Q4 2022 PG&E Corp Earnings Call
<unk> 10 per share right on guidance.
My second year with P. Genie with results delivered on plan no more no less as I like to say, we sweat the details. So you don't have to.
Our simple affordable model is designed to maximize work for our customers and deliver on our commitment to you our investors each and every year.
Our $1 10, EPS for 2022 was up 10% from 2021 as planned. We're also reaffirming our 2023 core EPS guidance range of $1 19 to $1 23 up 10% at the midpoint along with our previously stated longer term targets of at least 10% EP.
<unk> growth in 2024, and at least 9% for 25 and 26 also unchanged is our plan for no new equity through 2024.
As you know our sector, leading EPS growth is supported by robust capital investment and ongoing efficiency gains for the benefit of the 16 million Californians. We serve in fact in 2022, we invested $9 6 billion of capital into our system for the benefit of our customers our system has.
Never been safer and we continue to make it safer everyday I want.
Thank you our investors for your part in making that possible.
The simple affordable model underpins our confidence in reiterating our financial outlook today, despite the very real challenges faced by most businesses in today's inflationary and uncertain economic environment.
Turning to slide four we've made strong progress mitigating physical and financial risk. So here are some high points.
Wildfire mitigation, we saw 99% reduction in acres burned in 2022 relative to the average of the three years directly before implementation of enhanced power line safety settings.
As we reported last quarter, we were able to successfully navigate extreme summer heat conditions.
And in January our system was put to the test again with an unprecedented series of winter storms, which were met with truly historic levels of performance from the <unk> team.
In addition to addressing physical risk 2022 was a big year for our financial risk mitigation, we delivered our earnings guidance as well as non fuel O&M cost reductions of 3% net of inflation. This was ahead of our 2% plan and was achieved in the face of the most challenging inflationary backdrop many of us have seen in our careers.
Yeah.
NRG our seat we added under grounding, while removing vegetation management expense delivering long term safety, while keeping cost neutral for customers.
We closed our $7 $5 billion rate neutral securitization and worked with California policymakers over the summer as they passed constructive legislation supporting our tenure underground plans and to extend the life of our Diablo Canyon nuclear power plants.
We view, both as beneficial to customers and evidence of the Greater Trust. We are building day in and day out with our stakeholders.
On the regulatory front, we appreciate the CPUC resolving both the 2022 and 2023 cost of capital proceedings last year and in terms of customer savings. The net energy metering three point O decision with a win for customers. We estimate it removes about $1 billion of cost shift through 2030 relative to them too.
On slide five we show some highlights on our historic January Storm response, I want to emphasize that this story is about more than numbers on a page. This was us delivering for our hometown and our co workers are at their best when put to the test.
During the first two weeks of 2023 hit by historic back to back to back to back atmospheric River storms are electric team restored over $2 8 million customers through multiple waves of outages and we had 95% back online within 24 hours during each of those events.
January ranked as a top five storm in <unk> history and involved the largest contingent of resources, we have ever mobilized including around 7200 dedicated personnel from 10 states.
The strength and speed of our response also resulted in us seeing improved customer satisfaction scores compared to prior storm related outages.
We've also adopted the standardized emergency management system, an incident command system and with the support from California's office of emergency services, we've been aligning training of our emergency Center staff with our first responder public safety partners. When the time came our team and an army of partners acted with.
Skill and tenacity, protecting and serving each other and our hometown and we couldnt be prouder of them.
On slide six I'll recap, our layers of protection against wildfire risks, which start with our core system hardening vegetation management inspections and repairs when conditions warrant we supplement these with our enhanced power lines safety settings, and our public safety power shutoff.
We calculate these layers of protection, including improve situational awareness in coordination with first responders as delivering over 90% overall wildfire risk reduction.
We've already hardened more than 200 miles since 2019, and we expect our overall risk reduction to further increase as we pursue our 10000 mile underground program.
In the meantime, we continue to look for innovative new technology solutions, such as partial voltage detection and down conductor technology to keep reducing that remaining 10%.
On slide seven we take a closer look at our 2022 wildfire risk mitigation performance.
Historical data shows that from 2012 to 2020.
Before we implemented Etfs, 95% of the acres and 100% of the structures burned were related to admissions at times when conditions were at our three or higher.
While we were fortunate that 2022 didn't bring significant wind events for the year, there were still 31% more or three year higher days than in 2018 to 2020.
Despite the significant increase we saw a reduction of 99% and the number of acres impacted by utility Ignitions in 2022 over the same time period.
Slide eight illustrates our simple affordable model, which includes driving efficiency to make room for customer investment you've heard us talk a lot about the lean operating system and our four basic place in 2023, we're rolling out a fifth play my personal favorite waste elimination and we see this as key to <unk>.
Continuing to deliver our plans for both customers and investors.
Our primary constraint is customer affordability on which we are laser focused through our newly established Bill ownership Center led by Carla Peterman the.
The entire team is looking at the whole customer bill for savings, including energy supply costs, which we know are top of mind we.
We have a lot of opportunity to eliminate waste and improve our customers' experience make our system cleaner and more resilient all the while reducing cost we can do more for less.
The examples keep piling up so I felt I needed to bring back my story of the month. So here. We go. This month story is about work we are doing to improve efficiency in our new business area.
Presently our new customer connections take too long from start to finish as I recently told a group of California builders, we can and we will do better in fact, it is another perfect application Berlin operating system, and specifically waste elimination.
The team invited our developers and builders to come in and work with us to redesign our processes and shared their pain points.
We conducted a design thinking workshops and through rapid prototyping, we can see the path to taking our cycle time down dramatically improving our ability to both do the hook up on time and in less time imagine the rework the waste the frustration the delays we can eliminate one challenge is at 64% of the new <unk>.
Connection requests we receive today end up being canceled for a variety of reasons.
We do too much engineering before we are sure it will even be used this waste both time and money and it also is demoralizing for our talented engineers when much of their work never sees the light of day.
We can dramatically improve how we show up for our new customers and by doing that we can free up more time and resources to reinvest back into the system. This is just one of the areas, where we are delivering more of our customers with every dollar spent and that's what I would call, enabling California's prosperity.
Turning to slide nine.
You May recognize this chart, which shows how we executed in 2021 and 2022.
In 2021, we faced headwinds early in the year. Our recovery work then put US ahead of plan.
This is all part of the playbook, we're running now P. Jamie we plan conservatively and we remain nimble protect.
Protecting investors from the downside and when there is upside we will we will redeploy it for the benefit of customers, which in many cases means pulling work forward and protecting future years consistency is the name of the game.
You can see it play out again in 2022 weeks.
We faced headwinds, including a possible cost of capital reset we have planned conservatively, though and we're able to more than offset this and other pressures, allowing us to redeploy again on behalf of our customers.
And still deliver 10% EPS growth.
Employing the simple affordable model, we plan to consistently manage the work and deliver our earnings targets no more Nols and when we can we will redeploy favorability in the business on behalf of customers and look to de risk future years, with a view to delivering our consistent growth trajectory.
Lots of people say to me Ted what does this happens or what if that happens.
This is what we manage at PGD come what May we have the capability to be nimble and adapt to those challenging and changing conditions. It's a capability that can be taught and learned as I've said many times, we ride. The rollercoaster. So you don't have to you can expect to see more of this in 2023 and beyond.
And.
Moving to slide 10, you can see the progress we made in 2022 as we continue on our journey to build trust with policymakers, while creating the stability necessary to attract capital to invest on behalf of customers.
Already in 2023, we're pleased with the expedited resolution of our self insurance settlement reached as part of our general rate case. This innovative approach enjoyed intervenor support and most importantly can result in up to $1 $8 billion of savings for customers over the four year GLC period with as much as 300.
As expected in 2023.
We also have a number of important catalysts on the horizon.
Each of the four items, you'll see here in blue contain important benefits for our customers and for California will continue to work every day towards timely and constructive outcomes, but we don't do big bets here at P. Janie and I want to remind you that we continue to plan conservatively, even if I look forward to seeing more green check marks on this slide.
Turning to slide 11, let's take a look at our 2020 to report card.
While the mosquito fire did not result in any serious injuries and the estimated liability is well within our available insurance. It did cause us to Miss our goal of zero CPUC reportable admissions of 100 acres or more.
We put 180 miles of lines underground last year exceeding our 175 mile targets.
And we chose to redirect capital investment to maximize risk reduction during the year, which changed our plans for gas main replacement.
We exceeded our 2% annual O&M cost reductions offsetting inflation and delivering net savings of 3%. Yes that is net of inflationary pressure, we see plenty of potential to continue 2% net O&M reduction for many years ahead by working smarter and maximizing value for our.
<unk> and investors.
Core EPS came in right on plan at 10%, while we delivered 6% rate base growth and what was the final year of our <unk> cycle.
Lastly, we were pleased that Moody's recognized our significant progress on mitigating risk and improving relationships and mistakes when they revised our credit outlook to positive earlier this month.
On slide 12, we introduce our 2023 report card.
One key change is to our headline wildfire metric, where we're sticking with the targeted zero and adopting the new OIS metric for catastrophic wildfires. This measure lines up with our future wildfire mitigation plans and we think it's a better one for capturing events that are of real significance from both a customer and investor perspective.
We remain committed to our 10000 mile underground and goals and to achieving our unit cost targets, we'll be filing our 10 year plan later this year with more detail.
Our 2% O&M reduction plan shouldn't be a surprise either and there are no changes to any of our previous financial targets through 2026.
We're excited to be adding another year 2027 to our rate base in Capex as we look to give you more visibility into our long term plan.
Our headline five year rate base CAGR of nine 5% remains the same but it's now based off 2022 actuals and runs through 2027.
We're feeling really good about what we accomplished in 2022, and we look forward to delivering for you again in 2023.
With that I'll hand over to Chris who will discuss our financial and regulatory items in more detail.
Thank you Paddy and good morning, everyone.
As Patti mentioned, we delivered our financial commitments this year landing at $1 <unk> in EPS for the full year 2022, and completed the year without issuing equity.
We're also reaffirming our 2023 to 2026 earnings growth guidance.
Our commitment to no equity in 2023 or 2024.
This morning, I have a few updates to share with you to start I'll recap the drivers of our 2022 financial results and review our 2023 guidance drivers.
It will provide some data on how we're delivering against our simple affordable model.
Lastly, I'll provide a few highlights on our regulatory legal and legislative items.
Let's start on slide 13.
As you can see in our full year walk non-GAAP core earnings were $1 10 per diluted share for the year.
We earned seven from our customer capital investments and achieved <unk> and savings from cost reduction.
This allowed us to navigate the ups and downs during the year and deploy resources in our system for customers by pulling forward some work in future years.
Others, John financial decisions to deliver right on target for the year.
On slide 14, as we showed you last quarter, we have planned for substantial customer investment in our five year plan about a third higher than the prior five years.
We roll. This forward to include 2027 and as shown in Orange, we're planning to spend almost half of our capital in the next five years on risk reduction across the enterprise.
This includes system hardening pipeline replacement and other were critical to reducing risk.
We use a risk based approach to prioritize our capital spend.
Yes, even the highest risks and customer centric work first.
We are also focused on improving our capital to expense ratio over time.
We were able to do permanent repairs instead of temporary fixes, we improve that ratio and create headroom and the customer bill.
This important work in our system also drives earnings per share growth and improved our cash flow from operations.
And as you can see on the right hand side of the slide we've identified over $5 billion of incremental investment opportunities not yet in the plan.
We would intend to bring some of those customer focus spending into the plan as we work to create headroom on the customer Bill.
Using our simple affordable model, we can deliver more risk reduction for every customer dollar spend because of our focus on lead including waste elimination.
Given the substantial capital opportunities and our plan, our pending 2023 generate case and our focus on a return to investment grade ratings, we intend to continue to show progress on our <unk> to debt metric as you have seen on our report card slides.
We landed at about 12, 5% in 2022.
Some good progress there over where we ended 2021 at 10, 9%.
Moving to slide 15.
2022 teams with one set of challenges that we overcame we saw inflation rising interest rates extreme heat targeted supply chain shortage.
Gas price spikes and unprecedented rain.
And yet we found ways to stay on plan and as Patti mentioned the work of the teams to respond to the storage storms late last year and early this year was incredible.
That's why we're so proud of what we're delivering for customers and for you our investors using our simple affordable model.
We are laser focused on affordability and know you are too so let's dig a little further into the model.
Through a series of good business decision and a lean capabilities. We're building, we were able to exceed our targeted 2% non fuel O&M reduction in 2022.
Delivering a 3% reduction despite inflation we.
We use those savings to serve customers and Derisked 2023.
We saw significant savings for customers and vegetation management driven by improvements in unit costs due to a few strategic changes.
First we implemented a new accountability model in a consistent pricing structure to support the integration work, while improving contractor oversight and warranties for rework.
Then we also reduced our contractor count from 24 to 14 <unk>.
Implemented new sub contracting controls and regionalized work to build a stable and predictable plan.
This should result in a better customer experience.
We'll repeat visits and lower cost to deliver for our hometowns, while still meeting all of our commitments.
Through these efforts we've saved around $200 million of vegetation management costs in 2022 relative to budget.
And we expect to realize over $300 million in cost savings this year, while still delivering the units in the base work plans with improved safety and quality.
Also in 2022, we achieved an underground in average unit cost per mile well below the $375 million targeted shared in Investor day, and the baseline of over $4 million from just a few years ago.
And theres more opportunity for customers ahead as.
As you saw in our report card are 2% non fuel O&M savings remains our annual target.
We're just getting started finding cost savings for our customers whether it be through improving our capital to expense ratio eliminating waste from our processes, we're working with stakeholders to find better solutions for customers such as our self insurance settlements.
And as you can see in the 2023 planned column, we are continuing to aggressively pursue efficiencies to deliver our annual 2% non fuel O&M reduction, which similar to 2022 assumes continued inflationary cost pressures.
While our 2% O&M reduction target excludes fuel.
Wanted to take a moment to reflect on the higher bills of our customers have been experiencing this winter compared to last winter largely as a result of higher natural gas prices experienced across the west coast.
Collectively during the gas price run ups in the winter our procurement team was able to save customers well over $1 billion through a series of thoughtful measures, including a diversified portfolio that includes the interstate pipeline capacity, reaching back to the supply basin.
Gas storage and financial hedging.
To further support our customers we've been going after bill release strategies in partnership with federal and state regulators and policymakers.
One example would be supporting the accelerated timing of the annual climate credits, which should put over $90 back in the pockets of our average combination electric and gas customer.
Let's move to the top of slide 16.
As you saw through 2022, we're getting better regulatory financial outcomes, because we're delivering on our operational commitments and serving our customers better every day.
<unk> power and we own our performance.
For 2022 cost of capital was decided by the CPUC in Q4, leaving our 2022 ROE unchanged.
We also received a final decision in our 2023 cost of capital S. Scheduled providing further certainty as the 10% ROE approved applied through 2025.
Last month as requested the CPUC approved our self insurance settlement.
We appreciate this expedited decision as it allows us to avoid procuring costly welfare insurance from the commercial insurance market have released the next three years savings.
<unk> customers up to $1 8 billion through 2026.
We also filed the track two settlement in the DRC, which should help streamline the case procedurally with the schedule calls for a final decision in the third quarter.
Our Pacific generation application and moving through the CPUC process with the schedule that was released calling for a proposed decision no later than the end of November .
While this can mean, we don't get a final decision until 2024, we don't see the schedule set forth a scoping memo, resulting in a meaningful change to our financial plan.
We continue to view the sale as an opportunity to efficiently raise needed equity and a solution that benefits customers through realized tax benefits, which accelerated contributions to the customer credit trust.
Moving to wildfire related cost recovery in 2022, we were authorized to collect $2 3 billion.
And yet unresolved balance is now approximately $4 7 billion.
And I'm pleased to report additional progress on several cost recovery proceedings.
First our 2020 <unk> final with those cost moving at a rate.
Second we settled our 2021 whimsy resolving all elements apart from the cost of our vegetation management balancing accounts.
Additionally, we filed our 2022 and C application and emotion requesting interim rate relief.
Finally on this slide we are progressing through the next steps of two key pieces of legislation passed in 2022.
In November the Department of Energy confirmed Diablo Canyon is eligible for federal funding to the civil nuclear credit program and conditionally awarded a total of $1 1 billion.
We view the NRC staff decision last month to require new application as procedural and I'd note that our team have been working on a parallel approach from the outset.
NRC staff expect respond in March to a waiver request, which will allow for continued operation of the units beyond the current operating license expiration dates.
We're planning to file our new applications with the NRC before the end of this year.
Lastly, two notes on our progress on resolving legacy legal claims.
This week, we filed a joint motion for approval of a settlement reached with the CD resolving their investigation into the dog fire.
We continue to assert we were prudent operator, and we've agreed to forgo cost recovery on $140 million, which will be invested over three years to five years, primarily in future system enhancements with the $10 million penalty go into the state General Fund.
Second we've made some modest increases to our wildfire loss accruals for third party claims this quarter.
<unk> $75 million for the Kincade fire $25 million for the Zac fire and $25 million for the Dixie fire.
I'll remind you that our accrual for those Oxford is well within our available insurance.
We continue to book offsetting receivables for the accrual associated with the Dixie fire.
For the <unk> fire, we've reached agreement to settle claims, including with the cities and counties and we continue to work to fairly resolve individual claims through a fast claims process in mediation.
And all of these cases, we remain committed to continuing to make it right for the communities and customers we serve.
California has established legislative and regulatory processes allow for constructive outcomes when we perform well.
We recognize that we have a busy regulatory agenda with the CPUC and we appreciate the commission's thoughtful consideration as we work relentlessly to achieve our safety and reliability goals as well as advancing California's climate leadership.
Here on slide 17, I want to take a moment to remind you that we have relatively limited sensitivity some key variables outside of our control.
Part of this is due to constructive, California regulation, including decoupling for both gas and electric.
Four elements provide for formulated commodity recovery with timely cash collections.
Four year general rate case cycle, and a three year cost of capital cycle.
Additionally, we are taking the initiative through a simple affordable model and our focus on the bill, which we expect to further mitigate financial and regulatory risk as we continue to build trust with our customers regulators and policymakers.
Moving to slide 18.
We are progressing toward meeting the common stock dividend eligibility threshold later this year.
As a reminder, before declaring a dividend we will first need to report accumulative $6 2 billion.
And non-GAAP core earnings since our emergence from chapter 11, so starting from the third quarter of 2020.
For this purpose non-GAAP core earnings <unk> GAAP earnings adjusted for certain non core items specified in our plan of reorganization.
And as we step into 2023, we still expect to reach eligibility around mid year.
Our plan currently shows is reaching eligibility during the third quarter, although this remains subject to assumptions, including the timing of regulatory decisions.
Regarding our eventual policy I'll remind you that regardless of timing we plan to recommend to the board that we start with a small dividend initially set.
During and growth overtime.
I'll wrap here by emphasizing that we met our 10% EPS growth target in 2022, no more no less.
Going forward, we continue continued to reiterate at least $10 99.
And with that I'll hand, it back to Betty.
Thank you Chris.
Let me close by emphasizing we have made a lot of progress in 2022, and yet we are long way from being done we have plenty more for you to look forward to in 2023 and beyond as we continue to write the next chapter in the <unk> story.
For our current investors and for those of you still taken a look we hope you'll consider joining us in California for our 2023 Investor day on May 24th in the Bay area, followed by underground site visits in and around Napa County on May 25.
We're excited to share more details of our longer term financial plan and our investment opportunities.
Roll up our sleeves to sell some of our risk reduction tools and technology with you and.
And we'll also give you the chance to hear about our progress from some of our key California stakeholders, we can't wait to see you and with that operator. Please open the lines for questions.
Thank you once again, everyone that is star one to ask a question on the phone lines today.
Our first question from Shar <unk> with Guggenheim.
Hey, guys good morning.
Good morning, Sir.
Good morning.
Just real quick how do you in terms of the process and maybe establishing some framework around the patch and equity sale I mean, obviously, there's been some early stakeholder comments and the CPUC narrowed down and issues list. This year I guess do you feel there could be an expedited resolution via some form of a settlement par.
She'll settlement to move this process along faster.
Yes, Shar, we again as we've been pretty clear about this feel like the Pac Gen sale is a really good option for customers, it's a very efficient financing solution.
Expedited might be a little overly ambitious we know that the commission has a lot of inputs to take in from stakeholders and we want to give them the appropriate time to do that review, though we feel like we've made a really great case, and we feel good about the potential.
And then obviously you guys put out a mid to high teens credit metric targets is that just remind us is that inclusive of the <unk> equity sale or not.
Hey, Shar.
The Big plan. This base plan does include the proceeds from packed Gen and as you can imagine as we kind of more broadly look at the consistent view, we've had a mid to high teens by 2024 and <unk> to debt. The real drivers there are probably going to be the GIC.
The wildfire recoveries that we touched on a little bit ago, and obviously then are just underlying capex profile as well.
So Doug I would think about those really are the drivers behind what we're looking at there for mid to high teens.
Got it and then just lastly, Pat I mean, obviously one of the key messages for you on this call is like the bill impact is going to be sort of modest, let's just say right with some of the offsets and levers that you guys have been able to utilize and plan which is.
Really good message, but theres still like for instance over $800 million and deferrals that are pending approval right now I guess, how does that kind of play into the equation.
Yes, Thanks sure I will.
I'd say a couple of things first there is near term bill pressure as I think people across the country are feeling with the commodity cost impact in and what we're doing there as Chris mentioned on the call. The state did a really good job in and kudos to the commission for pulling ahead, the California climate credit for customers to to in the near term offset.
The commodity impact and we've obviously seen like others. The commodity cost is back down into a more normal range and that bodes well for customers and we feel good about that but longer term I think as we think about all of the necessary work for customers. This is why the simple affordable model here at Pega is so important.
For a long time, we were doing bandaid replacements and not doing the permanent corrective climate resilient infrastructure investments our customers have been asking for that's why underground and so important that's why our capital plan, we've given so much visibility to the capital plan because those investments in our infrastructure enable us to reduce.
Our expense improve that capital to expense ratio.
Our 3% delivery of our O&M savings this year, that's after inflation that factored in inflation and then we still delivered 3% on top of that that's just the beginnings of this team's capability to offset and reduce expenses to make the headroom for the necessary investments and truly climate.
Infrastructure. This is this is a model that is really starting to play out here at <unk> that will benefit customers from both their affordability and as we layer in those legacy costs, then they too will be offset by these cost savings that we're delivering and so waste elimination is our theme this year teaching people how to do more for less and really.
Actually making the customer experience better at a lower cost is what the simple affordable model delivers and we're excited to be employing it here at <unk>.
Terrific. Thank you guys I'll jump back in the queue and we'll be chatting soon thanks again.
Thanks Shar.
We will take our next question from Steve Fleishman with Wolfe.
Hey, Thanks, good morning.
Good morning so.
I think you just answered my first question Patty, which is that the when you talk about the O&M cuts net of inflation Youre basically, saying those are absolute cuts so.
Even though inflation was up.
678% last year, you your customer your O&M was down 3%.
Yes, Sir and we're proud of that and I'm proud of the team for the hard work that they did and we're just getting started Steve that's what's so exciting about this waste elimination in our story of the month about the new business. There is so much opportunity here and the team is hungry to learn I'm. So proud of them I actually was in our waste or new business Center.
The other day, where we're highlighting our waste elimination efforts and that team was smiling for the first time in a long time, because they are realizing that they can in fact have the tools people need to learn these techniques to actually reduce cost while they are doing more work and people are really learning fast I'm super proud of the team.
Should we think of the waste elimination is like incremental.
So the O&M constant 2% or that's just part of Thats part of achieving 2%.
Well it does definitely enables us to deliver that 2% and all the inflationary pressures. So we call it 2%, but it's inflation plus 2% and so that's what waste elimination delivers and that again as we have ups and downs that come at us that rollercoaster I talk about this is the capability that we can build into the team to turn on.
That capacity to reduce waste and absorb inflation and still deliver the 2% plus.
Okay, and then on the DRC could you maybe just talk to the schedule for that.
Is there likely to be on any opportunities to settle.
The partial provision so that further like insurance or.
That was the case overall.
Yes, so we have hit the stage where settlement.
It's not really an option at this juncture, we've settled pieces and parts like the insurance because it was so.
Valuable for customers to get that settled early and deploy those savings here in 'twenty three.
And so as we follow the timetable that the commission has laid out we're looking for.
Proposed decision and final decision.
In the third quarter, and we know that the commission has a lot on their plate, but we also know that this rate case is really important to customers and our ability to deploy all of the infrastructure investment that we've been talking about for the benefit of customers. So we expect timing to maintain the schedule that the commission has laid out.
Okay, Great and then lastly, just have to ask again, just any color you color from the fire victim trustee.
Yeah.
They're kind of pace of payments and timing of remaining stock sales.
Yeah, No we haven't really heard anything new.
Now that the the fire victims trust is aligned with our interests of delivering a safety for customers as the company succeeds it enables them to.
Provide for the victims that are included in that trust and so but no new information on timing on that front.
Great. Thank you.
Yes, Thanks, Steve.
We'll take our next question from Julien Dumoulin Smith with Bank of America.
Hey, guys.
Hey, good Julien how are you doing.
Thank you Lisa.
Wanted to kick it off first on a question related to 2007, I know you guys rolled forward the 95% rate base CAGR to 2027 held back on commenting on EPS I know we've had this conversation is about 10% or 9% in the past you bifurcated that very clearly.
I also appreciate the timeline of the current GSV and what that means for 'twenty seven but just asking the question. How do you think about 27% EPS growth and rolling for the EPS CAGR as well if you will.
Yeah, Julian I think how I think about 2027 is the abundant investment opportunity that we have for the benefit of customers.
We've been pretty transparent with our at least 10 at least 10 at least nine at least nine we're going to continue on that EPS growth trajectory, but we need that you know our focus is on developing the best long term capital investment plan that enables customers to have the infrastructure they've been waiting for and the cost mix by our cost savings.
We continue to do that enable that investment without burdening customers too much on that affordability. So our eyes are definitely on a long term infrastructure.
Infrastructure investment plan at the lowest cost possible for our customers.
Alright, I would imagine given the GSE and also over time kind of a normalization of the.
The growth trajectories between rate base and EPS, perhaps the bias please closer to nine and 10.
Well, we're just going to have to see Julien.
Fair enough fair enough, we're obviously thinking mostly about de risking our system physically in making those necessary investments for customers.
Absolutely understood with.
How do you actually since you mentioned this in the prepared remarks on the interconnections.
Your story I thought was very relevant given some of the feedback we're hearing I'm curious to get your perspectives on what kind of load growth, you're seeing where are you trending within that 1% to 3%.
And can you comment maybe on some some pent up load growth that maybe because of those interconnection delays may not have been realized yet if you will but I also appreciate that.
Thanks for taking electrification figures into that 1% to 3%, but overall where are you trending against that prospectively given some of these delaware.
Yes, as we've said, we're looking at 1% to 3% load growth over time more towards the backend of our plan in the front end, but we are seeing low growth in fact hot off the presses Julien we had a 23% of all new vehicle sales in our service area. In 2022 were <unk>, 23% I think thats a surprising number.
That's up from 16% in 2021, so the EV evolution is definitely happening in California, and definitely happening in our service area. In fact, the state was 20% EV penetration, we are 23 and 2022, so all that to say.
We are very bullish on the EV role in load growth every EV is like half half a house. So in other words to Evs equals a new household in our service area. There is definitely load growth potential our forecasts reflect that and youre right. We have to get really good at building out this capacity for our industrial and <unk>.
Residential customers as more fleets electrify Big School bus. So I was just in fact, we just we're in one of the electric school buses last week and that school bus the megawatt and Oakland Public schools is planning to include electric school buses in their fleet. So here, we are in our hometown, making sure that theyre going to be ready that's all.
All opportunity for us.
And so as we work with our regulator.
Our regulators, making sure that we are a dynamic regulatory environment, where we can in fact prepare for that capacity investment and be ahead of it is pretty exciting for customers and so the interconnection.
We're continuing to track with that investment, but we see real forecasted growth in the coming years and that's exciting for us.
Excellent. Thank you so much good luck, we'll see you guys soon.
Thanks Julien.
We'll take our next question from Nicholas Campanella with credit Suisse.
Hey, everyone. Thanks for taking my questions here.
I wanted to I wanted to hit the underground being so you've done about 300 miles now you have this 10 year plan that is going to be filed.
Soon but you also kind of changed the JRC.
I think there was an intra quarter update which might have removed some of the underground capital. So I guess first can you just kind of comment on since you've progressed through this program are you seeing pressures hiring costs or you are or are you seeing efficiencies more from lessons learned and then second just how do we kind of think about.
Your ability to hit the goal for <unk>.
Roughly 2000 miles with the shift in the GIC. Thanks.
Hey, Great question of course, we're very excited about our underground plan and just a couple of good important clarifications for everyone number one we reduced our mileage.
As a result of conversations with our key stakeholders, we have to we have to earn the right to do that underground we have to prove that we can in fact do it at the unit cost that we've described happy to report in 2020 to the 180 miles. We delivered was that a unit cost lower than we had forecasted so the team is desk.
Improving on efficiency and I feel like we're just getting started and really having the scope and scale of program that will consistently deliver the unit cost that we're forecasting our 10 year plan comes out later this year and that will clarify mileage and unit cost targets and I also want to remind everyone that look this under.
<unk> program is very important from a risk reduction and a customer satisfaction, but it's not a big bet.
The underground program is.
Less than 20% of our total capital plan is flexible and dynamic in nature, we're going to be working with our regulators and those stakeholders to make sure that we do underground rounding at a pace that they support.
I remind myself the Golden Gate bridge wasn't built in a year. It was built over time and its beloved and that's what our underground program is going to be it's going to be built over time, and it's gonna be beloved and we have to earn the right to grow those miles year after year after year and so we're very focused on doing that well, we've got a program structure setup.
Delivered real savings in our wildfire mitigation through vegetation management inspections. The same leadership team is leading the underground program. So we're expecting big things from Peter and the team.
They filled out our underground.
Program to the benefit of customers.
That helps.
Absolutely excited to see the plan as it comes together here so.
Just a quick question on the on the credit side.
Congrats on getting the positive outlook I guess for Moody's.
What is your understanding I guess of what the agencies are looking for now is it is it is it more time another fire season to get.
Get back to IAG here or.
Is it more metrics base because it does seem like the metrics are are going the right direction. Thanks.
Sure thing Hey, Nick I think it's in Moody's really reaffirm this too that our financial metrics as we look at are really already in that investment grade territory. So I think really across the agencies. Their emphasis is really shared on the physical risk reduction progress, we're making paddy hit the year over year improvements in an enhanced power line safety settings, and just to clear results of that delay.
<unk> and then I think also it's the desire to see continued progress in data points with our policymakers last year, we clearly made progress on some key customer friendly programs. Both the underground program and the Diablo Canyon operating life extension in terms of new policy and I think we just want to continue that progress this year and that could be across wildfire related Rick.
<unk> at the CPUC, certainly our general rate case, as well as the Pacific generation filings there at the CPUC as well.
Thanks, a lot for the time.
Thanks, Nick.
As a reminder, everyone that is star one to ask a question we will take our next question from David Arcaro with Morgan Stanley .
Hi, good morning, Thanks, so much for taking my question.
Morning, David.
I was wondering if you could speak a little bit to the upside capex opportunities to $5 billion that you laid out in terms of the transmission investment distribution.
What could be kind of the timing of getting more concrete numbers around that could hit the five year plan is it potentially kind of in lung gating. The capex runway from here and are there any milestones that we might track as you evaluate some of those upside opportunities.
Yeah. Thanks, David.
The point in sharing that potential upside is just to share that we have abundant capital infrastructure demand on the system and so it is truly on us to find ways to offset costs everything that's in the bill that is unrelated to capital investment or areas of the bill that we can reduce in order to enable.
<unk> potential headroom, then for that necessary customer benefiting infrastructure investment. So for example, we talked about this insurance.
Settlement, that's a big savings for customers over time, that'd be the sort of thing that that creates headroom that we can enable additional capital without pressuring customers' bills now we've filed a general rate case, it's important that'll be an important outcome. Later this year that will provide more visibility to exactly what capital we have support.
Our commission to invest and then we're going to continue to demonstrate this waste elimination capacity. So if we start to deliver greater than 2% O&M savings are other savings that enable headroom that creates the room for capital investment that doesn't pressure customer bills. This is the simple affordable model in action and it's dynamic.
<unk> in that way that if we additional find additional customer savings then we'll work with our regulators to approve additional capital to deploy to the benefit of customers.
Okay understood. Thanks, that's helpful.
Then I was wondering your.
Fire risk mitigation strategies, Brian there are a lot of different components of that I was wondering if you could speak to innovation.
That youre working on with regard to fire risk reduction in terms of technologies or new applications that you are exploring right now that could be layered on to.
The current risk mitigation programs.
Well I'm. So glad you asked because we're going to be highlighting that at our Investor day in May may 24th and 25th we'd love to have you out and.
Everyone on the call is welcome to join Us.
Some of the things that are pretty exciting our pulse partial voltage detection, which utilizes our smart meter technology for service line risk, we've got our down conductor technology, we're expanding the development of that program. Our teams have had some great breakthroughs in the last year.
Kudos to our advanced technology team and all of the hard work they've been doing.
And you'll get to see it firsthand when you come out so.
Lots of innovation and technology of course, all the data science that underpins, our EPS and our PSP is really incredible to understand in more detail and it's what gives us confidence heading throughout the year whatever the environmental conditions around us whether it's dry it's wet it's hot it's cold we're building infrastructure and the.
Capability to adapt to those changing conditions and keep people safe and I couldnt be more proud of the team and the progress. We've made we continue to make that progress and we will have it on display at our Investor day here in may come on out and see us.
Okay, Great I appreciate the preview and looking forward to the Investor day. Thanks, So much.
We will take our next question from Jeremy Tonet with J P Morgan Securities.
Hi, Good morning, it's actually rich Sunderland on for Jeremy. Thanks for the time today, just one quick follow up on the 5 billion Capex upside Im curious a little bit.
More around those opportunities and what the total bucket of possibilities are just.
Really the $5 billion is it size for what you think you may be able to fold in.
For the near to medium term and is there a larger opportunity set that you are still working through.
Hi, rich happy to take it.
Should take the second part first and say there is a larger opportunity set but again as Patti mentioned keep in mind. Our focus is absolutely on that overall simple affordable model, which includes that affordability constraint for customers right. So we've always got to keep that in mind as we go as we look at the opportunities themselves I really think that what we were mentioning earlier.
About the electrification growth is very unique for us.
So as we look at that the EV penetration opportunity you explicitly see a call out in that $5 billion opportunity capacity based investments and Thats really where we see targeted investments that we can make that will benefit the areas, where youre seeing not just need for wildfire risk reduction, but also in some of those suburban communities, where we're seeing.
Pretty dramatic uptake so the opportunity there I would say do start to come in the medium term and only increase as we go further out.
Understood that's very clear and then just one last one at the risk of I guess front running the analyst day update would that be the forum to address the EPS growth through 2027 I know this was asked earlier.
Sure I think I'll have to offer this to you come on out and see if we do certainly plan on intending to give you more insight into that longer term capital plan, but come on out and we'll be able to share more at that time.
Great. Thanks for the time today.
Thanks, Great. Thanks rich.
We will take our next question from Gregg <unk> with UBS.
Yes. Thank you good morning good.
Morning, Greg.
In the Diablo Canyon extension process shall.
Should we be watching for.
The NRC and state levels.
Well first of all we should be continuing to look for progress because we continue to make progress on that front.
The NRC really does have an important job to do and we don't want them to take any shortcuts. There focuses on safety and making sure that Diablo Canyon will meet the safety expectations and standards.
So we will.
<unk>.
With them, we have a great relationship with the NRC and we look forward to working with them on the re licensing process. That's an important part of the process.
Other several.
State based regulatory proceedings, there'll be occurring and I will remind everyone. We're.
We wanted to send some gratitude and recognition to our state and to our state legislature and our governor for having the wisdom to.
Suggest we extend the life of Diablo Canyon power plant that has a high performing nuclear facility Ghd free Baseload energy to the benefit of all of California, and so we definitely will be working closely with all of the different regulators to make sure that we make positive progress on that and so that that continues throughout.
The rest of the year.
Got it thank you.
Thanks, Greg.
We'll take our next question from Ryan Levine with Citi.
Hi, everybody.
Good morning, Brian listen for good morning couple of questions for Patty how is the hook up cancellation rate changed in the past year, how do you determine which interconnects to prioritize given limited resources in the right in the comments around a new play to the playbook are you looking at any changes to this process.
Yeah, we're looking at changes everyday to the process look we've got to be easier to do business with and I've had a couple different sessions with our builders here in California.
They are a key to California's prosperity, and therefore, we power them and they power, California with new housing and.
We're very much aligned with them, we're working with them to find accelerated tools and methods.
And it's really amazing to see our new business process map and simple changes that can be made right away. So that we don't have to make choices about who we're going to energize and who were not in the questions about how do we energized people faster.
And streamline that process and so as I shared that that example of these jobs that get canceled for a variety of reasons, maybe the customer decides they are not going to do their project. After all having nothing to do with us and we've done a full engineering. So we're looking at ways of doing a lighter engineering touch upfront just to give people the estimate that they need.
<unk> and making sure that we're only doing the engineering on the jobs that are going to get finished that's a huge cost savings in hours and dollars and it enables us to get the work done on time for the builders that are going to finish their projects.
And so both capacity and new business are really exciting load growth opportunities for us and the progress that were made in a very short order is pretty impressive we look forward to demonstrating that progress this year and continuing forward.
I appreciate the comments because I'm trying to get a sense in terms of quantifying the materiality of some of these delays.
When you assumed your currency I mean have you noticed any material changes in how customers had been interconnected or or any color you could share around the progress that may be made on a go forward basis.
Yeah, I mean, I think we're seeing increased demand, which is great. You know theres building happening in California people are talking about the exodus of California, I can tell you I'm not feeling it we're seeing a lot of growth here in customers and capacity. So the obviously the additional electric vehicles that I pointed to.
<unk> requires capacity investments at a substation level, but we also have.
Transmission forecast of additional load and we're continuing to see the opportunity to build more homes.
In broader spaces in California, and we're going to keep up with our building and our progress here at <unk> and that's what this lean operating system provides for US a foundation to have visibility into our demand and our ability to eliminate the way. So that we can meet that demand, it's pretty exciting times here at <unk>.
<unk>.
Okay. Thank you.
Thanks Ryan.
We'll take our next question from Paul Fremont with Ladenburg Thalmann.
Great.
To start with I was hoping to maybe get a little bit of an update on the on the <unk> trial.
I guess the trials due to begin in June how.
How long should we sort of expect before there would be a final decision reached in that proceeding and in the past I think you've indicated that.
The liability estimates could triple.
Is that still sort of your view in terms of how.
How much the liability could go up if you were if you were found liable.
Thank you Paul first of all on that subject I, just want to reiterate that our heart goes out to the victims of the dog fire and all of the wildfires. These environmental disasters are extraordinarily painful and we don't take them lightly and we're doing everything we can to make our system safer faster.
At the same time I know that my co workers are not criminals.
And we don't believe that these are criminal matters, all that to say we do.
Trial is the trial date has been set for June six we expect it to take about six weeks.
<unk>.
We don't expect.
Additional liabilities, because we actually plan to win I think it's important to know that our arborists. Our co workers are vegetarian patient management team works day in and day out to make the system safer faster and they have no other ambition than to do just that so.
We plan to defend our position vigorously.
So the trial would take six weeks, but the judge issuing a decision.
Could take.
Up to a year after that or.
Yes, Paul it's hard to say, we'll obviously keep people posted as that goes.
Okay.
In terms of disallowed interest.
Can you.
Sort of break out.
The liabilities or the disallowed rate base items.
That.
At the utility that go into that calculation.
Paul It's Chris I'm happy to to work on that with you offline I can actually give you the build as you know we do a roll up.
In the appendices of our materials and I'm happy to spend time with you breaking that out under comparable interest expense as we noted today ranges from $3 $70 million to $430 million.
And that concludes the question and answer session I would now like to turn the call back over to Patti Poppe for any additional or closing remarks.
Thank you Lisa and thank you everyone for your questions and your support.
Just wanted to remind you all that your investment in <unk> as an investment in California's safety and prosperity and we thank you for that we really appreciate your support and we are definitely feeling the momentum here at <unk>. We're proud of our performance in 2022, and we're writing the next chapter of our redemption story and we hope youll be along for the right. We look forward to see.
In California inmate, please be safe out there.
And that concludes today's presentation. Thank you for your participation and you may now disconnect.
Okay.