet all of our criteria in this case. And so as we look at the next phase of our filing, the supplemental SB 410, we see that we're going to need additional funding to keep up with customer demand. And so that's great news, I think, for California. I think it's great news for our customers. And so that's why we filed the supplemental. We won't build that into the plan until we know we meet our criteria of our disciplined approach, however. But I do think that bodes well for both customers and investors.

Got it. Perfect. And then you noted there's no incremental equity needs from the new CapEx in part junior subordinated funded. Are there any other embedded assumptions around the timing of future equity or dividends that helps you absorb the $1 billion of new CapEx? And how do you offset the $1 billion of CapEx with no equity? And does it do anything to the IG timing? I don't get a sense it does, but just curious.

No, it doesn't. The additional $1 billion in capital expenditures was funded through the junior subordinated notes, which were a $1 billion issue. This financing was very efficient, with 50% equity content, and we were pleased with the response. I want to remind you that we have not made any changes to our equity financing plan. We are still considering issuing a routine ATM program next year, and over the five-year plan, that totals $3 billion. Additionally, there is no new equity expected in 2024.

Fantastic, guys. Congrats, and see you in a couple of days. I appreciate it.

Yes. Hi. Good morning.

Good morning, Steve.

Hi. Can you share your thoughts on Governor Newsom's executive order regarding affordability initiatives? I know you have the simple affordable model in place, so you're addressing this, but could you provide some perspective on your plan?

Yes, we certainly share the Governor's and our policymakers' goals for affordable energy for the people of California. You highlighted our simple affordable model, which is indeed the way forward. As the state begins to see us effectively implementing and realizing these savings, particularly with our rate case filing for 2027 next year, we will be able to demonstrate the effects of the simple affordable model. We are committed to gaining the trust of regulators and policymakers in this journey. Furthermore, we aim to contribute valuable insights into what can truly enhance affordability in California. I believe our ability to reduce costs while increasing demand is a significant shift, and this will be encouraging news to policymakers once they grasp the implications for customer affordability as we invest in the infrastructure to support growth in California.

Okay. And then one other question. You mentioned one source of funding being DOE loans potentially. Just any thoughts on how the election outcome might impact that, if at all?

Yes. Unfortunately, it's a very confidential process. So I can't say much about it, Steve. But obviously, there's still time before the year-end for a resolution on the DOE funding and DOE loan. The thing that we like about the DOE loan is it's just net-net savings for customers. However, we've not built our financial plan assuming anything associated with that. That would be upside and accretive to the plan.

Okay. Great. Thank you.

Yes, you're welcome. Have a great day, Steve.

It's actually Rich Sunderland on for Jeremy. Can you hear me?

Hi, Rich. We can hear you. Yes.

Great, thank you. I'm curious, where things stand on the undergrounding guidelines, your approach to finalization. What are the next steps there after for harmonizing your plan to those guidelines once that process is completed? Thank you.

Yes, that's a great question. We are actively collaborating with OEIS to clarify and define the filing requirements. So far, these have turned out to be more comprehensive than we anticipated. If the current published guidelines are indeed the final ones, it may significantly postpone our filing. However, we remain optimistic about submitting the undergrounding filing by the middle of next year. We maintain that undergrounding is the appropriate solution in our highest risk areas. While it doesn't cover all our miles, it certainly addresses our most critical ones. We believe that, as directed by the legislature, this undergrounding filing will show the long-term cost benefit savings for our customers. We understand it is the most economical way to ensure our customers' safety without forcing them to choose between reliability and safety. We look forward to making that filing and will keep collaborating with OEIS, but I anticipate that our filing will likely be in mid-2025 at the earliest.

Great. Thank you. Very helpful. And then picking up the energization conversation, how are you thinking about ramping that work and clearing the backlog? Curious if it simply comes down to, I guess, what the CPUC authorizes in your supplemental request? Any other thoughts there?

Yes, that is indeed a significant factor. There are costs associated with the work, so our filing reflects the actual demand from customers to address any backlog and maintain our current growth rate. We're experiencing approximately a 10% year-over-year increase in new customer connection requests, which is encouraging news. It suggests positive prospects for California, and we aim to meet that demand. Fortunately, much of this demand can be met at a gradually lower unit cost, which we will achieve by enhancing our work processes, how we contract for these tasks, and how we schedule and bundle them. All the improvements we've been implementing will benefit our customers, and this is completely incorporated in our filing. We are eager to continue meeting our customers' expectations as the commission plays its role in approving this important investment.

Great. Thanks for the time. And see you all soon.

Yeah, great. Thanks, Rich.

Hi, good morning team. How you guys all doing.

Good morning.

Thanks Julien. How you doing?

Great. Just going back to what Rich mentioned earlier about the OEIS side. We noticed that SDG&E received a rather minimal number in a proposed decision. Can you elaborate on that a bit? I understand that your service is somewhat different, but is there anything noteworthy regarding this as you plan for next year's filing?

Yes. It's important to note that we are discussing our undergrounding filing, which is based on recent legislation, separately from their General Rate Case. While we have 1,200 miles of undergrounding approved in our General Rate Case, we aim to continue expanding this through 2026. The upcoming OEIS filing will be additional and aimed at the long term. In California, there is a lot of misinformation regarding the cost-effectiveness of undergrounding. We strongly believe that under certain conditions, it is the right and most cost-effective mitigation strategy. Many overlook the significant costs associated with tree trimming and overhead inspections year after year. Currently, customers are paying around $1 a month for undergrounding and $20 a month for vegetation management and inspections. There's a lack of understanding about this among customers and some policymakers, which is why we will continue to clarify these numbers and advocate for the benefits of undergrounding, not just for safety and reliability, but also for affordability in our most at-risk areas.

Yeah. No, I thought SDG&E got like 6% of the miles in the PD. But actually adjacent here, just last quarter, we talked about this 3.5 gigawatt data center pipeline, right? And you spoke about potentially a sizable chunk of that being related to one counterparty here. Where are you on that pipeline and moving forward and maybe diversifying it out, if you will?

Let me clarify that, Julien. We are completing our first cluster study and expect to communicate with those customers by December. This approach has proven to be a more efficient way to analyze the interconnection of new demand. We had multiple customers and projects which combined for an initial request of 3.5 gigawatts, whereas we initially planned for just a couple of hundred megawatts. While the 3.5 gigawatts is a significant increase, it only reflects what was identified in this cluster study, not our last request. I feel like I’m getting frequent calls about various projects from people wanting us to incorporate them into our plans and studies. Specifically regarding California and PG&E, being based in the Bay Area, there is a strong demand for access to the fiber network in the region encompassing Silicon Valley. There was a perception we were out of power, but we’ve confirmed that we actually have considerable capacity available on our system. We've increased both generation and transmission capacity in California, adding 9.5 gigawatts of new supply last year. Currently, 10 gigawatts of that supply is battery storage, which complements the excess solar we have during midday. We are ready to do business in California, and I see us as being in the optimal position—having just the right amount of demand that is financially viable for customers. I’m excited to expand in this area as customer interest continues to grow.

Excellent. I like the Goldilocks. Good luck, we'll see you shortly.

Thanks, Julien.

Thank you.

Yeah, hi. Good morning. Thank you.

Hi, Gregg.

Hi, Gregg.

Hi. Could you just update us on where you stand with FFO to debt and how that positions you with the agencies?

Sure. So we don't normally give intra-year updates, but there is no change to our outlook, which is the mid-teens. What I'll point you to is our operating cash flow, which is absolutely on track to increase $3 billion over 2023 to $8 billion in 2024. And we still see it growing after 2024. Sitting here on November 7, I'm feeling confident that by year-end, we'll be at or very close to that mid-teens guidance that we've put out there, showing significant improvements over 2023.

Okay. Thank you.

Good morning. Thank you for taking my question. I would like to follow up on the previous topic. As we approach another wildfire season, are there any updates you can provide regarding your recent discussions with agencies and their focus on the associated risks?

The key focus is on what we need to do to enhance the safety and speed of the system. Our current mitigations are proving effective, and it's important to highlight this. The risk level in California is particularly high this year, evidenced by the increase in the number of 10-acre fires, primarily due to non-utility causes. We are witnessing a significant rise in these fires. We are engaging in discussions about the effectiveness of our mitigations, and there is growing awareness of this issue. While our Enhanced Powerline Safety Settings and the Public Safety Power Shutoffs are important and we are refining their scope to target them more effectively and restore service to customers quickly and safely, they inevitably lead to outages. Therefore, we are examining what constitutes an acceptable level of outage considering the associated risks. The only complete solution to eliminate both Public Safety Power Shutoffs and wildfire risks is undergrounding, which we strongly support. That said, we are also progressing with covered conductor installation and have completed 1,000 miles in areas less densely populated with trees, alongside ensuring the safety of our equipment through proper inspections and evaluations. Our interactions with safety and financial regulators have been positive and highlight our progress. It's clear that people statewide are noticing changes, and we take pride in our track record of no major fires over the past few years, particularly with limited structural damage. This is a true measure of our safety system's effectiveness. We are making tangible progress, and that is felt by the community. The ongoing discussion about the best long-term mitigations and suitable infrastructure continues, and we must persist in educating and advocating for the right work for our customers.

Yes, Carly, I want to be clear that we are fully focused on enhancing our credit quality and engaging in ongoing discussions with the rating agencies. As we mentioned, we are currently just one notch below investment grade at Moody's. They have indicated that we are meeting their financial metrics, and we are assessing our performance as we enter another wildfire season, which has been particularly challenging. As I mentioned earlier, our performance was strong, and I believe Moody's will recognize that. We have an annual review cycle with them and currently have a positive outlook, so we look forward to further discussions and are feeling optimistic.

That's super helpful. Thank you for that. And then maybe shifting gears a little bit. Just as we think about the $5 billion of incremental investments you've highlighted in the context of the changes you've announced today related to the $1 billion of capital. Just how would you frame out the potential around rate base and earnings growth over that 26 plus 2026 to 2028 kind of time frame?

When considering the timing of the $5 billion in incremental capital, we have indicated that this amount is contingent upon authorization. I refer to it as the 4As for easy remembrance: it must be authorized, affordable for our customers, accretive to our earnings, and financed efficiently for our balance sheet. We expect to have an outcome from the SB 410 supplemental in the first half of 2025. If the outcome is positive, we will ensure it aligns with our guidelines and incorporate it. There is additional work associated with that $5 billion, including more transmission capacity, data center requests, IT improvements, and projects related to generation, hydropower, and electric vehicles. All of this will be integrated into our five-year plan as it meets our criteria. We have a robust pipeline, having added $1 billion this quarter while maintaining the $5 billion target. We have not reduced it to $4 billion, as our pipeline remains strong.

Great. That's very helpful. Thank you.

Good morning. Thank you. I have a follow-up on a previous question regarding the executive order on affordability. One of the topics that was mentioned was Wildfire Safety programs. I'm curious about your thoughts on potentially cutting certain programs or any affordability considerations you might apply to that program.

I think the bigger question is, do we have alignment between the safety regulator and the financial regulator on scope and cost and what's most effective. And I think that's really what's being discussed is how do we streamline the process of getting a safety regulation signed off on and then how does that feed into the financial approvals. And so I think it's more process than specific mitigations that are being discussed.

Got it. Okay. Thanks. Understood. Then on the financial side, I was wondering, would you expect the plan going forward to be rebasing EPS off of actual numbers as you finish up years?

Absolutely.

Hi. Good morning. Thanks for taking my questions. You spoke about sources of efficient financing, highlighted various categories. I think you said other hybrid, DOE loan and grant programs, working capital improvements and credit rating upgrades. So you left out potential asset sales. Just wondering if that's something you've ruled out for now. And if not, what you could monetize? And given that Pac Gen was rejected, what would give you confidence in approvals going forward?

Michael, asset sales are not currently on our agenda. We have sold towers before, but we are not moving forward with Pac Gen. Therefore, we do not view asset sales as a primary source of efficient financing in the future.

Got it. Great, thanks. And then secondly, you continue to highlight the opportunity set in months and years to come that you reiterated today for the higher non-fuel O&M reductions, increased load growth, lower customer bills. Just wondering if you could share your latest thoughts on the timeline when we could expect some of that to roll into your formal plan?

We recently brought in $1 billion, and we look forward to finding the right time to align with Carolyn's 4As, which emphasize disciplined business practices. I believe this is a crucial takeaway from today's call. PG&E is in a strong position with demand and a clear, disciplined path forward. We are capable of financing our initiatives, growing our business, and enhancing our customer service. Despite various external conditions, I am proud of the team's progress in driving sustainable growth. We will maintain this approach and remain disciplined to benefit our customers and achieve consistent financial results.

Great, thanks. I was referring to the O&M reduction, like the one to three to the two to four. The electric load growth is increasing while the customer bill is decreasing, which presents an opportunity compared to the formal plan. I was wondering when we could expect that to potentially be included in your formal plan.

You're currently observing some of this. The O&M reductions will be included in our GRC filing, as that's how we directly pass those savings to customers. We want to emphasize that we see this amplified, simple, and affordable model coming to fruition. We started with the growth in our capital rate base and are recognizing O&M savings internally. Just recently, I visited our Waste Elimination Center and was inspired by the enthusiasm from our team, who are genuinely happy at work and focused on enhancing our operations. Carolyn pointed out over 200 projects being implemented, with a total of 500 projects evaluated for various improvements, some directly related to O&M and others addressing different areas. The team is effectively learning how to transform the business. We anticipate that this simplified and affordable model will be realized in the near future as we pass along these savings and incorporate the load growth into our forecast for the upcoming GRC. This is the mechanism we have to convey those benefits to our customers.

Great. Thanks for the time. See you soon.

Thank you.

Yeah. Thank you.

Thank you, everyone, for joining us today. We appreciate your ongoing support. We really feel the momentum. PG&E is delivering the right kind of progress at the right time. And we hope you feel that, too. We look forward to seeing you at EEI. Have a great day.