PG&E Aktie

Thank you for standing by. At this time, I would like to welcome everyone to the PG&E Corporation First Quarter 2026 Earnings Release. [Operator Instructions] I would now like to turn the call over to Jonathan Arnold, Vice President of Investor Relations. You may begin.

Good morning, everyone, and thank you for joining us for PG&E's First Quarter 2026 Earnings Call. With us today are Patti 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 quarterly report on Form 10-Q for the quarter ended March 31, 2026. And with that, it's my pleasure to hand the call over to our CEO, Patti Poppe.

Thank you, Jonathan. Good morning, everyone. I'm pleased to be with you this morning to report another quarter of strong progress on multiple fronts. Today, we announced core earnings per share for the first quarter of $0.43. This strong start puts us solidly on track to deliver again and reaffirm our full year 2026 core EPS guidance of $1.64 to $1.66.

At the midpoint, our guidance implies 10% growth over 2025 and would mark our fifth consecutive year of double-digit core earnings growth. Looking forward, we're reaffirming our EPS growth guidance for 2027 through 2030, which is unchanged at 9% plus annually. We're also reaffirming our 5-year capital and financing plans, including 0 new equity issuance needs through 2030.

We continue to deliver for our customers on affordability. On March 1, we lowered electric rates for the fifth time since January 2024. For our most vulnerable residential customers, bundled rates are now down 23%. For other residential customers, rates are down 13% over that same period. In February, our Diablo Canyon nuclear power plant received the final state permit approvals needed to support extended operations through 2030. And in early April, the Nuclear Regulatory Commission granted Diablo Canyon, a 20-year license extension. These actions underscore Diablo Canyon's critical role in supporting California's reliability and clean energy goals, although further action by the state is required in order to operate beyond 2030.

Turning to Slide 4. We remain focused on helping California build a durable, long-term wildfire solution. The CEA's report and recommendations provide a strong foundation as the legislature begins the next phase of this important work. We were encouraged to see the CEA emphasize the cost of inaction, noting that, and I quote, "Inaction perpetuates unaffordability for consumers and hinders the ability to attract the capital required to maintain safe, clean and reliable infrastructure." This is a strong call to act for California policymakers.

As we said last quarter, the CEA report marks the beginning of the legislative phase. With the session running through August, policymakers now have the opportunity to evaluate a menu of options across multiple pathways. We remain encouraged by the progress toward meeting the commitment made by the legislature last year, to find and implement a long-term [ pole of society ] solutions. That commitment began with last year's SB 254, followed by the Governor's executive order, the CPUC submission to the CEA and now the CEA's report.

As I said last quarter, the status quo is neither sustainable nor affordable, and California needs a model that works for all stakeholders, whether they are those affected by wildfires utility and insurance customers, communities, the state and the capital providers needed to support a safe, reliable and clean energy system.

Turning to Slide 5. Our focus on wildfire mitigation remains clear and unwavering. We know this work is never finished, which is why we continuously look for better and more effective ways to strengthen our mitigation. Our operational mitigations, including PSPS, EPSS and continuous monitoring, are making us safer every day and position us to respond effectively whatever the weather conditions.

Looking forward, our long-term infrastructure hardening plans will combine safety and improved reliability and lower maintenance costs. Undergrounding is an important driver of customer affordability too, reducing the need for and expense of annual inspections and vegetation management. As you heard on our last call, the CPUC has now provided a clear path for us to request additional undergrounding through a 10-year plan.

We're still on track to make this filing with the OEIS in the third quarter, including our next approximately 5,000 miles and covering years 2028 through 2037. Combined with the 1,900 miles of undergrounding we expect to have completed by the end of 2027, plus an additional 4,000 miles of overhead hardening, this would result in nearly 11,000 miles of planned system hardening through 2037 or more than 3/4 of the high-fire threat miles we plan to harden based on our current risk modeling.

We'll provide more detail in our 10-year filing. But in the meantime, we calculate that our undergrounding to date, over 1,200 miles has already allowed us to avoid more than $100 million of maintenance spend, which otherwise would have been paid by customers. That is exactly the kind of durable affordability we're working hard every day to deliver for our customers.

Looking at Slide 6, you'll see our simple affordable model as amplified last quarter, giving us line of sight to customer bill growth of 0% to 3%. We call that our [ path to flat ], a destination our customers would love. As noted earlier, in March, we implemented our fifth reduction in electric rates in 2 years. That's real progress on affordability, and this progress matters most for customers who need it most.

Since January 2024, electric rates for our most vulnerable customers are down 23%. For our other residential customers, rates are now down 13%, about $300 less per year. That is real money. Turning to Slide 7. You can see the progress we're making in enabling rate reducing load growth. Projects are moving through our development pipeline with our final engineering stage increasing to 4.6 gigawatts since our year-end update. This progression from application to preliminary engineering and on to final engineering is a natural and expected part of the project cycle and reflects healthy forward momentum.

We also recently initiated our third cluster study, and the results reinforce that there's strong interest across our service area. In total, customer interest exceeded an additional 10 gigawatts, spanning multiple regions, including Silicon Valley and the Central Valley.

Importantly, this demand remains diversified. There's no single project driving these totals. We're committed to only adding load that is definitively rate reducing. We simply need to get the pricing right. Projects from this latest cluster study, which meet the rate-reducing threshold will move through preliminary engineering over the next 6 months, refilling the pipeline funnel from the top as earlier projects mature.

Importantly, this growth is occurring alongside significant resource additions across California. Since 2020, CAISO load-serving entities have added more than 33 gigawatts of new resources to the grid, including over 7 gigawatts in 2025 alone. In addition, the CPUC is continuing their practice of issuing [ new build ] procurement orders, which have resulted in 22 gigawatts under contract through 2029. This kind of growth is good for customers and good for California's economy.

Every gigawatt of new data center load can contribute to affordability by reducing electric bills by 1% or more, while also supporting thousands of construction jobs and generating hundreds of millions of dollars in additional tax revenue.

Before I hand it over to Carolyn, I'd like to tie all of this together with my story of the month. This quarter, that story is about continuous monitoring and how we are shifting from reactive maintenance to proactive, data-driven risk management. Continuous monitoring uses sensors, our smart meters, analytics and machine learning models to identify emerging issues on the system before they turn into outages, ignitions or safety events.

It's allowing us to see developing conditions in real time and intervene earlier, often before there's any customer impact. We're seeing tangible operational benefits from this approach. Continuous monitoring helped us avoid approximately 12 million unplanned customer outage minutes in 2025 and another 4 million minutes in the first quarter of 2026. In many cases, these interventions occurred before customers were even aware there was a problem.

Since the beginning of last year, we've had 1,484 good catches where sensor data flagged developing weaknesses or active events on the grid. 23 of these could have become ignitions but didn't. Identifying stressed equipment early also allows us to fix issues at a lower cost and avoid more expensive emergency repairs down the road. In fact, over that same 5-quarter period, early detection of stressed equipment helped us save an estimated $8 million of capital spend through lower cost repairs and over $1 million in expense by reducing time spent responding to emergency asset failures.

Continuous monitoring is also improving how our teams work in the field. More precise diagnostics mean our troubleshooter spend less time searching for problems and more time fixing them, improving both productivity and safety. Taken together, our continuous monitoring program is an important step forward and an example of how we manage risk, control costs and deliver reliable service.

With that, I'll turn it over to Caroline.

Thank you, Patty, and good morning, everyone. Turning to Slide 9. You can see our first quarter 2026 earnings walk. Core earnings for the quarter were $0.43, up $0.10 from the first quarter last year, putting us in position to once again deliver on our plan. Customer capital investments contributed $0.06, -- of that, $0.02 reflects ongoing execution of our capital plan and the associated return on rate base, including CPUC ROE. We also have a $0.04 benefit related to February's final commission decision in our 2023 [indiscernible] application.

Nonfuel O&M savings contributed an additional $0.02, partially offset by our decision to redeploy $0.01 back into business. Timing and other was a $0.03 tailwind in the quarter compared to the prior year. As we look forward to the balance of 2026, you can count on us to remain focused on disciplined execution and delivering our guidance while taking a thoughtful approach to redeploying savings in ways that benefit customers and help to derisk 2027 and beyond.

On Slide 10, there is no change to our 5-year $73 billion capital plan through 2030. We continue to see strong demand for customer beneficial investment across the transmission and distribution systems, and we still see at least $5 billion of incremental customer investment opportunity outside the current plan. We have flexibility in how and when we may pursue these additional opportunities to ensure we're making the right decisions for customers and investors.

Our preference today remains making the plans better by prioritizing bringing in investments, which enable new beneficial load and help lower rates for our core customers over time, or we could make the plan longer by extending the duration of our top-tier rate base growth. A third option, though not one we're considering right now is to make the plan bigger by adding to our current $73 billion plan envelope.

Taken together, these options give us confidence that we have flexibility in the plan and that we can continue to deploy growth capital in a disciplined way while at the same time, supporting affordability, growth and long-term value creation for owners.

Turning to Slide 11. Our Five-Year Financing Plan is also unchanged from our prior call. The plan continues to be built on conservative assumptions, which align with the guideposts I've previously shared. First, our plan is built to require no new common equity through 2030. Second, we remain focused on achieving investment-grade ratings, including sustaining FFO to debt in the mid-teens. And third, we continue to target ramping up to a 20% dividend payout ratio by 2028, then maintaining that level through 2030.

In February, we took advantage of favorable market conditions to execute 2 financings. We issued $1 billion of parent-level junior subordinated notes opportunistically starting to address 2027 parent funding needs. There is no change to our guidance for a net $2 billion of financing from parent debt and other through 2030. At the utility, we issued $2.2 billion of first mortgage bonds covering roughly half of our 2026 utility debt needs, which remain unchanged.

From a capital allocation perspective, and in light of encouraging indications that the state is serious about pursuing additional wildfire reform, we continue to see our current plan as the right one for both customers and investors. However, I'll reiterate that if we stop seeing progress towards reforming the wildfire risk model, you can be sure that we will actively reevaluate all aspects of our capital allocation plan.

On Slide 12, we continue to make steady progress toward investment-grade credit ratings, and I'm encouraged by the momentum we're seeing. Following our fourth quarter call, Moody's revised their outlook to positive, reflecting continued improvement in our credit trajectory. Our focus on strong financial ratios, discipline to hold the company leverage and continued progress on wildfire mitigation directly supports the criteria for potential upgrades.

As I've noted before, achieving investment grade is a key milestone for us. It will lower our borrowing costs and translate into hundreds of millions of dollars in customer savings over the life of the debt we issue, creating a durable affordability driver for customers, not currently assumed in our plan.

On Slide 13, we're reinforcing that we continue to see a path to deliver 2% to 4% long-term reductions in nonfuel O&M even after absorbing inflation and other cost pressures. Executing against our simple, affordable model is how we keep our capital program affordable for customers and sustained reductions in nonfuel O&M are a key element allowing us to grow our plan and fund the investments our system needs while also protecting customer bills.

In addition to the great example of continuous monitoring Patti mentioned, we continue to innovate and drive efficiencies in our field operations by applying technology. By leveraging satellite and LiDAR, we're improving the quality and consistency of inspections while reducing the volume of patrols, lowering contractor reliance and enhancing safety in the field.

Taken together, these changes are expected to deliver $24 million in annual O&M savings this year alone. This is another tangible example of how targeted technology investments support our long-term nonfuel O&M trajectory.

Slide 14 highlights major regulatory and legislative milestones we're monitoring this year. On the regulatory front, following our fourth quarter call, we received our 2025 safety certificate from the CPUC, which is valid for 12 months through early March 2027. Additionally, as Patti mentioned, we're on track to file our 10-year undergrounding plan with the OEIS in the third quarter.

I'll end here on Slide 15 by pointing out our differentiated story. We're proud of what we've accomplished, and we know there's still plenty of opportunity in front of us to continue delivering for our customers and our investors. We're focused on doing just that day in and day out. With that, I'll hand it back to Patti.

Thank you, Carolyn. Before we take your questions, I'd like to recap where we stand as we are building California's energy future. We delivered a strong first quarter, putting us firmly on track for another year of double-digit earnings growth. Safety remains our highest priority. We continue to strengthen our wildfire layers of protection. We continue to make real progress on affordability with a 23% reduction for our most vulnerable customers since January 2024. At the same time, we're seeing good progression of our rate-reducing large load pipeline, and we're encouraged by California's focus on constructive wildfire reform. .

With that, operator, please open the lines for questions.

[Operator Instructions] Your first question comes from the line of Shar Purreza with Wells Fargo Securities.

Patti, you've been vocal about not wanting to see the can kick down the road on legislation. I mean, obviously, that would be a bad outcome in your view. I guess, how should we think about capital allocation, like the buybacks in case some aspects of the CEA report get passed, but we don't get something that is all encompassing. So step in the right direction, but not the Goldilocks scenario. Is some progress about outcome [indiscernible] key aspects get pushed into '27, it's obviously a tight window and California is dealing with a lot. Just get a sense there.

Yes. Thanks, Shar. First and foremost, I would just reiterate that we're encouraged by the progress to date. We do think the right conversations are happening with the right folks, and we feel good and encouraged about that. I'll just offer that there's obviously minimum outcome to prevent additional costs being born by shareholders and this tail risk being able to be measured and understood.

We know that that's a very important floor for an outcome here. And as we've been very clear, we've been reiterating wide and far the value of the investor-owned utility model. We've been advocating for the importance of the capital that we are able to attain from the capital markets from our investors and how important that is to making our infrastructure investments affordable for California that as we spread out the cost of infrastructure over time because of the great capital that is deployed by our important owners, that is good for customers.

And so an important outcome of SB 254 is that we can attract low-cost capital to invest in that infrastructure to help California grow and make our energy cost more affordable for customers here. So I'll say all that backdrop to say that we feel like our capital allocation and our model is working. We're lowering rates while we're deploying our capital today. We think right now is not the time to change that plan, we know that the simple affordable model is the best plan for customers and investors.

And so we're very bullish on that. Now to the ultimate heart of your question, if that doesn't occur, if we don't get a minimum outcome that's essential, then obviously, we'll have to look at and we will not avoid looking at our entire capital allocation plan, the whole financial plan. I'm not going to rack and stack how we would think about that here on this call, but I will just say that all aspects of the plan will have to be on the table, and we'll take a look at doing what's best in totality.

But for now, we are encouraged by the progress that's being made and the level of attention to the issue.

Got it. Perfect. I appreciate that. And good luck there. Patti, just lastly, I mean, I know obviously, you keep highlighting the data center opportunity in the context of savings and kind of bill reductions, probably that's the right messaging in this environment. But is there kind of a point you can convert that into sort of like an earnings impact like some of your peers. I mean 4.6 gig in final engineering is somewhat material. I guess at what point does large load growth drive significant new transmission investments.

Well, I would say that it is. We are and we shared at the -- on our Q4 call that we've added more CapEx for transmission into our $73 billion capital plan. Given all of our circumstances, we think our $73 billion plan is the right plan. The idea that we would make that bigger would take some other changes, I would say, over time.

And so right now, as Carolyn has been very consistent in sharing that we want to make the plan better. And when we say better, what we mean by that is by pulling in that transmission and data center load growth, if it makes it more affordable for customers, that's better. And so we've been very disciplined about our cluster study work. And when we talk about final engineering, we're sharing real costs with our potential large load customers and they're signing on for them that are absolutely not just from a a sound bite or a marketing perspective but an absolute rate reducing new CapEx investment.

And so that makes our capital plan even better. There will come a time, I think, particularly after SB 254 Phase II resolution at the end of the legislative session that we should look at if the conditions are such that we could make the plan bigger, but that's just not now.

Your next question comes from the line of Nicholas Campanella with Barclays.

I just wanted to ask a follow-up on just the legislation and just there was a lot put forward by the CEA, like 3 separate phases. It's a big menu of things. And I guess just -- where are you kind of drawing the line? And what is sufficient? Is it more about having some type of permanent cap if I'm reading your response correctly? And then I just in the last legislative session, shareholders did have to kind of participate in some instances there. So how are you kind of thinking about that for Phase 2?

Yes. Nick, the most important thing, we think, is the whole of society approach. We think the governor was clear and the CEA report reflects that there are multiple aspects of wildfire liability reform that would be important for all California because remember, all fires in California are not caused by utilities. Insurance access in California is a real challenge to homeownership.

We have a housing crisis in California, making sure that we have an insurable housing market is very essential for the state. So well beyond utility concerns the CEA report reflects a whole of society approach. We think that's smart because we're Californians too. And we care about what happens here and what happens to all Californians, not just those impacted by a utility wildfire.

Now that being said, I am the CEO of the utility. So I do have a point of view that we need to make sure that the tail risk of wildfire liability is one that shareholders and investors can model can predict and know how great the risk is so that you can feel comfortable investing your clients' pension funds and retirement funds into our infrastructure here in California. So our minimum is very important that we have an ability to see and model and quantify what that tail risk is.

Now on shareholder contributions, as were required in the 254 Phase I, that is a question that's part of a total look of the value of the fix, the totality of the legislative action will determine whether there's any reason to make additional contributions. And so the package would have to be looked at as a package. And if it doesn't improve the status quo then contributions would be unacceptable. But if there's a dramatic improvement to the status quo, we obviously would be in dialogue with policymakers.

That's very clear. I appreciate that. And then I just had another question because it's kind of come up to the foray recently. Just the governor election in the state for various reasons has been more of a focus for folks. And I know that there's been some calls from various candidates on returns and affordability and maybe even notably a rate freeze.

But I do recognize on slides and in the simple affordable model, you're showing that you're pretty well positioned against that. So just what's the strategy here to kind of make that resonate with new policymakers? And then, I guess, just how high grade is the plan if we were to kind of go that way with some of the more draconian things that are being piched right now?

Yes. Look, the good news is this. Number one, whomever is elected governor of the state of California, we're going to want what they want, and that's affordable utility rates. The even better news is performance is power, and we are performing. As I mentioned, we've reduced rates 5x in the last 2 years. Our most vulnerable customers' bills and rates are down 23%. That is meaningful progress that we can point to.

And so politicians have to say what they have to say, I guess, to get elected. But when it comes down to brass tacks, and we actually have to do what's promised, I think our performance is a key enabler to our ability to work with whomever is elected to do exactly what these politicians want. We want the same thing. We want a healthy, vibrant California powered by PG&E and the IOU model is essential to the growth and prosperity of California.

[Operator Instructions] Your next question comes from the line of Steve Fleishman with Wolfe Research.

Just I think your comments are pretty clear on what you kind of want out of a law. Just when you look at the different proposals or structures that were in the wildfire report, are there any of the ones that best met what you want and you think other parties stakeholders as well.

Yes. I think Steve -- I think this whole of society look is super important. So the 3 pillars, the looking at hardening our communities from spread is so important. It's 1 thing to prevent an ignition. But when the 100-mile per hour winds are here, we need to make sure that our communities are ready and that they are built purpose, just like in hurricane zones, making sure that we get those building codes and implementation of those codes, that would be very important to derisking our communities. .

So obviously, that's a good thing. The liability limits and liability reform is something that we feel strongly should be looked at, particularly when a utility can demonstrate prudence and can demonstrate that through their wildfire mitigation plan, they are prudent. And then finally, any kind of state, backstop obviously helps to manage that tail risk. But what I'll tell you is there's lots of paths to odds here. There are all sorts of vehicles and methods and mechanisms.

And so the report, I thought did a good job of outlining multiple paths, not -- we don't need everything in that. In fact, some of them were intentionally this or that. And so I think now is the heavy lifting for the legislature to really consider what's the totality package. What is the state's ambition to truly create a wildfire liability construct that works for everyone and works best. And we're, as I've said, encouraged by the conversations that have ensued so far.

And then I guess 1 related question. Just somebody brought up the governor election and obviously, we had this shake up occur. Is there any way to interpret whether that actually adds more impetus to address this wildfire law this year or the other way around? Is it disruptive to it? Just any thoughts there?

I would say the Governor Newsom has done incredible work over his time as Governor to address these major fundamental issues with wildfire risk in the state. I think he's probably the leading governor in the nation who has taken and led his legislative bodies through major reform in this area on his watch. .

So as he indicated, and we're just -- from the reports and the executive order that he issued, I think he expressed interest in having a real fix but he can't act alone. He's got to have the legislature with him. And so it's been good to see legislative leadership describing a desire to really get into this issue. And so I look forward to them being able to do their job. And I think unrelated as much to the governor's election, but for the fact that it's Governor Newsom's last year in office here in California, I think he's made it clear that he'd really like to see action on this.

Your next question comes from the line of David Arcaro with Morgan Stanley.

I was wondering on the data center side of things. When might you expect to refill that bucket of application and preliminary engineering within a pipeline? And maybe more broadly, just what has been the pace of data center demand and conversations that you've been seeing?

Yes. I would say, first of all, the cluster study that we've initiated, we call it Cluster '26, our third cluster study has initiated -- has shown significant demand as we look at how we do the engineering, we do that over the next 6 to 8 months. We do parallel engineering of all the projects. This has been a real enabler to minimizing costs for any 1 project maximizing shared infrastructure investment and really getting a clear eye of where the capacity needs to be either added or leveraged where we have existing capacity.

And so one of the, I would say, the big developments we're seeing lately is more interest outside of just the Bay Area. And so that's exciting. I'll just tell you, I was at a conference in EEI Key Accounts Conference with all our large customers, and I was on a panel with, I'll just call a Class A data center developer. And as he and I were talking before we went on stage, he -- and this is a major data center developer was unaware, we had additional capacity here in California.

And so I think we still have a job to get the word out that California is open for business. We've added 33 gigawatts of capacity to the California grid, and we've got 22 gigawatts more under contract for the next 4 years. That is significant capacity being added on a grid that is underutilized because of our low air conditioning demand. So we really have an opportunity to serve these large load customers and I think word's getting out. And our third cluster, cluster 26 really has demonstrated that. So I would say, as you can see, as we indicated, 10-plus gigawatts showing interest. That's in the early phases of that cluster study. And as we do the engineering, obviously, some of that will fall out. We don't -- we've seen that over time.

But as you can see, we continue to move closer and closer to actual construction and being online. We still expect to have about 1.8 gigawatts online by 2030. And again, these are multiple projects, no one silver shovel, as I like to say. So this is, I'd just say all good for California, for California's tech industries, for the customers who leverage technology and for all of the people who use the grid in California, this is a big win-win.

Great. Yes, that's helpful. And I guess, I think you kind of alluded to this also in that response. But I was just curious, I mean, you've got significant electric bill reduction coming as you start to bring this online. So could you just help with a sense of when those data centers are coming online and when customers would end up seeing some of that bill reduction to kind of add on top of what you've been highlighting and achieving on the affordability side of things.

Yes. So the 1.8 gigawatts will be online by 2030. We forecast that to be about a 1% to 2% rate reduction for that time period. And so when you add that into our simple affordable model, remember, this is the way that we've been reducing rates already. There's very limited large load that's contributed to the 23% rate reduction for our most vulnerable customers and 13% rate reduction to date. That's been delivered through a simple, affordable model. Converting our capital O&M ratio to a more capital less O&M, reducing our maintenance costs through more efficient operations.

And as Carolyn mentioned, $26 million of savings by transforming how we do inspections. Those inspections are all O&M. So one of the secret sauces here at PG&E is our O&M reduction capacity and that is the most beneficial, quickest way to lower rates for customers. Of course, investment-grade credit metrics would also help lower bills for customers and large load as we transition forward is in the future years, our pathway, as we like to say, our path to flat. That is being driven by all of those factors. O&M reductions, more efficient financing and large load and the large load in the latter half of the plan.

Your next question comes from the line of Anthony Crowdell with Mizuho.

Follow-up to David's question on the -- I'm curious on the conversion from final engineering to construction, just your confidence in obviously, you've had an increase there, up to 140, just as that 4,600 now is in final engineering. Confidence of converting it to the construction mode. And then I have a follow-up.

Yes. So first of all, one thing to remember about how this large load gets approved and financed here in California. Our generation capacity is driven through the California Energy Commission, CAISO and the CPUC. And that's why we've added 33 gigawatts that process is working really well. I know that some of the ISOs across the country are struggling to get new large load built. We're getting capacity added to the grid.

So in order to get one of these large load customers, they can leverage that capacity that's been added to the grid without having to do one-on-one contracts per se. So when we talk about final engineering, we're predominantly talking about transmission and the transmission engineering that's required because in a lot of cases, we're able to just do a direct connect, dual feed with a backup online on-site in order to deliver the reliability that these large data centers require.

So to answer your question specifically, Anthony, we think there's a high conversion, but we've not been at this stage with this volume before. And so we're buttoning up all the final details with our counterparties. But the fact that they're moving forward, they're putting money on the table, these aren't final agreements, but they're awfully close, and they're putting real forecasted expectations for bringing load online that -- and so we'd say that process is working, but these will be important tests here, these final -- these 4 gigawatts to see how much of that actually goes to construction, but we're pretty optimistic than a lot of it will.

And so that's why we forecasted 1.8 gigawatts by 2030. Right now, that's -- you can use that as simple math, but those numbers could change here in the coming months.

Great. And then a follow-up on the $5 billion of incremental investment opportunities. And I know I think third quarter, you're going to file an undergrounding plan, and the miles are kind of subject to approval, how much of the $5 billion of incremental opportunities is dependent on the approval for the undergrounding plan or the undergrounding plan would be incremental to this $5 billion?

Unrelated. We built in a level of undergrounding and around $1 billion a year in our $73 billion plan, and that's what's built into our assumptions. So when we talk about the $5 billion, we talk more about accelerating reliability improvements, accelerating new business connections, accelerating these large loads, including more and more transmission infrastructure investment in our plan because right now, we're making trades between where best to deploy capital.

We have plenty of capital to deploy, and we're really working from an affordability and our balance sheet are key drivers to how much capital we deploy, which is why we love our plan. We think it's the best. It really threads the needle for customers and investors. And so anything we add to the plan at this juncture means something else is coming out. And so that's why we would say that the $73 billion incorporates all of those things.

Your next question comes from the line of Gregg Orrill with UBS.

I Was wondering about settlement discussions in the rate case, if you've had any and just your general thoughts on how that's going and settlement is at all likely>

Yes. I would say, first of all, evidentiary hearings will be here throughout May, and I think that's an important step in the process. That may create an opportunity for settlement. And so we would never rule out settlement. Obviously, we've settled cases in the past. But we've also gotten pretty strong indications from the CPUC that they like to do a fully adjudicated GRC. So we're open to both. We think we filed a great case. We think given our commitment to affordability and our follow-through on what we promised the commission, we would be doing with rates, and they're watching it happen. I think we enter those discussions as a real, trusted counterparty, and we look forward to the hearings throughout May. .

Your next question comes from the line of Ryan Levine with Citi.

Two questions. One, just in general, how does the summer look for weather into wildfire season? And then secondly, as you continue to look to optimize capital allocation into potential scenarios around CapEx, whether it's growth or something else. How do you look at what credit metrics to maintain on your holding company leverage?

Well, I'll take a weather question, and then I'll pass off to Carolyn on the credit metrics. On the forecast for weather, look, one thing I've learned, we have incredible scientists here at PG&E who are extraordinary weather predictors. But our strategy is not to count on weather prediction, we count on being ready every day.

And so regardless of the conditions, we are in a position and a posture to respond and to be prepared and to prevent. As I shared in my prepared remarks, this continuous monitoring application to our grid is extraordinary. I cannot overstate how exciting it is to us here at the company to look at the potential of being able to move from a reactive grid operations to proactive grid operations with visibility, knowledge and forethought before conditions materialize. And before a branch grows into a tree, before a line has any kind of degradation, we can see it. Before a transformer might have early signals of failure, we are moving into a fully predictive grid posture.

We're not there yet, but boy o boy, are we making progress and this continuous monitoring gives us a lot of confidence heading into this wildfire season that we have the posture required to prevent catastrophic wildfires. And so we're just -- we're working hard to make sure that we deploy those sensors and leverage that technology as quickly and as affordably as possible because it is so beneficial. I'll go ahead and kick it over to Carolyn for the credit metrics question.

Yes. Just on -- so just -- as a reminder, stepping back, like our current plan is certainly built around 3 things, as we've said. No equity, particularly at today's low valuation. We want maintain the common dividend, which provides us with flexibility. And then we do have some modest debt levels at parent level, sorry, debt financing in the plan at the end, but we are maintaining that 10%, and that's all built around maintaining our IG-level credit metrics today. post SB 254, I think that what you're getting at and looking at a different capital allocation if we said everything is on the table at that point in time.

And so all elements of that plan that I just went through, will be on the table to be considered at that point in time. And what I will say is that you can just really count on us to look at market conditions. We're going to be looking at what's going on with our stock price, what's going on with interest rates, what is the overall environment, and we'll come to that conclusion at that time.

Okay. And I appreciate the maybe sensitivity, but is there any color you could share around whether special dividends or ratable dividends or buybacks that we should consider in those type of scenarios?

Ryan, it's Patty. Yes, as I've said, we're just not going to rack and stack the alternatives here today. We're going to make sure that we do first things first, and that's to get a solid SB 254 outcome.

Your next question comes from the line of Richard Sunderland with Truist Securities.

Just 1 for me. Given the transparency in the SB 254 Phase 2 process, recent CEA report, do you expect any new look to the legislative process this summer, like in earlier bill introduction or more debate on public text or I guess anything else that offers more external insight into where the process stands.

Well, we don't know exactly what -- how the legislature is going to approach this, but we do know that the Assembly Energy Committee Chair, Cottie Petrie-Norris had indicated that she had hoped to hold hearing sometime in May, which would be -- she said that in public statements.

And so we're hoping that, that gets followed through on. We do think hearings will be important because it's a complex subject, and we think the more are legislators and these important committees both the insurance and the energy committees and the Senate and the assembly understand the alternatives. They'll see what the CEA report really was conveying that in action is not a good path forward. In action would be really just not an option. It's unaffordable. It's too expensive and too regressive. And we know our policymakers when they understand that we'll want to take the appropriate actions. And the good news is the CEA report provides multiple alternatives for consideration that would dramatically improve the status quo. So we look forward to those hearings and look forward to the discussion how it transpires here over the legislative session between now and the end of August.

Your next question comes from the line of Carly Davenport with Goldman Sachs.

This is [indiscernible] on for Carly. I had a question on the CAISO transmission project. Could you give us a sense of where things stand in terms of getting to a final approved status? Are there any projects that you're more optimistic could clear the final iteration this year? And then how should we think about the financing strategy for these projects?

Yes. Thanks. Great questions. We're excited to report the transmission planning process from CAISO is has completed, and they've awarded 25 projects for '25 '26 planning, totaling $4.16 billion of projects for PG&E. This is a big improvement for PG&E. I think there was a period of time where the CISO was not sure that PG&E could follow through and do these transmission projects at this scale. And their determination certainly has shown that they have confidence that of 26 projects, 25 were awarded to PG&E.

And we're proud of that. And all of those projects are currently built into our $73 billion capital plan. So no change to the capital plan there, just our ability to go ahead and execute those.

That's great. And then a quick follow-up on Diablo Canyon. Now that you got the license renewal, how are you thinking about appetite from the state to keep the plant on longer term?

Yes. Well, thank you for asking this question. I always love to talk about Diablo Canyon. Look, we're very happy with the NRC's 20-year license renewal, and that was a big milestone for the team. I think they've earned that with their performance, their continued delivery of clean energy for the state of California, one of the best operated nuclear plants in the country, proud of their performance, and we think that performance was essential in that license renewal.

Now it is up to the legislature on whether the plant would be extended beyond 2030. I think the CPUC has been very clear that there's a real cost benefit and the billions of dollars of savings for customers by having Diablo remain online. And there's a recent study by MIT that confirmed and validated CPUC's understanding -- or CPUC's forecast. So I think with affordability top of mind, I leave it in the hands of the legislature to take the necessary actions to extend the life beyond 2030. But the economics certainly work.

This concludes the question-and-answer session. I will now turn the call back over to Patti Poppe for closing remarks.

Thank you, Jeannie.

Well, Thanks, everyone, for tuning in today. We know a lot of eyes, including ours, are on Sacramento and wildfire liability reform, and you can rest assured that our eyes are also on running a great utility. The PG&E transformation is on track. We have never been stronger or better positioned to serve, and it is our honor to do so. Thank you for joining us today. Stay safe out there.

Ladies and gentlemen, that concludes today's call. Thank you again for all joining. You may now disconnect.

[Audio gap]

We are increasing the low end by $0.02, which brings the range to $1.64 to $1.66. At the midpoint, our 2026 guidance implies 10% EPS growth. Looking further out, I'm pleased to reaffirm our growth outlook of 9% plus annually from 2027 to 2030. As you've come to expect, we'll also continue our practice of basing future growth on our actual earnings. As previously announced, last month, I began the 5-year extension of my contract as CEO, which runs through 2030. I'm energized by the work ahead. Our priorities are clear: safely keep the lights on and the gas flowing and keep making bills more affordable. It's a safety, reliability and affordability trifecta that we're delivering here at PG&E. On the safety front, in 2025, we had a 43% reduction in serious injuries and fatalities compared to 2024, and our serious preventable motor vehicle incident rate improved by 30% achieving some of our best ever safety metrics. On reliability, our system-wide performance measured by SADI improved by 19% from 2024. And on affordability, it's our consistent execution on our plan. our simple, affordable model, which is allowing us to chart a differentiated path for our customers. On January 1, we delivered our fourth reduction in electric rates in two years, with our gas rates also going down. Combined with prior decreases, our bundled residential electric rates are now 11% lower than January 2024, with the typical customer paying about $20 less per month. That's progress customers can feel. If our pending 2027 GRC were to be approved as filed, combined gas and electric bills would be flat to down compared to 2025, and we're going to keep pushing because fighting for customer affordability is core to our strategy. Looking ahead, we see opportunities to further improve this trajectory through the addition of rate reducing load from data centers and other electric growth. This new load can deliver a win-win for California, economic development and affordability.

Slide 4 should be familiar by now and summarizes our consistent execution track record. Each year brings different headwinds and tailwinds, but our approach is unchanged. Plan conservatively and execute relentlessly to deliver consistent, predictable results over the long term. In 2025, we confronted early headwinds with strong execution during the year, particularly on the cost side, ultimately putting us ahead of plan. This allowed us to redeploy and pull ahead costs in the back half of the year. That's our model doing exactly what it's designed to do, deliver consistent results for owners while redeploying outperformance to benefit our customers. As shown on the slide, over the past four years, savings generated under our simple affordable model have allowed us to redeploy over $700 million for the benefit of customers, while still delivering for our investors. These are dollars which could have shown up as higher profits, but which we chose instead to deploy towards better customer outcomes and derisking future years. Said another way, profits and customer savings go hand in hand.

Turning to Slide 5. We remain intensely focused on helping California find a path to address the state's wildfire challenge. We will stay constructive and tenacious until we reach a more sustainable, safer and affordable future for our customers, for our communities, for our state and for those who commit their capital to us. Since our last call, the California Earthquake Authority stakeholder process for SB 254 Phase 2 has been progressing, and they are tracking towards submission of their report and recommendations to the governor and legislature by April 1st. I should note that the April 1st CA report won't be the end of the road for Phase II. In fact, it will mark the beginning of the legislative process. We aren't getting specific today on which policy choices might be most effective, but be reassured our team is actively engaged. In terms of core principles, our goal is to address the open-ended and unknown risks which the current construct puts on the IOUs and our customers. For California to attract your much-needed capital, you must be able to quantify and price the risk. Our customers and hometowns need us to access affordable capital as a prerequisite for safe, resilient and clean energy systems they expect.

Turning to Slide 6. Ignitions were down 43%, which resulted in a third consecutive year without a major fire caused by our equipment. This was achieved despite elevated fire activity statewide. As we do every year, we're looking to drive further safety improvements in 2026. We expect to further expand our continuous monitoring capabilities, including our smart meters, which are helping us get ahead of potential issues, anticipating failures before they happen. In late January, we announced the launch of Ember Point, a new venture between Lockheed Martin and PG&E Corporation, marking a critical milestone in our mission to end catastrophic wildfires. EMBERPOINT is intended to integrate next-generation wildfire solutions and set a new standard of wildfire safety. With our regulators approval, we can bring our wildfire mitigation experience and proven layers of protection while Lockheed Martin brings its cutting-edge prediction and detection along with military grade equipment and tools to help our firefighters stay safe while putting out fires faster. We can accelerate at scale the deployment of technology at the lowest societal cost, the goal being speed to safety, making our systems and others safer faster. In addition, EMBERPOINT gives us a pathway to flow some savings back to our customers over time. Also in January, five finalists were announced in the autonomous response track of [ X Prise ] wildfire, where PG&E is a main sponsor. This summer, the five finalists will be tasked with demonstrating autonomous systems, which can detect and fully suppress a high-risk fire in a 1,000 square kilometer test zone within minutes, while leaving decoy fires untouched. We couldn't be more excited to be helping advance real-world adoption of game-changing solutions. On the regulatory front, in December, the CPUC voted out revised guidelines for utility undergrounding plans. This is a key step that moves us toward initiating our 10-year plan filing with OEIS, luckily in the third quarter of this year.

Earlier this week, we and the other IOUs may require filing with the CPUC to establish the benefit/cost ratio methodology. Aligned with that, the CPUC guidelines provide us a path for us to file for approximately 5,000 miles of additional undergrounding over 10 years starting in 2028. These miles will represent the next phase of our undergrounding journey and will add to the 1,900 miles we expect to have completed by the end of 2027. Combined with overhead hardening, this would bring our total system hardening plans through 2037 to almost 11,000 miles and more than 3/4 of the high-fire threat miles we plan to harden based on our current modeling. The remainder of our overhead system in the HSD will be protected with operational controls like PSPS, EPSS, maintenance, including vegetation management and continuous monitoring as it is today.

As illustrated on Slide 7, we see PG&E's affordability story as our story of the year. As I mentioned earlier, on January 1st, we lowered our bundled residential electric rates for the fourth time in two years, and our average bills for those customers are now 11% lower than in January of 2024. That's a headline worth repeating. We hear a lot of discussion of affordability in absolute terms, but what gets less attention is that our bills as measured by share of wallet are below the U.S. average. Our value proposition relative to income levels is, therefore, better than average. Our prices are moving in the right direction, and we believe this will become easier for policymakers to recognize going forward. As our 2027 GRC proposal laid out, our simple, affordable model allows us to make needed investments, while holding our bill increases at or below typical inflation. Back in 2024, we started talking about our simple affordable model, amplified. This showed an opportunity for further improvement in each of the key elements, our goal being to bend our future customer build trajectory down even further.

Today, as shown here on Slide 8, I'm excited to share with you that we're officially updating our simple affordable model to show a new target future build trajectory of 0% to 3%. You heard me 0% increase in our bill is insight. We've amplified two key enablers, our nonfuel O&M savings and electric load growth. Our confidence in the PG&E performance playbook and in our ability to drive savings has continued to grow. We still see plenty of headroom for savings. As indicated by our capital to expense ratio, which has improved from 0.8 to 1.0 over the past two years, while improving our ratio remains well below our peer group average of 2.0, while top decile performers are close to 3.

Turning to our rate reducing load story here on Slide 9. Since our third quarter update, we've seen significant growth in projects moving into the final engineering stage, which now stands at almost 3.6 gigawatts, that's up 2 gigawatts, more than doubling from last quarter. We're excited by the opportunity to bring on large load and deliver savings to our bundled customer base, while enabling growth and economic prosperity for our state. In January, Carla Peterman represented us at a ribbon-cutting ceremony at the Equinix Great Oaks South data center, the first data center to come online under our joint implementation agreement with the City of San Jose. This was an opportunity to demonstrate that PG&E is delivering on our promise to provide fast, reliable power to large energy users. For each gigawatt of large load, we see the potential to drive savings of 1% or more on average monthly electric bills. In order to do this, it's actually quite simple. We just need to get the pricing right. And while the relationship between data centers and customer affordability is now receiving a lot of attention at the national level, demonstrating savings for our core customers has been nonnegotiable for us from the beginning and continues to be so.

With that, I'll hand it over to Carolyn.

Thank you, Patti, and good morning, everyone. Here on Slide 10, we're showing you our 2025 earnings walk for the full year. Core earnings per share are $1.50 at the midpoint of our guidance and up 10% from 2024. We've added $0.07 from our customer capital investment, deploying critical capital on behalf of our customers for safety, resiliency, reliability, capacity and new customer connections. In fact, with respect to new connections, by late 2025, we had cut application intake time by 40% from a 2023 average of 76 days to just 45 calendar days, and our engineering design times are down by 1/3, thanks to our performance playbook.

Our operating and maintenance savings came in at $0.20 for the year, and we were able to redeploy $0.09 back into our system for the benefit of our customers. We had over 160 waste elimination initiatives in 2025, which came from across PG&A from our front line to the back office, and we're not done yet as this is a muscle we're continuing to strengthen. Timing items reversed for the full year with the other bucket here mainly reflecting benefits from smart tax planning as we shared on the third quarter call.

Turning to Slide 11. There's no change to our $73 billion 5-year capital plan. We still see at least $5 billion outside the plan, much of which is FERC jurisdictional capital, which can enable rate reducing load growth.

Here on Slide 12, I'm pleased to share our 5-year financing plan. On the third quarter call, I shared our financing guideposts. Those principles have not changed and are reflected here. Importantly, our plan is [indiscernible] to require no new common equity through 2030. We continue to prioritize investment-grade ratings, including sustaining FFO to debt in the mid-teens. And we still target reaching a dividend payout of 20% by 2028 and holding that level through 2030. As you likely saw, we've doubled our annual share dividend to $0.20 for 2026. And based on our payout guidance, you can expect consistent increases in the next two years. This plan offers flexibility over the 5-year period and is based on conservative assumptions. On this slide, we're also showing our expected 2026 utility debt issuance of up to $4.6 billion. Our plan includes some modest additional parent level debt financing, which may include efficient tools such as junior subordinated notes. Overall, we expect our percentage of parent debt to remain below 10% through 2030, which is on the lower end of sector norms. While this need is more towards the back end of the plan, we'll always be opportunistic in terms of timing our market access. Given uncertainty on timing and indeed, whether the contingent contributions to the continuation account will be caused, we've not explicitly included these in our waterfall. If these were called PG&E share would be $373 million annually over 5 years, which we would plan to debt finance and still maintain our mid-teens credit metric.

Turning to Slide 13. Achieving investment-grade ratings and efficient financing are key principles of our financing plan. With investment-grade credit, we would be able to access lower cost debt, unlocking a key incremental affordability driver for our customers. Regarding capital allocation, consistent with what we've said before, we're in the midst of a state-led process on wildfire policy reform, and we continue to see our current investment plan as the one that best delivers for our customers and investors. Now is not the time to make a change. That said, as you would expect, we'll have a disciplined approach. And if we reach a point where we're not seeing clear signs of progress on the legislative front, then you can be certain, we'll take a hard look at all aspects of our plan.

Here on Slide 14. Now this is where I get really excited. We reduced nonfuel O&M by 2.5% in 2025, meaning we've now exceeded our target for 4 years in a row, and we're definitely not done yet. As Patti mentioned, we've updated our simple affordable model on this call to reflect O&M savings in the 2% to 4% range, up from the previous target of 2%. And as a reminder, this savings target is after we've absorbed inflation and other cost pressures.

Slide 15 highlights our upcoming legislative and regulatory calendar. The California legislative session is already underway. And as you know, the Wildfire Fund Administrator report is due April 1st. On the regulatory front, our general rate case process continues with intervener testimony tomorrow and hearings in April. We expect to file our 10-year undergrounding plan with OEIS in the third quarter, and we're tracking towards a November proposed decision in the concede and Dixie cost recovery proceeding.

I'll end here on Slide 16 with our value proposition. It's a reminder that the simple affordable model works. The concept is simple, but it's our differentiated performance that is unlocking benefits for both customers and investors.

And now I'll hand it back to Patti.

Thank you, Carolyn. We understand that the state's work on wildfire risk and SB 254 Phase II remains the critical variable for many investors, and we're fully committed to finding an outcome which delivers on key priorities. These include continuing to accelerate our reduction of wildfire risk while also delivering on affordability for our customers and attracting investment for California energy infrastructure.

Before we take your questions, let me recap some highlights from this past year. We achieved a significant reduction in serious injury and motor vehicle incidents resulting in some of our best ever safety performance. We reduced ignitions by over 40%, resulting in our third consecutive year with no major fires caused by our equipment. We improved electric reliability by 19% year-over-year. We now have 3.6 gigawatts of data center demand in the final engineering stage, positioning us to capture rate reducing load growth. Our customer transaction score, which we measure every day is up and our field crews are being scored 9.5 out of 10 by our customers when they interact with our frontline team. Our brand trust is up. We reduced O&M by 2.5%. We delivered another year of double-digit earnings growth, further extending our execution track record. And with all of that, we've lowered bills again, with our now amplified simple, affordable model offering a pathway to zero bill inflation. Now that's a year to be proud of.

With that, operator, please open the lines for questions.

[Operator Instructions] Your first question comes from the line of Nicholas Campanella of Barclays.

Great to see progress overall and definitely hear you on the 0% to 3% build growth in the refresh plants, thanks for that. Maybe just kind of if you were to kind of reflect on the CEA process, what is most encouraging to you? And then what is your view on just having something done legislatively in June versus September, just given the summer recess is. Historically, I think things have gone the full distance into September. I'm wondering if there's broad enough alignment in your view to maybe get something done sooner than that? And any comments on timing?

Yes. Thanks, Nick. I'll start with timing questions. Look, this is a complex legislative effort, and we definitely want to support taking the time to get it right and getting the right outcomes. And obviously, the sooner the better, but we want to make sure the most important thing is getting something right done this year. So we're very much intent of really helping make sure that we're on the right footing. We've got the right information and that the decision makers have the information they need to make decisions well. And so that leads to the CEA process. And look, I would say that they're right where they're supposed to be in terms of timing in the process, they're doing what they said they were going to do. We're encouraged by that. And as they close their latest webinar, the CEA said they're focused on actionable, viable and durable solution. And boy, we really support that because we know our customers and our investors bear an outweigh the cost of the current construct. And it's regressive. Our most vulnerable citizens are paying too much for this current construct. And so we definitely support the actions that are being considered. We do think that the most important criteria for us as we look at it is making sure that we continue to focus on risk reduction, on recovery outcomes for costs that are born, affordability, obviously needs to be a key component of whatever solution there is. And today, the current model is not affordable for our customers. And so we need to fix that and make sure then most importantly, for the audience on this call is that we continue and are able to be investable and that you can price the downside risk associated with the legal construct here in California. So we're very much focused on getting the right outcomes and taking the time required to do that here in this legislative session.

And then I know in the prepared, there was also kind of discussion about you would relook at the overall plan depending on the signs of progress in legislation overall. Can you just -- if it doesn't go the way it's planned, can you just give us a sense of some of the items or just how you would kind of rank what takes priority in capital allocation, whether it's the capital investment, dividend or otherwise that you would be looking at first?

Well, let's just back up for a little bit about capital allocation just in general. As Carolyn reiterated, and I'll just reiterate for everyone on the call that look, we see what you see. We, too, can do the math. The current valuation is absolutely not sustainable. And we are ringing that bell in every corner of California that we can find and in every office and in every conversation to make sure that people understand the value of the investor-owned utility model, and how important attracting low-cost, high-quality investment is to spread out the cost of infrastructure for customers over the long haul. And that means we need to have an attractive legislative construct. Therefore, that's what makes SB 254 Phase II so important. Now we say that, and as I said earlier that we do think that they're right where they're supposed to be, and people are following through on what they said they were going to do, so we feel good about that. But as we think about capital allocation today, because we're encouraged by that progress, because we're having the right conversations and because we're delivering everything that I talked about on the call, performance is power here. This is no time for us to pull back on serving our customers. Look, as I mentioned, our safety has continued to improve. Our reliability has improved 19% year-over-year. Our customer satisfaction is up. Our trust is up. Our rates are down. All of that to say, this is no time to change the model. However, to your ultimate question, Nick, if progress stops or derails, or we feel that the state has lost interest in getting to the right outcome on 254s, and obviously, all aspects of our plan. Must be and will be on the table. We will not continue to sustain this valuation. And so today, that could take a lot of different forms, and I'm not going to [indiscernible] here on the call, but there's a lot of different ways to approach that problem. And the entire plan will be on the table if we don't see progress or if it stops and derails.

Your next question comes from the line of Steve Fleishman of Wolfe Research.

So yes, so just maybe following on the CA process. We did get this view from the CPUC last week. And I'm kind of curious your take on that. And how influential they might be with the legislature in this process?

Yes. The CPUC is what we see that this is -- this current model is regressive, and it's putting excessive burden on our electric IOUs and our customers. And so I appreciated them sharing their points of view. They support what we support, which is a whole society approach. And I think people will definitely listen to what the CPUC thinks they are the state agency whose job is to confirm that we have financially healthy utilities and rates and affordability for customers. And given our performance and our ability to lower rates, while we are continuing to improve the service for customers. We hope that it makes it easier for the CPUC to fully advocate for the reforms that we think are necessary in SB 254 Phase II.

Okay. Great. And then just going back to the simple affordable model changes. So on the growth level, does the -- is this basically with this better visibility from the data centers you now have kind of line of sight to higher growth? Yes, I would action is going to be higher.

Yes. Yes. We definitely see, and as we shared, 3.6 gigawatts in final engineering. We had previously said about 1.5 gigawatts of that would be online by 2030. Now we're saying it's closer to 1.8 gigawatts will be online by 2030. Obviously, that continues to change and evolve. And as we get more applications and we can combine projects and bring things online faster, obviously, we'd accelerate that. But the good news is that we do see that real load growth in project stages that makes it very real, and we have lots of confidence about that. We said 2% to 4% load growth in the simple affordable model. That 4% is more at the back end of the 2030 -- of the 5-year plan, but we definitely see it in there. And we also see, as Carolyn shared an opportunity to continue to increase our O&M reductions as we continue to better serve customers. So it's really a combination. I'll also say that we are still seeing EV load penetration. We had 18% EV penetration in the final quarter of the year. even after the incentives went away. So we definitely are still seeing increased EV demand as well, and that's an additional load driver.

Your next question comes from the line of Shar Pourreza, Wells Fargo.

This is Marcelo [indiscernible] on for Shar. Maybe following up on that data center piece. How should we be thinking about the time line for ramp beyond 2026? And then is that, just to clarify final engineering stage fully incorporated into the 0% to 3% bill growth and CapEx opportunities on transmission, or would be incremental when it reaches construction stage?

Yes. That -- so our loan growth is part of the 0 to 3%. So to get to 0, we would need to see more of that low growth online. And so as I was sharing, as we look at the ramp to 2030, we can see about 50% of that 3.6 gigawatts online by the end of that range, so 2030. And so that's in that zone of 2% to 4% within that 5-year time period. So consider that a ramp in that period. There's other things, though, that we've got in the hopper to help drive affordability in addition to -- we talk about O&M and load growth on that. But the other line, we held at 2%, but there's other parts of the bill like supply costs, we had a good reduction in our supply cost here this year-over-year, thanks to our incredible supply team and work they've been doing to make the energy that we purchase and procure and produce more affordable. So there's a lot that goes into a customer's bill that can help get us to that 0% to 3% range and trying real hard to buy us as close to zero as we can get. And so we're going to keep working that every day.

Great. And then pivoting a little bit to credit metrics, investment-grade 1 agency, how much incentive is there for continued balance sheet improvement and then in line of sight to multi-agency investment grade?

Yes. So I'll take that. This is Carolyn. So a couple of things. Just to remember, Fitch just upgraded us this past fall to investment grade. Both Moody's and S&P have said that our financial metrics are meeting the investment-grade criteria. What they're really looking at is, again, the progress on SB 254 less of continued improvement in our balance sheet. With that said, we remain very committed to mid-teens FFO to debt metrics, and we continue to look at building a very sustainable financing plan to continue to meet those metrics.

Your next question comes from the line of Anthony Crowdell of Mizuho.

Just I wanted to follow up on Steve's question, only had one. On the legislature, there's some new faces or maybe old faces and new places in the State Senate, Senator [ Lamona ] is a [indiscernible] of the Senate, also a new Head of the Energy Committee. Just curious if you had any discussion with them. Just wondering if you think that may be required big portion of support of getting something across to finish line.

Well, of course, we've been in conversation with the leadership, and we continue to be -- and I think one of the hard things is our business model is hard to understand. And it's hard for people to believe and see that you can raise profits and lower rates, all at the same time. That's why our performance is so important, and why our mantra that performance is power really holds true at this time as we work to educate all of the legislators, including the leaders as well as others that we can, in fact, invest in long-term infrastructure, make the system safe, make the system resilient and lower costs. I think affordability is top of mind for all the legislature. And I think they're going to want to understand that as they make decisions on and can see that 254 is actually contributing to the affordability issues for their constituents, puts us on very much common ground. We want the same thing. We want a safe state. We want the ability for resources to respond when there is an incident and spread is taking place, but that our customers should not be subject to this regressive policy that has them bearing both the cost of the hardening of the infrastructure and claims then that follow when we were, in fact, prudent and capable operators. And so I think that, that problem takes a long form to explain to people. And so the more we work with the legislators to help them understand the full picture, the better. So we look forward to engaging with those leaders to help make sure that they're making the best decisions for the people they represent, which happen to be the people that we serve.

Your next question comes from the line of Julien Dumoulin-Smith of Jefferies.

Look, just wanted to come back on the upside capital you guys have here, look away from 254, how do you think about that $5 billion, and when you would be in a position around that, right? And as much as obviously, you guys are talking about sales and that trending in the right direction. I'd love to hear how you think about upside in the $73 billion CapEx plan. And then in tandem, how do you think about financing that to the extent to which you were over to go down that rabbit hole. I imagine that there is debt capacity is late to be able to accommodate that upside capital that you guys are identifying and/or how do you think about [indiscernible]

Yes. Julien, this is Carolyn, I'll answer that. As we think about the additional $5 billion, as we've said in the past, there's -- we see three options. The first of is you can make the plan favor, right? You could increase your $73 billion, but that's probably the least likely given our current valuation discount. Then there's the potential to make the plan better. And when we say better, we mean in terms of affordability in particular. And an example of that is accelerating or prioritizing certain capital that's associated with new load that could improve upon our bill trajectory. And then the third option is we could simply make it longer in terms of extending our above-average growth runway. So where we sit today and seeing the pipeline for load growth, where the way we think about that $5 billion is if there's any additional capital coming in, it's probably option 2, where we're looking to make the plan better, keep into the $73 billion envelope of our capital plan, but ensuring that we can drive affordability for our customers with that additional capital. In terms of financing, I'll just say that we continue to prioritize avoiding the need for equity at today's low value and maintaining the FFO to debt to mid-teens. So as we look at financing, that those are two of our key principles.

Awesome. Excellent. And then just if I can follow up a little bit on the process front, any specific milestones after April 1st that you'd be looking towards? I mean, I know at times, it gets pretty dark and opaque through the summer months, but anything in particularly flat here, at least at the outset beyond the April 1st recommendation?

Yes. I think that -- there's no specific milestones I would point to. I think there will be ongoing conversations, and it remains to be seen how much of those political conversations will be public or will they be handled by a subcommittee or however the legislature intends to take on the process once they've been given recommendations.

Your next question comes from the line of Carly Davenport, Goldman Sachs.

Just a couple of quick follow-ups to some other questions. Firstly, just on the data center pipeline. Great to see that growth in the final engineering and the under construction. Just any color on the movement in the overall pipeline? Is that a high grading, or are you seeing any shifts in sort of overall tone on demand?

Yes. I would say that will -- that number will continue to move. We -- as we mentioned, we just -- or at least we said on the slide, we just hired a Chief Commercial Officer. We're seeing lots of opportunity. People don't think about California when you think about manufacturing, but let me remind everyone on this call that California manufactures more products than any other state in the nation. California has more manufacturing jobs than any other state in the nation. I expect that those companies intend to grow. And so we're working to make sure that we can supply their growth as well, whether it's robotics or silicon manufacturing equipment and chip manufacturing equipment. That all lives here. And there's an electric bus company in California, like these companies intend to grow, and so we want to make sure that we grow for them as well. So I would say that number is at a moment in time, and I expect over time, when people realize that we have the capacity that we can, in fact, deliver the time lines that they want and make sure that what we deliver is then affordable for all of our customers that we're going to continue to be a key enabler to California's prosperity, and that requires growth, and we're excited to power it.

Really clear. And then just back on the wildfire policy reform, just as you talked about, given the urgency but also the complexity here. I guess, is it your expectation that this will be completed sort of in this legislative session? Or do you see any potential for other processes to sort of be borne out of this one?

We are very hopeful that this has resolved the substantive risk and cost allocation we're very hopeful that this is resolved during this legislative session. That would be -- this is the second phase of a 2-phase process, a 2-year session. And we've gotten -- I think we've seen what everyone has seen that they're right where they said they were going to be. The process is working as planned and the CEA is a very professional organization who is I'm impressed by the actions that they've taken and then following through on exactly what they said they were going to do.

Your next question comes from the line of Greg Orrill of UBS.

Congratulations on the results. Just I was wondering if you could talk about what you're expecting from the concede and Dixie cost recovery proceedings, who handles that? And what you're expecting to see out of that?

Yes. So we filed in November 2025, the first catastrophic wildfire proceeding that involves the resumption of prudency. What we submitted is a review of the cost that were paid by the while fund associated with Dixie and Kincade, that's the over $1 billion in claims. That's about $674 million. We're also looking for a recovery of Wema cost, which is about $1.6 billion. And that's primarily, if you think about this, remember, we did not have the self-insurance at that time. And so it's the donut hole between what we recovered from insurance versus up to the $1 billion, threshold before we can have access to the wild event. So we're looking for -- that's the second thing we're looking for recovery from. And then we're looking for a recovery from SEMA costs, which are about $314 million. So that's what we're looking for. I'll just remind you that we -- both with Kincade and with Dixie, we had a valid safety certificate which is -- so we're deemed reasonable in terms of our prudency. We think we've made a strong case, and we believe the facts support our case.

Your next question comes from the line of Ryan Levine of Citi.

Had one clarifying question around some of your comments. Are you looking to accelerate the prudency determination through the CEA process for future liabilities or future claims, the CEA process?

Yes. Ryan, there's a lot of things that we're looking at through the CEA process. So really, not specific. It's going to be a bundle of options and improvements and construct. And so I hesitate to have a specific outcome that we want to make sure that the risk, the downside risk is knowable and affordable for both customers and investors, and there's probably a lot of ways to make that happen.

Are no further questions at this time. And with that, I will now turn the call over to Patti Poppe, CEO, for closing remarks. Please go ahead.

Thank you, Oliver. Thanks, everyone, for joining us today. I'll just hit the high points. Look, our safety has improved. Our reliability has improved. Our customer satisfaction has improved. Our earnings have improved and our rates are down. And at the fundamental aspect of running a great utility, I could not be more proud of this team and the work that they have done. And for a company that leads with love, Happy Valentine's Day. I hope you have big plans for tomorrow. Enjoy your time. Thanks so much. We'll see you soon.

Ladies and gentlemen, this concludes today's call. We thank you for participating. You may now disconnect your lines.

Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to the PG&E Corporation Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, we have allotted 45 minutes for this conference call.

I would now like to turn the call over to Jonathan Arnold, Vice President of Investor Relations. Jonathan, you may begin.

Good morning, everyone, and thank you for joining us for PG&E's Third Quarter 2025 Earnings Call. With us today are Patti 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 quarterly report on Form 10-Q for the quarter ended September 30, 2025.

And with that, it's my pleasure to hand the call over to our CEO, Patti Poppe.

Thank you, Jonathan. Good morning, everyone. Our core earnings per share are [ $0.53 ] for the third quarter and $1.14 for the first 9 months of 2025. Today, we're narrowing our full year guidance range. We've previously shared a range of $1.48 to $1.52. The new range is $1.49 to $1.51 and we're keeping our bias toward the midpoint which is up 10% over 2024. We're also introducing our 2026 EPS guidance range of $1.62 to $1.66. At the midpoint, this is up 9% from our 2025 midpoint.

Last month, on our investor update call, we extended our 5-year capital plan through 2030. Highlights included at least 9% EPS growth each year 2026 to 2030, a 5-year capital plan of $73 billion through 2030, which supports average annual rate base growth of 9% and a financing plan, which does not require new equity also through 2030.

With the 2025 California legislative session over and the enhanced protections of Senate Bill 254 in place, our team is focused on collaborating with key parties, advisers and state agencies as the Wildfire Fund administrator prepares their April 1 report and recommendations for how best to socialize and mitigate climate-driven wildfire risk in the state.

This report is expected to lay out a wide range of policy options that will inform potential legislative action to stabilize the utility sector in the 2026 session. We're feeling the positive momentum of this process with what Governor Newsom on issuing his recent executive order calls a whole of government response to protect Californians from Wildfire. We share the governor's sense of scale and urgency and are committed to supporting the state's efforts to meaningfully adapt California's policy construct to meet the moment.

As this work continues, we know that there's no better protection for our customers and our investors than predicting and preventing catastrophic fires in the first place. PG&E's physical layers of protection are delivering. Through October 20, our total year-to-date CPUC reportable ignitions are down over 35% from 2024 levels and are running lower than any year since we started tracking these data in 2015. Despite this year having seen the second largest number of fires greater than 10 acres statewide since 2017, PG&E is on track for a third consecutive year of 0 structures destroyed due to CPUC reportable fires in high-risk areas under high-risk conditions. We are proud of that.

In spite of continued elevated climate-related risk, PG&E's layers of protection from ignition prevention to hazard awareness and response are proving effective. Contributing to this performance, we can point to several ongoing and new mitigations. About a month ago, we marked a significant milestone for our customers. PG&E has now constructed and energized 1,000 miles of power lines underground in the highest fire-risk areas. As we've consistently said, undergrounding remains the most affordable and effective way of delivering the safety and resilience our customers deserve. Customers should not have to choose between safety and having reliable electricity. Undergrounding is the only mitigation that delivers both.

This year, we cleared vegetation in a 50-foot radius at the base of nearly 4,000 transmission structures our data showed this approach would have contained the majority of transmission-related ignitions that we have experienced over the last 3 years. And we're continuing to deploy advanced sensor capabilities. including installing another 8,500 sensor devices this year, which builds on the 10,000 we rolled out last year.

These low-cost sensors, coupled with our existing smart meters and our newly deployed AI-enabled machine learning model are enabling secondary system-wide continuous monitoring. This capability allows us to detect potential thoughts on the system before they occur, including on the customer side of the distribution pool. We will continue to leverage data to drive our mitigations in the field, making the system and our customers safer each and every day.

In addition to executing on this important safety work, my coworkers have been leveraging our performance playbook to deliver consistent outcomes across the business for customers and investors. You can see our simple affordable model is working. Our 5-year plan contemplates $73 billion of customer beneficial capital investment through 2030. At the same time, building on lowered electric rates this year and planned even lower rates for bundled electric customers in 2026, we expect customer bills in 2027 to be flat to down to where they are this year.

We are doing this by eliminating waste and delivering on our 2% O&M cost reduction goals, enabling rate reducing load growth by partnering with our large load customers and executing on a financial plan built with flexibility conservatism and credit metric targets supportive of investment-grade ratings, which will lead to interest expense savings for customers.

We know that performance is power. When we perform we will have the power to influence perceptions and outcomes. By putting customers at the heart of everything we do and by doing what we say, our brand trust is on the rise and has been since our 2027 GRC filing started to change the narrative on affordability. In fact, when compared to our U.S. utility peers, the second quarter 2025 residential customer engagement study by Escalent showed, we had the highest annual increase in brand trust.

Our data center pipeline remains robust, at over 9.5 gigawatts. We've seen modest net attrition in our application and preliminary engineering phase since June. However, our projects in the final engineering stage continue to grow and advance. Most of the applications in our pipeline are for 100 megawatts or less. This is a function of existing California regulation but also assigned that data centers designed to support AI inference models have strong and compelling reasons to want to locate in PG&E service area, which includes Silicon Valley, the home of the technology sector.

Data centers of this size can be located in densely populated areas close to the end user and benefit from Northern California's extensive existing fiber network. This makes our service area a prime location for these customers who require real-time speed to ensure an optimal user experience. We are laser-focused on making this a win-win-win for our cities, our customers and data center developers. For example, we partnered with the City of San Jose to identify more than 150 acres of land adjacent to our existing infrastructure and in the heart of Silicon Valley that will be power ready for the data center selected from the city's competitive RFP issued earlier this year.

Our robust pipeline with a diverse set of projects is a great opportunity for customer affordability and California's economic prosperity. Every gigawatt we bring online offers the opportunity to reduce electric bills by 1% to 2%. I'll remind you that this is upside to our plan, both in terms of customer affordability and in terms of capital growth. Given our bias for conservative planning, our capital plan only includes about $300 million a year for this type of capital, much of which falls under our FERC formula rate.

With that, I'll hand it over to Carolyn to discuss our financials.

Thank you, Patti, and good morning, everyone. Here on Slide 8, we're showing you our earnings walk for the first 9 months of 2025. Core earnings per share are $1.14 and we're on track to deliver on our 2025 non-GAAP core EPS guidance narrowed today. As you can see, we've made additional progress towards our O&M cost savings goal contributing $0.05 for the quarter and $0.08 year-to-date. We continue to see unit cost reductions in our inspection processes and savings through vendor contract renegotiations as 2 examples of our cost savings initiatives.

Another key driver is timing and other. This bucket is contributing $0.10 for the quarter and $0.04 year-to-date. Both the third quarter and 9 months include benefits from smart tax planning. As a result of a method change, we're able to accelerate the deductibility of certain mark and recognize greater tax savings. We view this tailwind as upside available to redeploy for the benefit of our customers in addition to protecting future years.

Turning to Slide 9. There's no change to the extended 5-year capital plan, which we shared with you last month. Our planned customer beneficial investments support average annual rate base growth of approximately 9%, 2026 through 2030. Our rate base growth in turn, supports annual core EPS growth of at least 9% also through 2030. As a reminder, our rate base forecast excludes the $2.9 billion of CapEx to be securitized under SB 254.

Incrementally today, we're sharing more detail on our capital investment plan as shown here on Slide 10. This continues to be a no big bets plan. It includes many important projects over the course of the 5 years to improve safety, reliability and resiliency for our customers while enabling economic growth through capacity upgrades and new business connections.

To give you some examples, our plan includes a recently approved upgrade of our Helms hydro facility, enabling at least 150-megawatt increase in generating capacity. It also includes a substation upgrade, which more than doubles the electric capacity and improves reliability north of Sacramento. And it includes deployment of about 300,000 grid edge meters by 2030. These meters have distributed intelligent apps and advanced data processing, which support customer electrification as well as wildfire risk reduction.

Last month, I shared with you our financing guidepost, shown here again on Slide 11. We Importantly, our plan is built not to require a new common equity through 2030, a key consideration given where we currently trade. I also emphasize that we are continuing to prioritize investment grade ratings including maintaining FFO to debt in the mid-teens. Again, IG is one of the most meaningful potential affordability enablers for our customers.

I'll remind you that we're targeting a dividend payout ratio of 20% by 2028 and maintaining that level through 2030. This offers financing flexibility over the course of our plan as well as implying near-term compound EPS growth well in excess of 50% over the next 3 years. Our planning also contemplates the possibility that the Wildfire Fund administrator calls for the contingent contributions authorized by SB 254.

Regarding capital allocation, I'll remind you what both Patti and I shared on our September update call. Based on progress in the 2025 legislative session and encourage and signals that the state is serious about pursuing further reform in Phase 2, we see the investment plan we have shared with you that's delivering for our customers and investors now and for the long run.

That being said, we'll continue to take a disciplined approach when it comes to capital allocation. If we were to reach a point where we aren't seeing clear indications of progress, we would certainly consider reallocating some capital towards more immediate shareholder return. Of course, always being mindful of our credit metrics. A key differentiator of the PG&E story is our performance playbook and focus on waste elimination to deliver better outcomes for our customers.

To that end, we've achieved nonfuel O&M savings in excess of our target for 3 years running, and I'm confident that we will meet or exceed our 2% reduction target again this year. We're also on track to make meaningful improvements in our capital to expense ratio this year and beyond. In 2024, we invested $0.90 of capital for every dollar of expense. We forecast that this year, we'll invest $1.20 of capital for every dollar of expense. On the regulatory and policy front, we expect a proposed decision on our cost of capital application in November. And as Patti said, important milestones are coming up as stakeholders weigh into the second phase of SP 254.

I'll end here on Slide 14, with a reminder of our value proposition enabled by our differentiated performance. We're executing on our simple affordable model by generating annual cost savings for the benefit of our customers, enabling load growth with our 5-year capital investment plan and improving our balance sheet. I'm pleased Fitch has taken the first move to return our parent company rating to investment grade. This is just the beginning. As we continue to prove out our philosophy that performance is power.

And now I'll hand it back to Patti.

Thank you, Carolyn. The fundamentals of the PG&E playbook are undeniable. Strong layers of physical risk mitigation improving every day. ample runway to continue reducing nonfuel O&M, rate reducing load growth serving customers and California's prosperity, improving credit ratings and balance sheet health and our differentiated rate case proposal as a critical proof point all of which provide a path for customer bills to be flat to down in 2027 from today. These performance fundamentals set the stage for constructive legislation but more importantly, a framework that creates prosperity for customers and investors.

With that, operator, please open the lines for questions.

[Operator Instructions] Your first question comes from the line of Steve Fleishman with Wolfe Research.

So just on the SB 254 process, is there any better sense of in these steps, whether those would be made available that we can see? Or are we going to really more see things towards the end of the process.

Yes. Thanks, Steve. On the process front, we do -- we aren't sure what the CEA is going to share publicly. We do know just process-wise, the stakeholder abstracts are due November 3, right around the corner, full submissions by December 12. State agencies will submit final recommendations by January 30 and then that final study from the CEA April 1. We don't know what of those will be public. We're waiting to see that ourselves but we do know those are the milestone dates.

Okay. Understood. And then maybe just on the -- just any -- at this point on the cost of capital case, are we just basically waiting for a proposed order the process is done otherwise?

Yes. Steve, this is Carolyn. Yes. No, we are. We're -- as we've said in the past, we believe we put a really strong case forward, and the PD is expected in November 2025.

Your next question comes from the line of David Arcaro with Morgan Stanley.

I guess would you expect the policy reform recommendations next April to be prescreened with like the legislature and kind of have buy in, in advance of then going into the session. Is this something that we should have gave you a little bit more confidence that it's kind of vetted and should have a good chance of making it through.

So I guess, as we talk about this, David, let's just back up a little bit and talk about where we are and then we'll talk about where we're going. First and foremost, what we saw from the legislature this year is that they took action. Look, there was concerns certainly about the fund durability and the risk then that was to shareholders. in the event that the fund were depleted and the disallowance cap was dissolved.

So I do want to just step back and remind everyone that this legislature and our governor took action very quickly, and we're thankful for the actions that they took. And there are some key benefits that I just want to reinforce have been achieved already. I think there's a lot of, obviously, focus on Phase 2, but let me just remind us what happened in Phase 1. You know that protecting the fund and through the continuation account and our disallowance cap was a very important continuation of AB 1054, but there were several improvements to AB 1054 that I just want to hit really quickly, and I'll get to your process question.

Moving the disallowance cap date to the date of ignition, I'm going to call that the unsung hero of SB 254. A lot of people haven't talked about that, but moving that disallowance cap date to the date of ignition versus after the entire prudence determination process protects investors in the billions of dollars range of lower exposure through the disallowance cap and any dollars that the IOU would have to pay back to the fund. That reduces that exposure dramatically. That was a big improvement.

We also, of course, had no upfront contributions and with a significant portion of the contributions from the IOUs to the fund as a contingent call only in the event of a future large utility cost fire that jeopardizes the liquidity of the fund. That was a much improved source of -- or method of refueling the fund versus how it was done the first time. And of course, all new IOU contributions to the fund act as credits against the future regulatory disallowance that again, was a big improvement. And individual utility funding has been rebalanced, reducing the amount that certainly PG&E is paying into the fund by about 25%.

So I say all that, just a reminder to everyone that we have some significant improvements as a result of this Phase 1 process of SB 254. We were very thankful that the governor had leaned in so strongly though on Phase 2. He did not have to issue an executive order. The study bills are issued all the time. He wanted to make it clear. I think that the actions of the CEA and the report and the recommendations and then potential action by the legislature in 2026 was a top priority for him through that executive order. And his comments about a whole of government approach to wildfire is very important, I think, for California, for our citizens, for the -- all of our customers and for everyone who lives here, it's just a very important step to take.

Now what we know is that the comprehensive language that he shared that was both in the actual legislation and in his executive order was good to see. I would suggest that just flat out too soon to say what the best answer is going to be. We're going to see this range of proposals. The dates I just reviewed with Steve are the dates that the process will work. Obviously, the governor and the legislative leaders will be having conversation as this process unfolds. And -- but I would expect that the CEA report should be providing some really good recommendations to the legislature on which to act.

Excellent. Now I appreciate all that color and the context there for the entire process. And then maybe a bit of a separate question here. From what you can tell, is the undergrounding decision still on track for this year? And how should we think about that? Could that still lead to a future acceleration of your undergrounding activities in the future GRCs?

Yes. Procedurally, currently on October 30, here just a couple of days, commission meeting. Currently, the final recommendations on the 10-year undergrounding procedure will be -- it currently is on the agenda. All that to say, we certainly have expressed concern with some of the requirements and some of the methodology associated with determining which miles should be undergrounded. And so we'll be watching closely as the commission provides that direction next week.

I will say that -- and I shared this in our prepared remarks, we do believe that undergrounding remains the appropriate mitigation in some of our miles, not all miles. And I think that's important for people to understand. The miles that we've been talking about are in our highest risk areas where today, customers are experiencing 10 or more outages as a result of our safety methods. Our safety methods with enhanced power line safety settings, certainly reduces the risk for customers and keeps customers safe.

However, the outages that go with that safety choice are not acceptable. And so in these areas, we need to have a higher risk reduction through undergrounding and a better customer experience through a resilient energy system that can stand up through all sorts of weather conditions. Both fire hazard conditions as well as extreme snow conditions et cetera. So we are -- we continue to be bullish about undergrounding as the most affordable means of both reducing risk and providing resiliency in these highest-risk miles and will continue to advocate for that. We'll be obviously working with the commission on the time depending on their timing on our 10-year filing. And we obviously will need to meet the requirements that the commission outlines.

But just to remind everyone, as part of our 2027 GRC, we did include a bridging strategy in the event the 10-year plan were delayed in some way. we did propose a bridging strategy to continue our current level of undergrounding, which is about 300 miles a year. And I'm happy to report, as I mentioned in my prepared remarks, that we did hit a key milestone of 1,000 miles underground, and we've done that at a 25% lower cost than when we started. And so we continue to improve the cost for customers while we improve their safety and resilience.

Your next question comes from the line of Julien Dumoulin-Smith with Jefferies.

Just wanted to follow-up, actually, if I can push a little bit more on the Phase 2 piece. How do you think about that conversation fitting into a broader, more comprehensive focus in the state on reform of insurance. Just want to understand what your understanding of the scope of the conversation is in the coming year as well as if there is any nuance to break apart as far as inverse condonation.

I get that IC perhaps is maybe a bridge too far or at least it seems like a big ask. Are there other ways to dissect this that are relevant that folks should be thinking about? Again, I don't want to preempt the study per se that's coming out, but how do you think about strict liability conversation more broadly here as best you can tell? I get it's early.

Yes, Julien, if I had a crystal ball, I would say that it's too soon to say the governor comments in his executive order and in the actual legislation itself, we're clear that it's a whole of government approach to insurance and utilities. Look, utilities are so important to California's future. We at PG&E power the tech industry. We power the future prosperity of our state. We think there's a big case to be made that our financial health and our customers' well-being our essential ingredients to California's future.

So we'll look forward to how the study plays out, and we'll look forward to fruitful discussions with many parties to determine the best way to protect customers, preventing catastrophic wildfire in the first place and then having the right response and a means of compensation for those people who are harmed. So I do look forward to the whole of government approach that the governor has outlined.

Awesome. Excellent. And then just following up a little bit on the nuance of the data center pipeline. It was down slightly here, but again, if you can speak a little bit to what transpired there with the 500-megawatt reduction. But more broadly, as you think about it's actually coming into fruition, would you in for being able to raise capital as you drive more bill headroom from data center realization? Or is that more about having a more of a linear read to build reductions at large?

Yes. So I would suggest -- and this is great news. The most important numbers to look are the ones that are getting closer and closer to construction. So the final engineering numbers went up, and we expect of that 1.6 gigawatts in final engineering, about 95% to be online by the end of 2030. So -- and some of that's on -- will be online as soon as next year. So all that to say that I would suggest that our pipeline is rich.

There's a lot of -- that kind of opening of the funnel is a very fluid number. I had a call this week with another customer that's not reflected in those numbers. So trust me when I say those numbers move a lot. And that's -- I think that's good because we're really taking a stand here that any of this new large load that we add here in California is going to be beneficial to customers and investors. Because what that means is we'll be able to invest in the capital to deploy, particularly transmission to build out the -- and some of the distribution system to build out that new large load for those customers.

But the new revenue from that large load more than offsets the cost for customers to fund that CapEx, so we can grow our returns and yet reduce bills for customers. It's a really important win for California. And then you layer in the tax benefits, local property and sales tax to local communities. I'm in continual conversation with community leaders, mayors, et cetera, who are very bullish about this as a source of growth and new revenue for our cities to provide new housing options to provide new public safety options. And so there's really a lot of momentum here across the state to make sure that we bring online this new load.

Yes. And maybe I'll just add to your second part of your question there, Julien, as we think about additional capital for these additional data centers, we think about it in 3 distinct possibilities. One could make the plan bigger. We could make the plan bigger. But perhaps that's the least likely given that -- given our current stock valuation. There's also the potential to make the plant better, as you indicated, right, in terms of affordability and driving affordability for our customers by bringing in this beneficial load from data centers. that's a strong possibility. And then we also could just simply make the plan longer in terms of extending our above-average growth runway. So that's the way we're thinking about it. And as I said, it's more likely the second or third and not the first part.

Your next question comes from the line of Carly Davenport with Goldman Sachs.

Maybe just to start on some of the commentary on the credit side. You obviously highlighted the Fitch upgraded in your prepared remarks. Just curious if anything you can share on conversations with the other agencies and sort of how you're thinking about milestones on the path to potential upgrades there as well.

Yes. We continue to have good conversations with both Moody's and S&P. And as you know, Fitch just did the upgrade. I would say they're looking for what you're looking for, which is progress on Phase 2 and that would be a significant trigger for them as they think about our investment grade. They both indicated that our financial credit metrics meet their investment grade criteria to really looking at the regulatory environment. Moody's is on a typical cycle where we see action in the first quarter. But again, that's really up to their internal assessment of the regulatory environment as well.

Great. And then maybe just on the O&M front. You've executed really well there relative to your targets for a number of years now. I guess just help us frame out what it would take for you to have the confidence to potentially raise that target? Or just curious if that is a potential driver of upside as you think about the 2026 range that you've introduced here?

Yes. I'll just say that I just continue to be really all and proud of my -- of our PG&E coworkers and their use of the lean playbook and driving waste out of the system. As you indicated, 3 years in a row running and we are on target to meet or exceed the 2% this year I have no lack of confidence that, that's going to continue. Just we may -- as we indicated, we're seeing significant progress on our capital expense ratio, but we're still fourth quarter. We still have lots of opportunity to go.

So I would say that, that continues to be a driver of our simple affordable model. We are continuing to look at our numbers and where there's opportunity. We're not at the point where we're thinking about raising that. We're not raising that 2% for this year, but it is definitely a driver for affordability in our earnings.

Your next question comes from the line of Aidan Kelly with JPMorgan.

Just wondering how comfortable are you with 2026 EPS guidance before you have a resolution on the cost of capital proceeding, I guess just any detail on what outcome ranges are contemplated in this outlook would be great.

Yes, I think you can rest assured that we plan conservatively. We think we filed a good cost of capital proceeding or filing. We think there's no lack of evidence that our actual cost of capital is up. All that to say, though, as we build out our plan, and I think you can start to really see the pattern year after year after year that despite a variety of circumstances, we ride that roller coaster so you don't have to, and we deliver what we say.

I think we could all agree it's a choppy year, and there's been a lot of conversation here in California, and yet, we continue to deliver. And that's what I want everyone just to get comfortable with that we will plan conservatively under a variety of scenarios and make sure that we're in a position to deliver for customers and investors very consistently.

Got it. That's clear. And then on the storage front, I guess, it looks like some positive momentum here for commerciality with your completion of the CRC energy storage microgrid with Vault -- Energy Vault last month. Just curious to what extent you see this project as like a blueprint for other higher communities as you kind of think about the reliability concerns during like safety shutoffs.

Yes. We're really excited about that project. And we definitely have other communities that we're preparing to do similar installations. We have -- every time we do these, we learn. This will be another opportunity for us to learn. Look, our ideal scenario is that, number one, we have less outages through infrastructure built for purpose, Aka undergrounding.

And then in cases where public safety power shutoffs are a necessary part of our safety tool kit, which they are minimizing exposure by sectionalizing devices by some of these microgrids to harden -- to protect downtown so that they can have critical services during a public safety power shutoff, we want to make these outages invisible to our customers and keep them safe. So the whole suite of operational opportunities that we have, we're going to continue to pursue those.

Your next question comes from the line of Gregg Orrill with UBS.

How do you think about the direction of the payout ratio beyond 2028, if that's possible to know at this stage?

Well, as we had indicated in our last call that we are growing the dividend to a 20% payout to '28 and then maintaining it through 2030 at 20%.

And that concludes our question-and-answer session. I will now turn the conference back over to Patti Poppe, Chief Executive Officer, for closing comments.

Thanks, Christa. Well, thank you, everyone. We appreciate you joining us. As I hope you hear today, we're on full speed here at PG&E. Our entire team is working to deliver for our customers and for you, our investors every day. You can expect nothing less. With that, we look forward to seeing you at EEI.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to the PG&E Corporation Investor Update Conference Call. [Operator Instructions] Please note we have allotted 40 minutes for this conference call. Thank you.

I would now like to turn the conference over to Jonathan Arnold, Vice President of Investor Relations. Jonathan, please begin.

Good morning, everyone, and thank you for joining us for PG&E's Investor Update. Before I turn it over to Patti Poppe, our Chief Executive Officer; and Carolyn Burke, our Executive Vice President and Chief Financial Officer, I should remind you first 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 presentation. Our presentation today 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.

And with that, it's my pleasure to hand the call over to our CEO, Patti Poppe.

Thank you, Jonathan. Good morning. Our update today comes on the heels of a busy California legislative session culminating in the passage of Senate Bill 254. The bill was signed into law by Governor Newsom on September 19 and went into effect right away. The actions taken by our state this legislative session show that they appreciated the urgent need to improve upon the framework originally adopted under AB 1054 in 2019.

SB 254 provides important protections today and lays the foundation for a second phase as the state has acknowledged that the utilities and their customers cannot continue to carry the full burden of climate-driven catastrophic wildfires, especially when the utility has acted prudently. The important enhanced financial measures and the state's commitment to a meaningful second phase were the critical elements of the bill, which we and our Board weighed before deciding to opt into the fund extension. We plan to make this election this week.

In terms of financial measures, SB 254 creates the framework for a new $18 billion continuation account available to cover future fires. Extending the fund provides 3 key benefits. First, it provides for timely compensation for future wildfire victims. Second, it allows for smoothing the bill impact on utility customers. And third, it builds on the investor protections of a disallowance cap. In addition to providing for the new continuation account, SB 254 includes several changes versus the original AB 1054, which we view as constructive.

To start, utilities are not required to provide any large upfront contributions and a portion of the utility funding is under a contingent call, meaning it will only be required in the event of a new covered wildfire and if the administrator sees a need for cash to settle claims above and beyond available resources. Critical to upholding the principles of inverse condemnation, these contributions made by the utilities to the continuation account have value, meaning they can be credited against a future disallowance and requirements to reimburse the fund if were later found imprudent.

Next, PG&E's share of contributions to the Continuation Account is just under 48%. So our annual contribution will step down by 25% from $193 million to $144 million per year starting in 2029. And the disallowance cap calculation has been clarified to reflect 20% of T&D rate base equity as of the date of ignition rather than the date of the disallowance decision several years into the future. With our growing rate base, this is a meaningful change.

The state also took an important step forward in providing for a securitization option for fires with ignition dates in 2025 prior to the effective date of the new bill. This credit supportive provision allows for securitization of wildfire claims before the CPUC prudency review. While this provision is not directly impactful to PG&E, it's a helpful signal that the state appreciates the need for the investor-owned utilities to have a ready source of liquidity beyond the available fund resources.

SB 254 also took one step toward limiting liabilities, introducing a Right of First Refusal for subrogation claims, giving the utilities an option to purchase claims from insurance companies at the same price as a third party would be willing to pay. SB 254 sets a clear path for the legislature to consider more comprehensive wildfire reform in the 2026 session. With the immediate need to address this legislative session, our attention has already shifted to the second phase.

Specifically, the fund administrator is charged with studying and making recommendations to the legislature and the governor. The list of 10 focus areas includes considering new models to socialize liabilities from wildfires, including changes which potentially could supersede the current Wildfire Fund construct. We're encouraged by the comprehensive nature of this language. We're also encouraged by comments made by senior members of the legislature and the governor's office, both prior to and after the bill's passage.

We are confident that this sets the stage for action in 2026. As you know, SB 254 calls for securitization of $6 billion of fire risk mitigation capital. PG&E's portion is approximately $2.9 billion, which will apply to wildfire mitigation capital expenditures approved by the CPUC on or after January 1, 2026. This dollar figure is much less than the earlier drafts and allows us to continue important risk reduction work at pace.

The devastating wildfires in January took us all by surprise, and the state took constructive action that protects victims and customers and recognizes the importance of healthy investor-owned utilities. We look forward to working with them on phase 2 of SB 254. Now let's talk about the extension of our simple affordable plan. As I've shared with many of you, I started 2025 with a lot of optimism. This is the year we prove out the simple affordable model with our 2027 general rate case filing.

This is the year we show customers that rates are going down, and this is a year to focus on serving our large load customers and enabling rate-reducing load growth. I'm happy to report that while many have been focused on the California legislative process, my PG&E coworkers have been busy executing, making these plans a reality and leveraging our performance playbook to deliver consistent outcomes for customers and investors.

First and foremost, we are a company of operators, and we get up every morning to serve, putting customers at the heart of everything we do. We also know that performance is power and have built our work plan and financial plan knowing that when we perform, we will have the power to influence perceptions and outcomes. The plan we're sharing today is the plan we believe best delivers for customers and investors now and for the long run. At the same time, I want you to know that we hear your thoughts on capital allocation.

If PG&E stock continues trading at depressed levels, and we aren't seeing clear signs of progress toward meaningful policy reform, then we would certainly consider reallocating some capital toward more immediate shareholder return, always being mindful of our credit metrics. The most likely way we would do this is through an opportunistic stock repurchase for which I would not hesitate to seek the appropriate authorization from our Board if conditions warrant.

But first, let me reiterate, this would not be our preferred path. We prefer to keep investing in safety and resiliency for our customers, enabling rate-reducing load growth, which will drive the state's leadership in the macro trend of AI and electrification and ultimately helping our state meet its ambitious clean energy goals affordably.

With the fund administrator report due next April, another rate reduction this month, our brand trust scores on the rise, customer bills projected to be flat to down in 2027 versus today and a robust data center pipeline, we're positioned to deliver for California, our customers and you, our investors. As part of our 5-year plan, we will continue important wildfire mitigation work, including undergrounding. We will prepare the grid to serve new homes, businesses and electric vehicles.

We will continue to invest in the safety of our gas system with pipeline replacement, and we will invest in more rate-reducing load with incremental FERC transmission capital now in the plan. Completing this and other important work for our customers translates into average annual rate base growth of approximately 9% for 2026 through 2030, which in turn supports extending average annual core EPS growth of at least 9%, also through 2030.

Our simple, affordable plan contemplates our share of the securitized utility capital investment under SB 254. It is built to not require new PG&E common equity through 2030, while also delivering customer bill increases well below inflation.

With that, I'll turn it over to Carolyn to discuss more specifics of our extended 5-year plan.

Thank you, Patti, and good morning, everyone. Today, I'm happy to reiterate our 2025 non-GAAP core EPS guidance range of $1.48 to $1.52 with a bias to the midpoint. That's up 10% over our 2024 result. I'll provide core EPS growth guidance of at least 9% each year, 2026 through 2030, share the details of our capital plan, which includes average annual rate base growth of approximately 9% for 2026 through 2030 and offer our financing guideposts, including that our plan does not require new common equity through 2030, a key consideration given where we currently trade.

Turning to Slide 6. We intend to invest approximately $73 billion over the 5-year period. This is a combination of CPUC and FERC's jurisdictional capital and includes the $2.9 billion of CapEx to be securitized under SB 254. Additionally, we will be guided by the following key financing principles as we move forward. First, we will continue to prioritize investment-grade ratings with IG being one of the most meaningful potential affordability enablers for our customers. Our plan maintains FFO to debt in the mid-teens, and I'll remind you that FERC jurisdictional capital converts more quickly into operating cash flow through our annual formula rate. S&P made a recent decision to maintain our positive outlook, and they too are looking to the second phase of wildfire legislation.

Meanwhile, just this past Friday, Fitch upgraded our parent corporate credit rating to investment grade with similar comments on the importance of further wildfire policy reform. Second, we continue to plan conservatively. This includes having contemplated the possibility that the Wildfire Fund Administrator may or may not call for contingent shareholder contributions within the plan period. Third, we're updating a legacy commitment to pay down $2 billion of parent debt. At this stage, we believe we have grown into our current level of parent debt, which stands at about 10% of total debt. That compares to a peer average of around 25%.

And lastly, we're sticking with our plan to target a dividend payout ratio of 20% by 2028. We target reaching this level on a linear basis and holding there through 2030. We still see 20% as an appropriate and conservative goal, offering financing flexibility over the course of our plan. These guidelines are in addition to other operating levers that we work every day, such as reducing nonfuel O&M by at least 2% and improving our capital to expense ratio. I am excited about this plan and what it can deliver for our customers and you, our investors.

It's grounded in our brand of conservatism and will be executed using our winning performance playbook. As Patti mentioned, though, I too want to assure you that we intend to maintain discipline when it comes to capital allocation, staying mindful of ongoing regulatory and legislative outcomes included, but not limited to, progress towards a successful phase 2 of wildfire reform in our state.

With that, I'll hand it back to Patti.

Thank you, Carolyn. We're looking forward to connecting you -- connecting with many of you here in New York this week. And with that, we'd be happy to take your questions. Operator?

[Operator Instructions] Your first question comes from the line of Shar Pourreza with Wells Fargo.

So I just appreciate the color this morning. Just as we focus on capital allocation, what is your '23 financing plan embed beyond the 20% dividend payout by '28? And what would be the time frame for you to seek Board approval for buyback flexibility? Do we need to wait until the end of the '26 legislative session for that?

Thanks, Shar. Well, first, obviously, as we said, we're focused on value now and the long term. It's really important to know that our primary focus is investing our capital for the benefit of customers. We think that's the right near-term and long-term approach. However, we'll obviously continue to monitor the stock price and the state actions and attention during SB 254 phase 2.

There are conditions that we would consider a buyback given the equity we issued that equity to fund our plan through 2028. And given the securitization of CapEx, that could be the equivalent of about $1 billion of -- maybe $1.5 billion on the high end of a buyback. But really, we're focused on our credit metrics and delivering for customers. And so we think in the near term, that's really the best plan.

I'll have Carolyn hit the high points of the financing plan over that period.

Yes. I'll just say that as we've said, we've always built our financing plan, first and foremost, to focus on our balance sheet and maintaining FFO to debt in the mid-teens. That's a core principle. Maintaining our dividend at 20% through 2028 and sticking to it through 2030 generates a lot of internal equity, and that provides us with additional flexibility. If we need any other sort of financing, but you just can always count on us to look at the most efficient form of financing as we've done in the past, Shar.

Got it. Okay. That's perfect. And then just lastly, can you just elaborate on any further offsets to new shareholder contributions relative to plan?

Maybe you can -- other offsets, what do you mean by that, Shar? Maybe you can just give me a little color, so I can...

Just how do you mitigate shareholder contributions relative to what you have in plan there?

Well, I was just going to say -- as we said, we've built our plan to contemplate the contingent cost. And so to the extent that it's not, that would -- we consider that upside. Just...

And I'll just add in that, obviously, our simple affordable model is what drives the whole financial plan. So the offsets, obviously, significant O&M savings that we've continued to build into the plan now and for the future provide ongoing benefits, both for customers and for the financial plan.

Your next question comes from the line of Anthony Crowdell with Mizuho.

I guess just more on the legislative front. I'm curious, it was a very productive legislative session, but is there anything you didn't get or anything you guys may plan next year?

Well, I think Anthony -- great to hear your voice, Anthony, this morning. We are obviously focused on phase 2. There's much yet to be done. The whole idea that we reduce claims through multiple measures, number one, just hardening the system and support for hardening and support for both our infrastructure hardening and community hardening. We invest a lot of effort and money into preventing an ignition. We also need to, as a state, invest in community hardening and preventing the spread.

And so that's obviously a key part of phase 2. And the liability reform, we'd love to see additional liability reform as part of phase 2 and then broadly a larger pool to socialize cost. I think one of the things that's important, and we definitely have heard this from legislators and state leaders, wildfire and extreme climate conditions have continued impact on California's livability on California's housing crisis. We need to have insurable homes for people to be able to get a mortgage and buy a house in California.

So these climate risks are adding to the housing crisis. So phase 2 really is an opportunity to open the aperture, look for additional means of insurability for the state for, again, as I mentioned, community hardening and really looking at limitations on claims to protect customers, particularly when a utility has been prudent. We don't want customers to continue to bear an overreliance on those claims. And so I think claims reform is an important part of phase 2.

Great. And then if I could just -- I believe you have -- administrative recommendations are due April 1, whatever the recommendations are, could you just talk about how it goes from recommendation to -- does it then come up to law? Does it come up in the legislative session then that would start? I believe it starts in May. Like just, how does it go from recommendation to law? And that's all I have.

Yes. I mean, I think some of that will materialize over time. But just like our regular legislative session, lots of ideas hit the tape in the beginning of the year. And so this report coming out in end of March, by April 1, will provide the framework then and legislative leaders will then need to do the work to take those recommendations and convert them into legislative proposals that will then subsequently be voted upon through the rest of the legislative session.

Your next question comes from the line of Ryan Levine with Citi.

How does the $6 billion provision of SB 254 or from a company perspective, $2.9 billion impact the financing plan? And can you kind of talk through the implications there, both in the plan and how that could evolve?

We have included the full $2.9 billion in our $73 billion -- in our $73 billion 5-year plan. So we -- and as we've just laid out, we feel very comfortable that we don't need any further equity to support that. The securitization occurs throughout the plan, throughout the 5-year plan. That's really going to be -- the exact timing of that will really be dependent on our final GRC approval.

Okay. And then procedurally, given the comments about seeking Board approval for the share repurchase, is there -- I think Shar asked about kind of time line, but is there any color you could provide around how you would look to structure that if you go in that direction? Are you thinking more opportunistic? Was that the thrust of the comment that Patti had made?

Yes. Ryan, this is Patti. I would say it's too soon to say. We've not gone to the Board for that approval yet because we really feel like our go-forward plan serves the best value now and in the future, but we'll obviously be mindful as conditions take shape as we head into next year if we need to take different actions.

Your next question comes from the line of Carly Davenport with Goldman Sachs.

Maybe just on the new capital plan, the mix between FERC and CPUC CapEx shifting a bit here. Just curious if there's an optimal mix there that you target or maybe how much incremental flex there could be to prioritize FERC investments to the extent that the state environment is more challenged?

Yes. So you'll note in our plan, we're starting to see a good uptick in our FERC-regulated transmission investments. And I want to make sure it's clear that very little of that actually is any kind of beneficial load growth data center transmission CapEx yet. We need to continue to move that work through our cluster studies. And so what you're really seeing in that plan is already -- what I would describe as bread-and-butter transmission investments that, frankly, we've been working and waiting to build into the plan.

And with this 5-year look, we now are able to increase that transmission investment, including, again, as I said, bread-and-butter substation transmission upgrades, good maintenance as well as CAISO-approved transmission projects. We have a big project in Oakland that was CAISO awarded. So there's a lot of certainty to that FERC investment.

And like all of our CapEx plan, there's always internal competition for what's the highest value capital to be deployed at the lowest cost for customers that provides the most benefit -- and we're excited to be able to start to pull in that FERC CapEx. So much less driven by the appetite for capital from the CPUC and more driven by the needs of our customers and the needs of the system, and we're excited to be able to pull in that transmission work.

There's lots to be done. And as we've said, we still have at least $5 billion of incremental CapEx that we would love to pull into the plan if we were ever able to. But we feel like this is the sweet spot of capital deployment at the lowest cost for customers and keeping in mind our balance sheet and our credit metrics.

That's great. And then maybe just thinking about the simple affordable model, if I recall, you had some upside levers around things like O&M load growth. I think you've already touched on the O&M piece. Is the load growth embedded in this plan still that 1% to 3% range? Or is there any upside that you've now baked into this revised plan?

Yes. We're keeping it in the 1% to 3% for now. As we complete the cluster studies, both -- we've shown 1.5 gigawatts of applications in our final engineering in our first cluster study, where we see about 3.3 gigawatts of moving through our second cluster study. As those projects get to interconnection requests and final signed contracts, then we'll start to pull in that load.

But we're trying to be very conservative on our load growth estimates so that we can have an accurate and conservative forecast. But another big driver, Carly, in our simple affordable model is more efficient financing. That's why our emphasis on investment grade continues to be a real drumbeat. We know that those credit metrics are essential to lowering cost for customers. And so efficient financing will continue to add value for customers as we continue to gain the confidence of the credit agencies.

Your next question comes from the line of Steve Fleishman with Wolfe Research.

So just how are you thinking about cost of capital outcome in context of the plan and just managing around that?

Yes. Obviously, we feel like, Steve, we've made a really strong case for our cost of capital filing. That proceeding obviously will take through November, and we hope to be able to implement then that whatever the revision to cost of capital is in January procedurally. Look, we do think that our actual cost of capital has gone up given the conditions here with the wildfires in January and the reaction from the markets and our credit metrics. So we feel like we've made a strong case. Obviously, the commission will make the final determination.

Okay. And then just on the stage 2, like is there any better -- like is anything going to happen this year on this? Or are we really going to ramp up next year? When are we going to get a better sense of the process for that?

It's a great question, Steve. I think some of that is still materializing. We look forward to hearing from, obviously, Ann Patterson at your conference as well as from the governor's office about what their plan is and how the process will take shape. And I'm not sure how visible and public it will be through that April report, but you can be sure behind the scenes, we'll be working to provide important insights and contributions.

And our team is definitely in full speed ahead working on making sure we're providing the best and most robust input to the process. But it may be very quiet between now and April 1 or there may be key milestones that's going to have to be for the governor's office to clarify.

Your next question comes from the line of Aidan Kelly with JPMorgan.

Yes. So just with the capital plan now rolled forward to 2030, could you speak to when you might be able to realize the identified $5 billion in additional CapEx opportunities at this point in time? And then just like on the funding side, is there any kind of considerations for that incremental CapEx?

Yes. As we said -- as we look at that additional $5 billion of capital, as we've said, there's a number of ways that we could bring that into the plan. We could simply add to the plan or we could look at each of those projects and how they impact affordability. And so we may upgrade our capital plan by replacing some of that -- those $5 billion projects with some projects that are currently existing in the $73 billion or we could, again, continue to extend the duration of our plan. So we've got a number of ways of looking at that $5 billion and how we would bring it in. And we're always working it, to be quite honest. There are always new opportunities coming. And as Patti said, we -- our capital -- all our projects compete for capital. And we look at what is the most affordable for our customers and makes the most sense for our strategy.

And just to make sure it's clear, we have added -- we brought some capital into the plan. That's why we've rolled it forward for 5 years. We brought some of that $5 billion in and continue to have at least $5 billion more to contribute to the benefit of our customers. And so the one thing that I hope people really understand is our system has a lot of opportunities for, again, bread-and-butter capital deployment for the benefit of customers.

And much of that CapEx is rate reducing CapEx. When we are able to prevent the band-aiding and the maintenance of the system and rather rebuild it to modern standards given its age and condition, that is good for customers. It helps to lower rates while we're investing in meaningful CapEx for customers.

So we've got a lot of appetite for capital out here in California. We've got a lot of appetite on our system, the at least $5 billion. Again, we'll be disciplined about that. Carolyn has been clear that we've got real firm guidelines, but our customers have a lot of work for us to do, and we look forward to doing that in a way that helps to lower rates and really deliver value for customers.

Got it. Appreciate the color there. And then just looking kind of at the upcoming CEA report this April, in your slides, you kind of highlight -- Physical Mitigation and Community Impact is one area of it. Maybe just high level, curious, how much upside for risk improvement do you see kind of versus your current mode of operating at this point in time? Do you see this more kind of catered to the local communities at this level? Or just any commentary on that would be great.

Yes. I think one of the important things in the phase 2 report will be the importance of communities preparing to prevent the spread of wildfire. And for the state to work with the communities, and obviously, we'll be a key part of that, to make sure that our communities are prepared for this climate hazard that exists around us.

As we continue to reduce our ignitions, and I'm proud to report our ignitions this year are at the lowest level in recent tracking, even given extreme conditions around us, we know that ignition prevention is one thing, but spread needs a lot of focus. And we know that CAL FIRE is the best in the business. But in between preventing an ignition and fighting a wildfire with our high-quality, high effective firefighting resources, there's a need to harden homes and communities, make them defensible so that spread is not such a risk.

And that's what will help fix the housing crisis in California and the insurability crisis in California. So as we look to phase 2, it's all about opening the aperture, looking at the societal issue that exists, and we will obviously be a key part of working on that, but there's a lot more to it than utility-caused ignitions. And I think that's the recognition that the situation in L.A. this year helped to really illuminate.

Your next question comes from the line of Paul Fremont with Ladenburg Thalmann.

Going back to the cost of capital, I guess a couple of questions. The yield spread adjustment that you guys are asking for, I think the interveners have -- are objecting to that. Any thoughts there as to how investors should think about that?

Well, we think -- as we put it into our filing, we think it makes sense. I will say that the importance -- the most important thing that we think about is, again, we're very focused on getting our IG ratings and limiting the difference between what we're seeing and as we offer our short term -- as we offer our short-term debt by focusing on our IG ratings.

And so that would be continue to -- the difference there will continue to decrease. But at this point in time, I mean, it is a difference, and we think that's the right way that we should be compensated in the cost of capital. But again, I'll just remind you that we're not necessarily counting on that in our plan.

And then one other question on the cost of capital. Obviously, you guys are looking sort of at increased risk in terms of what you're asking for with respect to ROE and equity ratio. But the interveners, I think, are sort of focusing on affordability and their testimony as to why they think -- why they're recommending lower equity ratios and lower ROEs. Given sort of the legislative -- legislature focus on this whole affordability issue, how do you think the commission sort of balances those 2 objectives?

Well, I think 2 things here, Paul. One, the commission has been clear that the cost of capital application and cost of capital process is not the vehicle to manage affordability. And frankly, the best way to manage affordability is the work that we're doing that lowers costs for customers. And so we're working on affordability. Our rates are down this year. Our rates are forecast to go down again yet this year and then down again next year.

In the face of the national trends, we're proud that we have turned the corner there, and we continue to see capability of lowering rates through our simple affordable model, reducing O&M at industry-leading levels, continuing to improve our efficient cost of financing, we know as our credit metrics improve.

So we say all that to say the cost of capital should be a technical correction, and there's a process for it, and we are confident that the commission will use the process as it's intended and yet we still plan conservatively. We're not assuming large or significant cost of capital improvements. We're going to continue to plan conservatively, though we think our application absolutely warrants the improvements on the cost of capital.

And that concludes our question-and-answer session. And I will now turn the conference back over to Patricia Poppe, Chief Executive Officer, for closing comments.

Thank you, Krista. Thank you, everyone, for joining us. We are very much looking forward to serving our customers better every day, and that is the path -- and the best path to deliver increasing value and consistent financial performance for you now and in the future. Thanks for joining us today. We'll see you here in New York.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Thank you for standing by. My name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to the PG&E Corporation Second Quarter 2025 Earnings Release. [Operator Instructions].

I would now like to turn the call over to Jonathan Arnold, Vice President, Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us for PG&E's Second Quarter 2025 Earnings Call. With us today are Patti 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 quarterly report on Form 10-Q for the quarter ended June 30, 2025.

And with that, it's my pleasure to hand the call over to our CEO, Patti Poppe.

Thank you, Jonathan. I am pleased to be with you this morning to share another solid quarter of execution. Our core earnings per share are $0.31 for the second quarter and $0.64 for [indiscernible]. full year guidance range of $1.48 to $1.52 with a bias toward the midpoint, which is up 10% over 2024.

Top of mind for us and likely for you, too, are matters before the California State Legislature, specifically, improving upon the AB 1054 Wildfire construct and landing sensible affordability legislation. I'll start with AB 1054.

Key decision-makers are currently focused on ensuring there is a mechanism to protect the wildfire funds durability. I'm confident that meaningful measures will be enacted this session sufficient to address downside risk and improve upon the status quo. It's also becoming increasingly clear that the state, just as it has done before with earthquake risk, really needs a longer-term comprehensive societal approach to catastrophic wildfire risk in the context of our changing climate conditions. This will take longer than the next 6 weeks, but a constructive step forward this session will need to provide the necessary protections in the interim and give clear direction for substantive next steps.

Keep in mind, as with AB 1054 the IOUs would need to opt in to any additional wildfire fund contributions. As such, any replenishment framework would need to be part of a package, which improves upon what we have today and also sets the stage for comprehensive reform.

Next, regarding legislative proposals to address affordability, we are 100% aligned with our legislature on the goal of affordable service for our customers while not compromising on safety or reliability. Where we differ is on the most effective means to achieve our shared goal. There are some elements in the proposals, which we firmly support. For example, moving funding for public purpose programs off the utility bills. As we've seen in many prior sessions, initial language tends to evolve significantly by session end, resulting in better long-term outcomes for customers and investment in California. I'm confident that this can happen again in 2025. There is simply too much up stake for the state to not push forward to make the most constructive policy choices possible.

As evidenced by our 2027 general rate case proposal, our business fundamentals and core execution have never been stronger, and our simple affordable model is providing the framework to continue funding needed investment while holding customer bills at or below the rate of inflation.

As a reminder, the legislature is out on recess through August 18, after which they return for what is typically the busiest part of the session wrapping up on September 12.

Based on what we see today and having modeled a range of potential outcomes, we're pleased to reaffirm our current 5-year financial plan through 2028. For EPS growth, 10% this year and at least 9% each year 2026 through 2028, $63 billion in capital investments, no change to our financing plan to fund this capital growth, including no further equity through 2028 and continuing to target reaching a 20% dividend payout by 2028. While we're not providing specific details beyond 2028 on this call, we remain confident that the simple affordable model can continue to drive sustainable savings for customers and earnings growth for investors for years to come. Once we have legislative clarity, we look forward to sharing more of the details with you and rolling forward our plans.

Also unchanged is our focus on physical and financial safety. Our prioritization of customer affordability and our firm commitment to enabling California's growth and clean energy ambitions.

Turning here to Slide 5 are improving layers of physical protection ensure our hometowns are safer today and will be safer still tomorrow. We have a substantial suite of wildfire mitigations currently in place aimed at both ignition prevention and post ignition response, and we continue to learn and improve upon existing mitigations year-over-year.

For example, I'm particularly excited about our deployment of more than 10,000 sensors throughout our high-risk areas. These sensors attached to our poles with 4 screws can be installed in about 5 minutes and provide data with very tangible results for customers, including detecting potential failures before they occur, preventing ignitions and shortening outage durations. In addition, we've expanded our PSPS model to assess fuel risk beyond the traditional high-risk boundaries. And when conditions warrant, we won't hesitate to include such areas in a proactive power shutoff.

We've executed 4 PSPS events already in 2025, all of which included transmission lines. In fact, as part of our June PSPS event, a total of 22 transmission lines were de-energized for safety.

Given the potential impact of the Eaton fire on Wildfire Fund durability, some of you have asked what happens if there's another big fire this year before new legislation goes into effect? As a reminder, for any fire in 2025, we would first turn to our customer-funded self-insurance, which addresses claims up to $1 billion. We're also able to request cost recovery from the FERC under our formula rate. Beyond the $1 billion threshold, we would turn to the Wildfire Fund. And beyond the funds, we would seek recovery from the CPUC under the enhanced prudency standard. Importantly, PG&E has an annual safety certificate in place today. And clarifying one common misconception, if there are multiple events within a single coverage year, which together exceeds the fund's resources, then available funds would be paid out by the administrator pro rata and not on a first event first paid basis.

Moving to Slide 6. I want to reiterate that we share our state's desire to address customer affordability. In fact, we've been at it for a number of years, and we are on our way to delivering on that key priority. Our bills went down this year, and our forecast show residential combined bills to be essentially flat for the remainder of 2025, and going down again in 2026. We also see a pathway for 2027 bills to be lower than they are today. Our rate case, as proposed, would result in customer bills being flat compared to current bills as GRC revenue increases are offset by reductions in other items. This is a darn good proposal. And yet we're taking additional actions to lower rates even further.

For example, our flat projection does not include savings from the DOE loan facility, reduced borrowing costs when we achieve investment grade, and beneficial load growth, allowing us to spread our fixed costs over more units of energy. We forecast the energy we provide will continue to be more and more affordable through the deployment of the simple affordable model. Over time, our customers will experience savings and notice the trend.

Also, with electric bills expected to be on the rise nationally, affordability can become a positive differentiator for us and we're looking forward to turning around the prevailing narrative with California regulators and policymakers.

Another driver of affordability will be beneficial load growth. As you see here on Slide 7, our data center pipeline continues to grow. Last quarter, our pipeline reflected demand of 8.7 gigawatts. Now adding interest from our second cluster study offset by some attrition, we're actively working 10 gigawatts through various stages. That's healthy growth since last quarter and a nearly 3x increase since this time last year. The 10 gigawatts represent more than 50 different projects, many on the smaller side, consistent with the inference market. We recently filed for approval to serve Microsoft's planned 90-megawatt data center project in San Jose. This is just one of many smaller projects in our pipeline.

I'd like to call our data center growth Goldilock load, not so much to be a problem and yet enough to be beneficial for all of our customers. This is because our demand is differentiated by having a diverse set of projects, ensuring that our development pipeline remains robust and not reliant on a single location, counterparty or approved. While we value this diversification, we're also excited to be seeing data center operators expressed interest in some larger-sized projects as well as locating beyond the Bay Area into other prime locations within our service area. The market has gotten the message. PG&E is ready to serve. This is good news for Californians who stand to benefit from this unprecedented growth.

Our civic leaders recognize this opportunity too. Just last week, I had the pleasure of standing with San Jose Mayor, Matt Mahan, to formally announce nearly 2 gigawatts of projects in the city of San Jose, powered by PG&E. Our 10 gigawatt pipeline enables California to create thousands of new construction and permanent jobs in the state, secure the future of AI and tech in California for decades to come. And generate billions of dollars in annual revenue for the state through increased property taxes and additional sales tax revenue. We're particularly excited by beneficial loads because every gigawatt we bring online offers the opportunity to reduce electric bills by 1% to 2%.

The fundamentals of the PG&E operational story are strong and getting stronger. The proof is in our results, improving and building upon our physical layers of protection year-over-year, submitting a general rate case, which delivers on our commitment to stabilize customer rates, and seizing the tremendous opportunity for customer affordability from data center load growth in our service area.

With that, I'll turn it over to Carolyn.

Thank you, Patti, and good morning, everyone. Here on Slide 8, we're showing your earnings walk for the first 6 months of 2025. Although core earnings of $0.64 are down from this point last year, as Patti mentioned, we're on track with our internal plan and confident in delivering on our 2025 noncore EPS guidance of $1.48 to $1.52 with a bias to the midpoint.

First half results were impacted by the dilution from our December equity financing, in addition to the CPUC cost of capital Phase 2 decision last October. Over the second half, timing items are expected to fully reverse and we have line of sight of additional O&M savings. We have nearly 100 different initiatives, big and small, that are yielding savings and will continue to yield more savings this year.

Turning to Slide 9. Our 2027 general rate case is the lowest GRC percentage increase we've requested in 10 years and reflects our commitment to stabilize customer bills by deploying our simple, affordable model. With only a modest increase in base GRC revenues and an expected reduction in other items, we see a path for residential bills to be down in 2027 compared to today. This is the result of an intentional continuous effort to eliminate waste on behalf of our customers. In fact, in this filing, we highlight $2.5 billion in capital and expense saved across the enterprise from 2022 to 2024. These savings are being delivered across PG&E. We've rebalanced our use of subcontractors in gas operations. In electric operations, we've deployed tools to enhance our work bundling strategy and improved our new service application process to accelerate connections.

And as we've talked about before, we continue to find opportunities to reduce the cost per mile of undergrounding, including piloting new installation equipment.

Our simple affordable model is enabled in part by annual nonfuel O&M cost reductions. Annual savings exceeded $200 million in 2022, 2023 and 2024. And I'm increasingly confident we are on track to continue beating our 2% target this year and beyond.

With continued strong execution in this area, coupled with efficient financing and beneficial load growth, we see a path to holding bill growth to 1% to 3% while continuing to make needed capital investments on behalf of our customers.

Here on Slide 11, we're reaffirming our $63 billion capital plan through 2028. Not included in the plan is an incremental at least $5 billion of customer beneficial work, much of which is FERC transmission. As we think about this $5 billion, I should emphasize, we will be very mindful of our valuation discount to utility peers, and I can assure you that we have no intention of issuing additional equity at these levels. As you know, we have already issued the equity needed to fund our existing $63 billion investment plan through 2028, and we have achieved compliance with our authorized regulated capital structure. This gives us considerable flexibility moving forward.

When it comes to capital allocation, I want you to know, first, we plan conservatively. Second, we have a number of options and have built a plan with several points of flexibility. Third, we think and plan long term with our customers in the state's best interest at heart. Fourth, we will always be mindful of market conditions as they relate to funding the plan. Finally, to be clear, if the state did implement policy choices, which significantly constrain our longer-term ability to deploy a needed growth capital accretively, we would carefully consider whether it might be more efficient to return some capital to shareholders.

Focusing on proposals to securitize some of our capital investment, we strongly believe that this is not the right policy choice for our customers. Not only is it ineffective at delivering meaningful near-term customer savings, it also risks increasing our actual cost of capital, thereby driving up customer costs on the balance of our rate base, a significant unintended consequence. That said, we strongly support the goal of passing affordability legislation in this session, and we're advocating in the legislature for policy choices that more effectively deliver on our shared goal of affordability.

As Patti mentioned earlier, we've modeled a range of potential legislative outcomes for our current 5-year plan, and we remain confident that we have sufficient financial flexibility built in to deliver on our earnings guidance.

Our 5-year financing plan shown here on Slide 12 remains unchanged. The plan is built to support our customer beneficial capital investments while also sustaining investment-grade credit metrics. As we've said in the past, the $2 billion parent debt paydown by 2026 in our plan was not an obligation. We're reevaluating this element of our plan, and we'll likely maintain the current level of parent debt through 2026. This decision gives us flexibility in our 2026 plans, and we're still forecasting mid-teens FFO to debt.

Second, we have created flexibility to defer some long-term financing to 2026, depending on conditions later this year. We're continuing to indicate $5 billion of estimated utility long-term debt issuance in 2025. We've raised $3 billion of this so far. And following the extension of our revolving credit facility that closed in June, we have flexibility to manage the remaining 2025 maturities without returning to the market until 2026.

Reaching investment grade at the parent company will be a big win for our customers and continues to be a key focus for us with the resulting lower future borrowing costs, investment grade is one of the most impactful and fast-acting affordability enablers, a point we will continue to emphasize in the context of the ongoing policy discussions. Last quarter, I mentioned that this was a big year for us in terms of regulatory filings. Two of those filings are behind us and moving through the process. First, the cost of capital application, which will set our CPUC return on equity for 2026. We believe we've made a strong case and look forward to a final decision before the end of this year. As a reminder, our filing is premised on the state delivering a constructive legislative fix for wildfire liability policy this year. Second, the 2027 GRC proposal, which I've already addressed. And third, our 10-year undergrounding plan, which we intend to file by year-end.

I'll end here on Slide 15 with a reminder of our value proposition, which we reaffirmed again today. We're focused on execution, including on the policy front, serving our customers and also delivering for our investors. I firmly believe that these commitments are not mutually exclusive. Today, we're standing for stabilizing customer builds and delivering consistent, predictable outcomes for all.

With that, I'll hand it back to Patti.

Thank you, Carolyn. While I acknowledge the questions prompted by the current legislative session, the fundamentals of the PG&E playbook are undeniable. Strong layers of physical risk mitigation improving every day, ample runway to continue reducing nonfuel O&M, beneficial load growth serving customers in California's prosperity, improving credit ratings and balance sheet health, our differentiated rate case proposal all providing a path for customer bills to be flat to down in 2027 from today.

As I like to say, performance is power. It's our responsibility to continue to demonstrate performance and earn the trust and cooperation of our legislative leaders so that we can follow through on our promise to perform. When we do what we say and continue to improve our performance, we have the power to influence perceptions and outcomes. I've never felt more certain about the PG&E team and our ability to deliver both for our customers and our investors. With that, operator, please open the lines for questions.

[Operator Instructions] Your first question comes from the line of Steve Fleishman with Wolfe.

So just appreciate the comment on the confidence in achieving the growth under various legislative outcomes. Maybe just to be more specific there, so I think concerns that we hear are things like the securitization proposals on the affordability bills and then potential equity needs to fund a new wildfire fund. Could you maybe be more specific on those issues? And just, again, kind of if those were to pass, just your confidence in hitting the growth rate?

Yes. Thanks, Steve. I'm very happy to clarify these questions. First, as we said, we've done a variety of assessments against a lot of legislative scenarios, and we are reaffirming our guidance through 2028. We feel very strongly that we've got the flexibility required. What I will say is we continue to advocate on the affordability front, that securitization is not more affordable for customers. In fact, it would result in bills going up, not down. So we are definitely not supporting the securitization proposals and there are some good proposals, though, and we'd be disappointed if good affordability legislation didn't get passed this year.

I think there's just -- our business model is a little complex and for our policymakers it takes a minute to understand how that sort of decision could actually negatively affect customers. And so we just continue to advocate and educate and yet still make sure that we have a financial plan they can deal with any outcomes that might come through the legislative session. There are some things on affordability we do love in the package. The public purpose programs could save $12 a month on a customer's bill, that's a big deal. And we think that some of the other things like DOE, like debt financing for the transmission that could be a really good outcome for customers. So we're going to continue to work together like we always do, to make sure that we've done a good job advocating for the right affordability solutions.

Now on the equity needs for the wildfire fund, I'll just tell you, there's no reason to assume that an upfront payment would be required, and we definitely would not be supportive of issuing equity, particularly at our current valuation to fund the wildfire fund. And so when we say we have to opt in, we want to make sure that what we're opting in is better than the status quo.

And the state has a pattern of doing the right thing. Our legislative process is a little noisy. We do it out loud here in California, and it definitely is public. But the good news is that means it's transparent, and we'll get to the right end just like we have year after year after year after year.

Your next question comes from the line of Nicholas Campanella with Barclays.

I just wanted to pick it up from there, not supportive of issuing equity to fund a wildfire fund solution. But just how are you thinking about the palatability to fund anything upfront at this point? I acknowledge that you also have, I think, some holdco debt capacity that Carolyn alluded to. But maybe I can just ask how you're thinking about that?

Yes. Thanks, Nick. I just think there's no reason to think that there would need to be a large upfront contribution. The fund doesn't need cash today. Claims typically take years to pay out. And it's important that we have the most affordable ways of supporting the wildfire fund. And so the fund has an important role. It provides the basis for a liability cap for investors. The durability of the fund matters. The liquidity of the fund, however, does not happen quickly. The claims don't pay out quickly. So it doesn't put us in a position. And so I don't think there's a strong reason to assume that a big upfront payment would be required.

Okay. And then just -- you gave a lot of details on how you're thinking about end of year and then 2026 financing. Can you just kind of remind us on where you kind of stand today on balance sheet capacity if we were just look at it simplistically, like I think after you did the equity late last year, you kind of talked about having a $2 billion of holdco debt capacity. But can you just remind us on where you stand now?

Yes. So -- Nick, it's Carolyn. You're right, we did do the equity in December and our $63 billion plan is fully funded at this point in time. Now what we updated today is the timing of that $2 billion parent paydown of our debt. We do not intend to pay it down by the end of 2026. And this is what's giving us added flexibility in our 2026 plans, but it does remain an element of flexibility in our plan. It's still -- we still have it as being paid down through -- by 2028. We're still targeting mid-teens FFO to debt. I mean, we're -- and we're there already. So we plan and intend to maintain mid-teens FFO to debt through 2028. The percentage of that parent debt is relatively low versus our peers. And so that continues to be an element of flexibility for us.

I appreciate that. I'm sorry to make you repeat yourself. .

Your next question comes from the line of Julien Dumoulin-Smith with Jefferies.

Maybe just follow up a little bit -- to follow up a little bit on what was being discussed earlier. And obviously, the upfront acute needs of the balance sheet would be clearly unpalatable in the current environment. How do you think about a ratable or delayed contribution here? I mean how do you think about the concept at all, right, notwithstanding even the idea that it would be front-end loaded. I just wanted to try to expand a little bit on the degrees of freedom that might exist here, as you think about how to resolve the demands or tensions from the state as well as any other possible directions that perhaps might not be obvious or visible here, if you will?

Yes. I think it's important to remember what is the purpose of the wildfire fund. The wildfire fund is intended to be -- provide smoothing for rate -- for our customers, smoothing rates for our customers to fund that fund because under the inverse condemnation doctrine for a prudent operator, the claims are collectible from customers. Now we don't think in the long run, that's the right affordability picture for California, given the wildfire risk that exists here in the state. But in the near term, we want to support that wildfire funds durability because that wildfire fund also provides liability exposure protections for investors, and for the IOUs so that we can continue to be financially attractive and viable to deliver on California's clean energy ambitions and our AI leadership and making our system safer. And so the fund plays an important role for both customers and investors.

How to maintain the durability of that fund could take a lot of different forms. We do think that longer-term payments and spreading out the costs matches the kind of pace at which the liquidity of that fund is required. We've seen that the funds and the claims get paid over a long period of time. So what's important to do here is make sure we spread out the cost over the longest period of time in a way that are still -- that there's enough value to be provided to those who are harmed by the effects of wildfire.

And a quick follow-up here. I mean it's not necessarily obvious. But how do you think about inverse condemnation as being part of the reform conversation? We've seen it somewhat in adjacent states, but I want to ask in the context of tackling tort reform and IC specifically here. Is that part of the conversation here?

I would say the path toward a more holistic solution certainly needs to go beyond utilities. California needs a holistic wildfire solution. Look, we need a functioning insurance market for customers. The spread of wildfire is what is the most expensive portion and that needs to be modernized through defensible spaces, building codes, better forest management, there's a holistic solution. Claims, limitations definitely should be on the table. And so I think that the -- the state has a real existential challenge here. And thankfully, we have a history of working well together here in California. The best solution will come when we stand together and find the path that protects and provides protections for those harmed by wildfire, but also prevents wildfire.

We spend billions of dollars a year preventing an ignition. And I'd say that the equal amount is not being spent to prevent spread. And I think that's a state role that we need to play together to make our communities hardened just like we did for earthquake. We think there's other solutions that should be on the table and that we should look at. So I would just suggest that inverse condemnation in its strict and most current form only fix is part of the problem. We need a bigger solution for California, and we're standing with California. We live here too. We want to make sure it's a safe and vibrant place that can continue the California dream. We need to make sure that we've got wildfire legislation over time that reflects that and enables it.

Your next question comes from the line of Richard Sunderland with JPMorgan Securities.

Turning to the data center pipeline and your San Jose announcements, can you expand on the San Jose update a little bit and particularly the path and timing to capturing some of those load growth benefits for customers. I guess I'm thinking back to the 1 gigawatt and 1% to 2% math there and when that might be an opportunity to add it to your outlook?

Yes. We're so excited about this. We want to earn the right to serve our communities. In San Jose, obviously, as I like to say, the smartest city in America, we're proud to serve San Jose. And we worked hard with the city to make sure that they can both accelerate permitting and the ability to do construction of data centers in San Jose and that we have the power to keep them on time. And so we see construction for most of those projects starting at late '26, early -- or construction starting soon, but the actual load materializing in 2027, predominantly, construction preparations will take most of 2026. And so then we'll see that -- we see that pipeline both in San Jose than across the rest of the service area, taking shape '27, '28, '29. It's very exciting. Once people found out that PG&E was ready to serve, the applications came rolling in. And so our cluster study process has been very effective.

And again, working with City of San Jose has been a great catalyst for the state because the Mayor Matt Mahan in San Jose is a real leader who really saw the benefits of this load growth for tax revenue and an ability to take advantage of believe it or not, there is land and space in San Jose to build, and we are taking advantage of that. So the partnership was really important to us to accelerate the progress and two, building out that construction and getting that load online, we would see the rate benefits probably starting in 2027.

Got it. That's very helpful. And then expanding on those benefits, how are you thinking about tackling the affordability conversation in the legislature, given your outlook for '26 and '27 bills and then the points you just hit on the load pickup thereafter. Obviously, people are focused on the pressure right now, but you've also charted a path that could be different over the next few years. Do you see this affordability conversation is something that you can get to outcomes in this session? Or do you expect a multi-session effort here?

Yes, I think we can get to -- I would be disappointed if we didn't get to affordability solutions here this session. There are good ideas on the table that we like a lot. And that, combined with our simple, affordable model. In defense of our legislature, our rates have gone down and flattened this year, but that's the first they're seeing it. And so that's a big change in trajectory here in California. Our rate forecast to go down would be a big change here in California. So I think in the timing right with our legislature, earning their trust is important. And the -- as I say, performance is power. We have to perform. We have to deliver those rate reductions. And as we do then they can be more confident.

But in the near term, there is work that the legislature could do to make bills more affordable in California. 30% to 40% of our bills are policy driven. And so the legislature has a role in an opportunity to play a role in making energy more affordable here in California. And so things like the public purpose programs coming off the build, that's $12 a month for customers. There's other things further NIM reform that would be important. The way we finance transmission on the debt side of that equation, we could do state-driven loans much like the DOE does and much like our DOE loan program office, that could do the debt financing for transmission. That would save customers and be a revenue raiser for the state.

So I think there's some really innovative solutions, and we appreciate the opportunity to work with the legislature to find the right solutions that actually benefit customers, both in the near term and longer term. But I'd like to see that get buttoned up this session to your point, Rich.

Your next question comes from the line of Anthony Crowdell with Mizuho.

I wanted to jump on Rich's question. And I appreciate it's transparent, the legislative process in California, and it's very fluid. But any thoughts on if we could see the solutions for AB 1054 combine and morph into also the affordability bills that are out there, and we get one big package?

Well, it's a great question, Anthony. Look, we've got 6 weeks left, so a lot of things will get combined. And I do think it's good to look at the holistic impact both for customers and for the IOUs make sure that we've got a package of solutions that work together this year.

And then this is maybe a harder question, and I understand if you don't want to answer it. You highlight that whatever comes out of the legislature related to the AB 1054 modifications, it's voluntarily for all the utilities they want to opt in. So like obviously, questions earlier about maybe equity upfront or something is just something that you really would not sign up for. Are there any other items that you kind of want to see or don't want to see that would really cause you to think I want to really volunteer to sign up on this legislation?

No, I think it's the totality of the package, Anthony. It has to net-net be better. It has to be better for customers. It has to be better for our IOUs, for our cost of capital. We want to make sure that it's net better than the current construct. And I have confidence that we can find a net better path, the wildfire fund is important to investors and customers, it's durability matters, and how it gets funded matters. And so I -- what I'm confident about is that we have the right policymakers who have the right mindset about how best to serve the people of California.

And so we're going to work together to find the right outcome. We have confidence that they'll do the right thing in the end, and we're doing a lot of advocacy to make sure that the fund is durable and that, that pathway to a longer-term fix, the real substantive changes in the legislative arena and here in California are meaningful, and we follow through on those. That's going to be an important part of what matters to us for agreeing to opt in.

Your next question comes from the line of David Arcaro with Morgan Stanley.

Let's see, let's say, Edison had an ALJ proposed decision that had recommended lower wildfire mitigation CapEx. I was just wondering if you think that has any read across to you with your GRC? Could that influence how you prioritize different CapEx programs at all? .

Well, so as you know, that Edison's proposed decision just came out and we look forward to hearing their take on it. What I'll tell you about our wildfire mitigation plans, we continue to file our wildfire mitigation plans and our GRC reflects it. We still intend to file our undergrounding plan later this year. I do think it's really important for the state of California that they see the value and undergrounding. Today, in our customers' bills, we spent $20 a month on vegetation management our customers do, and they only spend $1 a month on undergrounding. Undergrounding is the right permanent solution in our highest risk areas, not everywhere, but our highest risk areas.

And so I think it is important that we continue to show we can do it more affordably than we can do it efficiently. We are showing that. We're showing our unit costs going down and our ability to deliver for customers improving, and it is more affordable than our current construct of inspections and vegetation management year after year after year on those highest risk miles, and we know it reduces the most risk for the lowest cost. So we're going to continue to advocate for undergrounding as a key part of the wildfire mitigation solutions here in California.

Your next question comes from the line of Carly Davenport with Goldman Sachs.

I wanted to follow up on the data center pipeline. Just any thoughts on how we should think about your expectations on the conversion rate from early stage to final engineering to construction. And then could that pipeline conversion shift if ultimately, there are securitization provisions around energization spend?

So I would say, first of all, through our -- what we've seen in our Cluster 1 and Cluster 2, from the very first application to moving into construction, we're showing about a 50% attrition rate. So that, I think, could carry through or perhaps as we start to build more and get better at it, maybe we are able to convert more of that into real beneficial load. So I would say that it's early days to really have a strong prediction on attrition rate, but probably in about that 50% zone.

I think as the legislative agenda comes to completion, we're going to want to make sure that we can serve that large load. We're going to want to make sure because that's the best kind of CapEx. That CapEx reduces builds. And so I think we're going to want to make sure that we have means of including the ability to finance that new CapEx and serve that large data center load. So we're going to be advocating strongly for that.

Carly, maybe I'll just add that a lot of that is, remember, transmission. So FERC fund did not necessarily CPUC or.

Got it. Okay. Great. I appreciate that color. And then I wanted to just ask quickly on the O&M reduction target, just given the commentary and the prepared about potential upside relative to what you have kind of baked into the plan there. I guess just any specific opportunities that you would highlight driving that potential upside?

I'm sorry, can you repeat that question Carly? .

Just the potential...

I'll take it, Carly on the O&M. I'll take it, Carly, sorry. This is Patti. On the O&M, we see lots of potential for upside. One of the areas that we're excited about is AI, of course, being able to deploy it, we've been able to dramatically improve our inspection process and reduce the cost to deliver that. We've got some new technologies we're deploying in our vegetation management area, where we're able to really streamline how we use technology to get a better vegetation read at a lower cost. And there's hundreds of projects. Carolyn mentioned hundreds of projects across the enterprise, where people are deploying what we call waste elimination is the fifth play in our playbook, and we have all sorts of small ideas and then large ideas, self-insurance has been a continual benefit to customers things like that, both on the big size and the small size.

So I would say our O&M engine is just getting revved up and you can count on us to be working hard to exceed that 2% target every year.

Your next question comes from the line of Ryan Levine with Citi.

In your prepared remarks -- in your prepared remarks, there was mention of an interim study of a more holistic solution related to AB 1054, which was also referenced by several other stakeholders recently. How do you envision this process? And any sense of what actually would be studied between now and presumably the end of the governor term?

Yes. We're looking forward to really partnering with the state to look at things like the insurance market, how is it? Do we have a viable insurance market for customers in California? Do we have the right building codes? Do we have the right community hardening programs, forest clearing. And then we want to look at things like claims limitations. Other states are taking those actions to make sure that what is paid out in claims really goes to victims and not necessarily other participants in the process. We want to make sure that the California system is holistic, much like earthquake. Earthquake is an environmental hazard in California yet, building codes, make it safer. We've got response plans. We do drills. It's a collective California approach to earthquake. We need the same collective California approach to wildfire.

And we definitely want to be a key part in that study, that work and put meaningful legislative actions and measures in place so that Californians can continue to experience the quality of life and certainty and affordability here that they're expecting.

Great. And then one follow-up on the financing plan. How do you view the proposed decision [indiscernible] before capital would be funded relative to plan? Any color as to how that interplay with some of the other drivers of your outlook? .

Yes, Ryan, it's Carolyn. A couple of things. Just remember, that is [indiscernible] PD, and so we still have to wait for the final decision, which could be voted out as soon as the end of August. But another important thing to remember is that the PD allows for additional funding up to $2.4 billion for '25 and '26. Thanks to the SB 410 funding, where we received last year, we're actually on target to work through the backlog, and we continue to drive meaningful unit cost savings. And as we've been saying, any new capital approvals would not necessarily be additive to our plan. While we could make the plan bigger, we could add to our capital plan. We would also may look just to simply make it better by prioritizing projects that benefit customer affordability like energization or we could simply make our 9% growth plan longer in duration. So those are the choices that we have as we think about adding to the capital plan.

Your next question comes from the line of Gregg Orrill with UBS.

Just around the cost of capital proceeding. Would you consider modifying your cost of capital position based on certain legislative outcomes? How much latitude is there within that proceeding in order to do that? Does the schedule allow for it?

Yes. So our filing that we made, we think we've made a very strong case with an order where we requested of 11.3%. The filing did assume resolution on AB 1054. There is the possibility to have -- there is the ability to file an off-cycle application. But at this point in time, as we've said, we're confident there will be a resolution that there will be a constructive resolution on AB 1054. And so we believe that the right fix is the legislative fix. The schedule right now, we're pleased to see that there will be a final decision before year-end, evidentiary hearings at the beginning of September, and we expect a PD in November.

Your next question comes from the line of David Frank with Zimmer Partners.

Patti, could you tell me, is your confidence of hitting the targeted earnings growth rate under different legislative scenarios underpinned by options for capital redeployment, such as regulated FERC transmission investments or stock buybacks, which at 7x earnings today is obviously accretive to investing rate base?

Our plan and what our confidence is that we have optionality. We have a lot of options. We have a deep demand for capital for our customers and capital investment to serve this new data center load, to do energization, to connect new businesses, to make the system safer, to make it more reliable, to continue to operate a safe gas system here in California, to operate our generating assets. We've got lots of demand for capital on our system. And we're going to make sure that we balance the needs of customers and the expectations of investors.

Look, the IOU model is critically important for California. It's important for the safety of Californians. It's important for AI leadership in California. It's important for our clean energy ambitions. The IOU model is essential, and that IOU equity capital is essential. And so our job is to make sure that policymakers, decision-makers understand that and value that like we do and make sure that we have appropriate returns for investors. And being attractive to investors can take different forms, and we'll take those forms if necessary, but our primary confidence is born on a really effective legislative outcome this year, and that will drive our ability to further implement simple affordable model, which delivers capital and earnings growth while reducing cost for customers. And we think that model is the winning solution for California.

Got it. Sounds like a good plan.

Your next question comes from the line of Paul Fremont with Ladenburg Thalmann.

I guess my first question is we've seen in the press about a [ Newsom ] plan for an $18 billion replenishment. Is that the entire plan that you're expecting out of the governor's office? Or is that just a part of something larger in your view?

Yes, Paul, it's look, the devil is in the details. I certainly would not be relying on a press article to tell the whole story in this case. Let's let the process work. Again, like I said, sometimes the legislative process here in California can be a little bit of a bumpy ride, but we get to the right end in the end. And I have confidence that we'll do that here. And so as part of a holistic package, as we've said, what's really important to us is, number one, there's durability to the fund, affordability for customers and attractiveness for investors as well as a longer-term solution that really gets at the systemic environmental hazard that wildfire is causing here for the Californians that we serve.

Right. And then there's obviously not a lot of detail, but is there anything that you can share in terms of how the portion allocated to the IOUs would be allocated?

Yes. We're really just not in a position to speak for the legislature on this. Those are decisions that they'll be making, and we'll be working to advocate for, obviously, proper cost allocation.

I will now turn the call back over to Patti Poppe, CEO, for closing remarks. Please go ahead.

Thank you so much for joining us today, everyone. We know it's been a little bit of a bumpy ride, and we are in it for the long haul, and we want you to know. And I just want to remind you that we've looked at a range of scenarios and feel comfortable reaffirming our financial guidance through 2028 against this backdrop of a variety of outcomes. And we just look forward to keeping you updated as the legislative activity takes shape in the coming weeks. We're standing for California. We're standing for our customers, and we're standing for you. Thanks so much. Stay safe out there. .

Ladies and gentlemen, this concludes today's call. Thank you all for joining, and you may now disconnect.