Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- PG&E Corp (PCG, Financial) reported core earnings per share of $0.31 for Q2 2024, bringing the total to $0.69 for the first half of the year.
- The company reaffirmed its 2024 guidance range of $1.33 to $1.37, indicating at least a 10% increase from 2023.
- PG&E Corp (PCG) has committed to no new equity in 2024 and has maintained its five-year financing plan.
- The CPUC approved an incremental $2.3 billion of capital investment for energization, with the possibility of requesting more if needed.
- The company's wildfire risk mitigation strategies have significantly reduced wildfire risk, with no fires of consequence linked to PG&E Corp (PCG) so far this season.
Negative Points
- The company faces increased wildfire risk, with circuit mile days under high-risk conditions up 48% year-to-date.
- CPUC reportable ignitions under R3 or higher conditions have increased to 20 year-to-date, compared to 6 at the same time last year.
- Despite improvements, the company still faces challenges in maintaining system reliability during extreme weather conditions.
- There is ongoing scrutiny and skepticism from interveners like Cal Advocates regarding the company's ability to keep bill increases below inflation.
- The company has a significant amount of planned capital expenditure, which may require careful balancing of financing and operational efficiency to avoid impacting customer bills.
Q & A Highlights
Q: Patty, obviously you guys have talked about this in the prepared comments, but it's obviously been a pretty active fire season. So starting off kind of on the plan for undergrounding. I mean obviously we appreciate that you're waiting for the final go-ahead for filing, but I guess how have your assumptions and plan evolved over the past few quarters? Any thoughts on maybe layering in incremental miles versus the GRC-approved levels?
A: Well, that's a great question. Obviously, undergrounding is top of mind. And I'll open by saying we continue to see undergrounding as a critical element of our total layers of protection. It's one of the layers and one of the most important layers in our highest risk, most vegetation dense areas. So we definitely stand by our commitment to underground our highest risk miles. As we work through the application process of our 10-year filing, look, we're still working through with OEIS. In fact, there's a public workshop scheduled for today to continue to look at the necessities related to the filing. And so as we look at the timing of that filing, it's going to be wholly dependent on what those requirements are and what the expectations of OEIS require. So given that, we have 1,230 miles approved in the GRC through 2026. And we intend to -- obviously, we're on track this year to meet the mileage requirements. I don't see us filing a different kind of filing between here and the filing of the 10-year plan. And so I don't think there will be incremental mileage added outside of either our next GRC or the undergrounding 10-year plan. Those are two good mechanisms. And given the direction of our regulators, we'll use the appropriate one to file for the next range of miles.
Q: Any comments on sort of the Park Fire in Butte County? I mean, is there any kind of early indications on the cause or any kind of presence of PG&E's equipment? I guess, how are you executing on PSPS preparedness and response in that area?
A: Yes. Well, first of all, our hearts go out to the folks near and around Chico, and we pray for their safety and the safety of our firefighters who are out there doing valiant work. Right now, there are no indications of our equipment being involved or contributing at this time. And there are no anomalies detected on our system at the reported time of the fire start. And one of the things, Shar, that I'll share with you that gives me great comfort, and I would hope that it would give investors great comfort, is we know. We can see our situational awareness with our 24/7, 365 Hazard Awareness Center. We're on the job and we can see; we know what's happening. We can have boots on the ground immediately. And I'm just so thankful for our partnership with CAL FIRE, as well as our own safety crews that I mentioned in our prepared remarks, and our public safety specialists. They give us a level of awareness and understanding that just didn't exist just a handful of years ago. And I'm so thankful for our team being so ready and on the job at all times. I will offer -- you mentioned PSPS. You know, here it is July. We haven't done PSPSs in July before, but we did this year. That's our readiness posture. We've done two small ones. The first one was about 2,000 people. Look, these are -- we've sectionalized our system. We've enabled the ability to very targetedly respond to changing conditions and be prepared. I just can't overly emphasize how important it is that that daily readiness should be reinforced for folks. We have a totally differentiated safety posture here in California, and specifically my team here at PG&E is ready and on the job and partnered with CAL FIRE hand in glove.
Q: Just on the -- I guess a couple questions. First, to a degree, it sounds like you're getting closer to potentially being in a position to invest some of the incremental capital beyond the plan. And just any framework to think about the financing part of that once you get there?
A: Thanks, Steve. Yes. So I think what's very important is that, and we've communicated this before, that we do have a framework. We have certain guideposts when we consider financing any new capital. One, it needs to be affordable for customers, and then we define that as being within the 2% to 4% of bill growth that we've talked about over the course of our plan. It must be accretive to EPS. And again, I'll just remind you that our current financing plan assumes issuance of equity and still meets the 10% growth this year and 9% in '25 to '28. And, finally, it needs to be helpful to our balance sheet. So those are our goalposts. And when you look at our current financing plan, two key elements that we've maintained. It's balanced, and it provides flexibility. And that flexibility, again, is in the ramp-up of the dividend and then the parent debt pay-down of $2 billion by the end of 2026. So when we think about new capital, we just think about our current financing plan and using that same approach. We're going to be balanced and we're going to try to maintain flexibility. And so you can assume -- one way to think about this is that you can assume that we're going to follow our authorized regulatory structure at the utility and always find ways to make it as efficient as possible by using the parent debt -- on the parent level. So we'll always be mindful of market conditions. We're very aware of where our stock is trading. And we're going to maintain, as I said, that balance and that flexibility.
Q: I was just wondering if you could walk through the energization order in process going forward to secure more of the CapEx at this point?
A: So are you asking, Jeremy, about the regulatory procedures? Or are you asking about the actual CapEx?
Q: The procedures.
A: Yes. Okay. So first of all, the Commission's order to include $2.3 billion of incremental funding is a cap. And so what we do then is we'll make filings that reflect what we actually were completing and up to that cap. So what was really good was that the commission made it clear that if there were incremental demand beyond that cap, which frankly we see, then we can make additional applications. And we'll consider doing that even yet this year to show that when we have real demand that we can serve, we'll file for that and that should give the commission then more visibility into what the actual customer need is. And therefore, that could go above and beyond that $2.3 billion cap.
Q: Carolyn, just to pivot back to some of the earlier conversation here on financing, and I know there's been a lot of commentary here. How do you think about the timeline here on kind of addressing credit improvement? Right now, I think there's been some discussion
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
