Q1 2023 PG&E Corporation Earnings Call
Good morning, My name is Andre and I will be your conference operator today.
At this time I would like to welcome everyone to the P. G. M. E Corporation first quarter 2023 earnings release Conference call. Today's conference is being recorded all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press the star key followed by the number one.
On your telephone keypad, if you would like to withdraw your question Press Star one again.
At this time I would like to turn the conference over to Jonathan Arnold Vice President Investor Relations. Please go ahead.
Good morning, everyone and thank you for joining us for <unk> first quarter 2023 earnings call with US today are Apache Puppy, Chief Executive Officer, Chris <unk>, Our executive Vice President and Chief Financial Officer, and Carolyn Burke, Our executive Vice President of Finance, who will step into the CFO .
ROE later today, 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 first quarter earnings call 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 PGE Cool Dot com.
We would also encourage you to review our quarterly report on Form 10-Q for the quarter ended March 31, 2023, which was released earlier today and with that it's my pleasure to hand, the call over to our CEO Patrick Puppy.
Thank you Jonathan and good morning, everyone.
I'd like to begin by noting that this will be Chris fosters last earnings call with T. Jamie.
Chris for your commitment and service to our company over the past 11 years.
Since we announced our CFO transition in March Chris has worked tirelessly to ensure an orderly transition to Carolyn Burke, who will formally take over as our CFO . Later today. So thank you Chris for your friendship your leadership and your dedication to serving our customers and investors.
And a formal welcome to Carolyn who brings a wealth of financial experience to Pee G&A as we continue on our journey, we're making the company at the top performing regulated utility.
You'll all have opportunities to get to know Caroline at upcoming events, including at our Investor Day in California later this month.
We know you have a lot of calls occurring today and since we've had a strong quarter and we'll be seeing many of you in just a couple of weeks, we'll be crisp and to the point, let's get started.
Turning to our results on slide three you'll see we reported first quarter 2023, non-GAAP core earnings of 29 per share.
This result keeps us on track with our plan for the year.
One timing item to consider is our 2023 general rate case.
As is common with California, <unk>, we have a memo account in place, which will allow for new rates to be implemented retroactive to January 1st.
Meaning that after the final decision is reached we would expect to begin recognizing the JRC outcome along with the prior quarter's catch up.
The case schedule calls for a proposed decision in the second quarter and a final decision in the third quarter.
We continue to communicate with all stakeholders how important it is to have a timely decision in order to have the resources, we need to deliver for our customers.
Also today, we reaffirm our full year 2023 core EPS guidance of $1 19 to $1 23, which at the midpoint represents an increase of 10% over 2022.
We also reaffirm our previously stated longer term targets of at least 10% core EPS growth in 2024, and at least 9% for 2025 and 2026.
Also unchanged is our plan for no new equity issuance through 2024.
As we've said before we will work to manage the business through ups and downs like weather regulatory timing interest rates and inflation, while delivering the safety and reliability investments that our customers need and the consistent financial results our investors expect.
Here on slide four I'll review some of the highlights and proof points as we continued to make progress on mitigating risk both physical and financial.
On wildfire risk mitigation, we filed our 2023 wildfire mitigation plan at the end of March which further builds on the layers of protection approach from our 2022 plan.
Record winter rain and snowfall have left our hydro assets in a stronger position than they've been in for some years.
FEMA or catastrophic event memorandum account as one of the constructive features of the California regulatory model.
It enables us to focus on serving customers when they need us the most well we track and defer for future recovery much of the costs associated with these historic weather events.
We recorded several hundred million dollars of repair and restoration work to the steamer count between December and March.
Meanwhile, our customer restoration efforts and storm response have been well received in our communities and our performance benefited from the investments we've made in technology situational awareness and emergency response coordination.
We've also continued to see more constructive policy outcomes building on last year's passage of legislation supporting our establishment of a 10 year underground plan as well as the state's decision to extend the life of the Diablo Canyon nuclear plant.
Highlights in the first quarter include our wildfire self insurance plan, which enjoyed unusually strong support from intravenous.
We were also pleased to receive the nuclear regulatory commission waiver, allowing our two Diablo Canyon nuclear units to continue operating beyond their current license expiration dates while the NRC is considering the renewal applications.
We expect to file our applications with the NRC by year end.
And most recently in the past week, we were encouraged by the proposed decision issued in our 2022 Wednesday preceding this would grant our full request for $1 $1 billion of interim rate relief.
Allowing for collection over 12 months also as requested.
The PD could be voted out by the CPUC as soon as the June eight meeting and we will be advocating for timely adoption, so that customer benefits can be realized.
These benefits include millions of dollars in customer financing savings as well as providing cash funding to accelerate investment this will facilitate us delivering needed safety reliability and customer connections work.
I'm also happy to report on continued progress mitigating financial risk.
A simple affordable model and deployment of waste elimination the fifth play of our lean operating system enables improving the customer experience, while keeping us on track to deliver our 2% annual O&M savings in spite of weather and inflation.
Also in support of customer affordability, we worked with the state to offset commodity price increases on winter bills with an acceleration of the annual California climate credit.
Overall during the winter gas commodity price run ups, our procurement team was able to save customers over $1 billion through a series of thoughtful measures, including a diversified portfolio that includes interstate pipeline capacity, reaching back to the supply basin.
Natural gas storage and financial hedging.
Turning to slide five.
We continue to estimate that our layers of protection have mitigated over 90% of wildfire risks through the combination of inspections physical hardening, our enhanced powerline safety setting public safety power shutoff and improve situational awareness and response.
While 2022 did not bring the typical high wind events that would trigger P. S. P. S. We did see an increase of over 30% in high fire risk base, given the significant drought conditions.
Despite this increased risk or Etfs program resulted in a reduction of 69% and CPUC reportable admissions along with 99% fewer acres impacted for Etfs enabled mines versus the pre eps's baseline or 2018 to 2020 average.
Our 2023 wildfire mitigation plan builds on these core elements and we'll also see us deploy additional operational mitigation, such as partial voltage detection, which leverages, our existing smart meters and are down conductor detection with a plan to install over 1100, new enabled devices on the system by the end of.
2023, translating to over 75% coverage of high fire risk areas.
Other programs being expanded for 2023 include our transmission pole clearing our transmission operational control and further measures, including Eps's sexualizing to reduce customer impact.
We expect to be sharing more with you on the incremental risk reduction associated with these programs at our Investor Day later in the month.
Slide six is a reminder of our simple affordable model, which continues to sit at the heart of our customer value proposition. We remain on track to deliver on at least 2% annual non fuel O&M reduction with our wildfire itself insurance and incremental vegetation management savings providing line of sight on continuing to.
To offset inflationary pressures this year.
That's a good moment to bring up my story of the month, which has to do with revisiting the way we approach our work and in this case in our underground program and how we're eliminating waste in our process.
Historically <unk> internal standards had required our underground electric lines to have at least 36 inches of cover.
Upon revisiting this approach in reviewing regulations and the practices of other underground utilities, we determined that 36 inches of cover is not required in most places and there is little evidence that incrementally deeper conduits are meaningfully safer or more reliable than slightly shallower condos.
Therefore in Q4 of last year, we revised our standard to only require 30 inches of cover unless of course, otherwise directed by permitting authorities.
While this may not seem like much.
This six inch change in depth reduces the labor hours required to install our underground conduits and reduces the amount of spoils created during our trenching activities by approximately 17%.
We're estimating that this change of six inches will save at least $25 million in 2023 alone.
That's lower cost for our customers for the same ultimate values getting our electric distribution lines underground and permanently reducing the risk.
This is just the beginning of our waste elimination effort, we're benchmarking with peers and reviewing where it's appropriate to put the Congress 24 inches deep another six inches of potential savings.
And we're analyzing the entire underground delivery process.
<unk> stream mapping exercise to identify further opportunities for efficiency better customer in coworker engagement and even more waste elimination.
So many practices in large organizations like ours getting memorialized in standardized in two ways.
Our fifth play and our focus on it will unlock value for customers in large and small ways for decades to come.
Slide seven recaps some of the key regulatory and policy catalyst, we have in front of us for 2023. The one minor change is for Pacific generation, where the ALJ recently added about a month to the schedule in response to request for additional time from the Intervenors. This will likely push the proposed decision from late <unk>.
23 into early 2024, and the sooner we get a final decision the sooner we can bring the expected benefits to our customers.
We know there is a lot on the plate at the CPUC at this time.
We also know that we want what they want a safer and more reliable system, which has enabled.
With timely approval of necessary infrastructure investments.
In the meantime, we are improving our processes to make every dollar go further and building the case for the right investments to meet customers' expectations.
I'll end here on slide eight with a report card, reflecting on track status for all of our operational and financial targets I am pleased to say, we're on track to deliver on our commitments to both our customers and our investors. Despite the early challenges from winter storms.
We are confident we have built a resilient conservative plan, which is designed to absorb the ups and downs of the business and the market as I like to say, we'll ride that roller coaster. So you don't have to.
And before I hand, this over to Chris and Carolyn <unk>.
I'll leave you with two additional notes on the financial front first.
First we look forward to being eligible to reinstate our common dividend later this year, which we view as a key step in our returned to financial health and essential for attracting the capital we need to deliver for our customers.
As we announced on the year end call, we expect to hit the required earnings level in the third quarter.
Second we've been encouraged to see the fire victim trust continuing to monetize their stock holdings and at growing values.
The trust now loans around 6% of our stock and as of last week had distributed over $9 billion to their beneficiaries.
And now I'll hand, it over to Chris for some financial highlights.
Thank you Patty and good morning, everyone.
Today, we are reaffirming EPS growth of at least 10% each year in 2023, and 2024 and at least 9% in 2025 and 2026.
We're also reaffirming our commitment to no equity in 2023 or 2024.
As Patti mentioned, we're on track to deliver our 2023 financial commitments.
This morning, I am pleased to have Carolyn Burke, joining me for the financial update.
We plan to cover three main topics with you.
To start our review the drivers of our Q1 2023 financial results and review the key performance factors that we expect to see in the remaining nine months to deliver our full year, 10% EPS growth.
Carolyn and I will next provide a few highlights on regulatory legal and legislative items.
Carolyn will then close us out with the reiteration of our value proposition.
Let's start on slide nine.
On this slide we're showing our results for the quarter and drivers were forecasting for the next nine months as we walk through our full year guidance of $1 19 to $1 23.
For the first quarter our results came in at 29.
Versus first quarter last year, you see <unk> benefit from lower operating and maintenance costs, partially offset by a penny of redeployment.
Lower O&M spend as a result of the storms Patty spoke about earlier with many of our co workers activated on storm duty less planned core work we've completed during the first quarter of this year.
This allowed us to redeploy funds to operational and enterprise programs.
This nimble shifting priorities and execution is made possible by the capabilities. We're building here at P. J D.
Enabled by our lean operating system.
Finally, you'll see we're calling out <unk> of other including some timing items.
What you don't see as a meaningful impact directly from the storms.
That is because of our long established <unk> mechanism, which is an important constructive component a california utility regulation.
Another driver, reflecting explicitly but to keep in mind is the benefit from customer capital investment or rate base growth.
As you know a final decision in our 2023 general rate case is expected in the third quarter of this year consistent with past cases.
How do you described we will be allowed to record those catch up revenues for prior quarters. Once the final decision is received.
We're also reiterating our commitment and consistent focus on executing annual 2% non fuel O&M reduction.
I'll remind you that we are planning conservatively and plan to deliver on target no more no less redeploying any excess back into the business for the benefit of our customers.
On slide 10, our customer capital investments have not changed from yearend.
We have tremendous opportunities to invest capital into our system for the benefit of customers to advance California's ambitious climate goals and support growing customer demand with the adoption of electric vehicles.
This growth benefits, our customers and our investors, while providing additional cash flow from operations.
Our simple affordable model is how we plan to make this manageable for customers.
Moving to slide 11, and 2022, we exceeded our non fuel O&M cost reduction target, taking 3% out of the business despite inflation.
We use those savings to serve customers and Derisk. The 2023 plan, which assumes continued inflationary cost pressures.
As I mentioned on the year end call, we see more opportunities for customers ahead and the team is just getting started in terms of finding cost savings and eliminating waste.
Let's move to slide 12.
We believe performance is power. So we intend to continue to deliver on operational commitments, serving our customers better and making our system safer everyday.
We expect to delivering these results will help us achieve better regulatory and financial outcomes.
In California has the regulatory structure in place to help us do just that.
Starting at the top of this slide our 2023 cost of capital is final at 10%.
This decision covers the three year period through 2025, providing certainty for our investors.
The cost of capital decision also continues to provide for a trigger mechanism.
Should interest rates remain where they are and the mechanism trigger we would intend to file with the commission for an upward adjustment consistent with the mechanism.
Next is our pending 2023 generate case.
As a reminder, we've already reached resolution on a wildfire self insurance settlement saving customers up to $1 $8 billion through 2026.
Worth noting is at over 85% of our requested revenue requirement increase seeks to mitigate risk in our gas and electric operations.
And deliver a level of safety that our customers expect and deserve.
Our Pacific generation application continues to move through the CPUC process.
A final decision is now expected in early 2024 based on the schedule update from the ALJ.
We are gearing up to launch the marketing on a parallel path and we expect to do so this quarter.
Our next cover our pending wildfire related cost recovery applications.
With our 2020 whimsy costs now in rates the net unresolved balance at the end of the first quarter is approximately $4 8 billion.
As a reminder, we settled our 2021 whimsy resolving all elements apart from the cost in our vegetation management balancing account.
As Patti mentioned in the past week, we were pleased to receive a proposed decision recommending that <unk> be granted 100% of the interim rate relief, we had requested that our 2022 whimsy application.
This amounts to some $1 $1 billion over 12 months.
It will be a constructive recognition of the importance of timely cash recovery a key focus for the company.
Not only with this outcome reduced financing costs for customers. It will also result in tangible work being executed sooner than would otherwise have been the case, including in the current year.
The recently published schedule calls for a final decision in the overall 2022 whimsy application as soon as Q1 of next year.
We're advocating for timely resolution and Oliver Whimsy cases.
<unk> cash flow will allow us to accelerate our progress toward improved balance sheet health.
Moving to debt and providing resources to enable us to meet customer growth demands on the system faster right.
My pleasure to now hand, it over to Carolyn Burke.
Thank you, Chris and good morning, everybody.
At the bottom of this slide we are highlighting some milestones and next steps at the two key pieces of state legislation passed last year.
In addition to the dose confirmation that Diablo Canyon is eligible for federal funding through the civil nuclear credit program. We were also granted a waiver by the nuclear regulatory Commission to continue operating the units beyond their current license expiration dates while we work through the full re licensing process.
Also during the first quarter, the California Energy Commission in consultation with the queso and CPUC issued a neat determination supporting extended operations at Diablo Canyon to provide electric system reliability in the state.
Finally in terms of the underground team I'll remind you that the pending 2023 general rate case includes army crashed through 2026 as does our recently filed 2023 wildfire mitigation plan, we will be prepared to fire file our 10 year plan later this year, depending on the guidance from the opposite.
Energy infrastructure safety once we file OE I asked will have nine months to review before going to the CPUC, who will also have nine months for their review.
Now as many of you know, California is my new home as shown here on slide 13, I'm quickly and happily learning that California's regulatory construct makes this a great place to do business.
In addition to the protection provided for under Assembly, Bill 10, 54, and the Sema tracker, Patti and Chris discussed earlier.
<unk> also benefits from decoupled rates and a three year cost of capital set independently from a four year forward looking rate case and this is just to name a few.
Our strong regulatory environment is an advantage that we will never take for granted.
Chris mentioned performance is power and we know we must perform we understand that affordable customer bills helped us not only mitigate financial and regulatory risk, but also importantly help us as we continue to build trust with our customers our regulators and our policymakers.
As the incoming CFO I intend to continue to build upon the sector differentiating simple affordable model that Patty and Chris put in place.
The implementation of our lean operating system is helping piccinini improve the customer experience reduce O&M enhanced capital work planned throughput and quite simply making <unk>, a more enjoyable place to work for and Brett.
This year as part of engaging our coworkers and our lean method of waste elimination, we've established our waste elimination center, we are already tracking over 200 projects across the enterprise.
And we're finding common themes throughout the business.
First there's a whole lot of over processing and.
And second there is a whole lot of defects required rework.
That means a whole lot of opportunity.
Micro workers are excited about tackling these issues and projects and driving improvements for the benefit of our customers, we're going after big and small opportunities some simple and some complex.
Take this simple example, a customer mailings.
U S postage rates are expected to increase about 7% this year, where we have no control over these mailing rates, we do control what we send to our customers.
This waste elimination project is looking at what communications, we can digitize or eliminate altogether.
If we just eliminated one mailing per household per year, that's approximately $4 million and saved postage as.
As you can imagine we're not stopping with just one mailing and this elimination project saved more than just postage.
As Patti mentioned earlier, we're going after large waste elimination projects.
Including in our underground <unk> program.
The team is excited to show you more examples out in the yard during our Investor day in May where we'll demonstrate waste elimination driving real unit cost savings and making permanent risk reduction affordable for our customers.
I'll end here on slide 14 by saying that our value proposition is strong and it's improving every day, we are progressing towards meeting the common stock dividend eligibility threshold. Later this year as a reminder, before declaring a dividend we will first need to recognize accumulative $6 2 billion.
In non-GAAP core earnings since our emergence from chapter 11, starting from the third quarter 2020.
For this purpose non-GAAP core earnings means GAAP earnings adjusted for certain noncore items as described in our plan of reorganization.
Our plan currently shows is reaching eligibility during the third quarter, although this remains subject to assumptions, including the timing of regulatory decisions.
I'll remind you that regardless of timing, we plan to recommend to the board that we start with a small dividend initially feathering in growth over time.
I'll leave you with this.
We're on track for 2023, EPS growth target of at least 10%.
At least 10% in 2020 for at least 9% in 2025 and at least 9% in 2026.
I'm looking forward to getting the chance to meet many of you in person during our upcoming Investor day in California later this month.
And lastly, I'd like to thank Chris for his generous support and advice. During this transition period I can't say enough about the incredibly strong team. He has built here. Thank you Chris.
Thanks Carolyn.
I'd like to say, it's been my privilege to serve as CFO here at PGD and my time in prior roles over the last 11 and a half years.
I'm really proud of what we've accomplished and we felt very strong five and 10 year plans.
<unk> now shifts to sound execution, which I have the utmost confidence this team can achieve.
I'm also very confident that I'm handing the baton over to a very talented leader who will shortly come to know is the perfect choice to take Pge's Finance organization through its next chapter with that I'll hand, it back to Paddy to rep.
Thank you again, Chris and welcome Carol.
In closing we are solidly on track for another year of consistent performance in 2023, we look forward to sharing more details with you on our progress and our confidence in the outlook at our California Investor Day on May 24th of May 25th while we do have a virtual option for the main slide presentation for those of you wonder.
Whether to make the trip there will be a lot more for you to see and experience outside of that webcast window, we'll be showcasing some of our key technology, including wildfire risk reduction Etfs and underground Inc. We also wanted to give you a better understanding of why we're confident we can execute our plans, including our 10000 mile Underground program.
At our in person events, you'll also get to hear directly from key, California stakeholders, including policymakers customers and other critical partners as we continue writing the next chapter of the <unk> story.
We really hope to see you here in this great state of California at the end of the month with that operator. Please open the line for questions.
Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
We will take our first question from Steve Fleishman at Wolfe.
Yes, hi, good morning, everybody and congrats to Christian and Caroline.
Thanks, Steve Good morning, so.
You bet.
Just first.
Any color and thinking on.
The situation going into this fire season, just from all of the range.
Et cetera, just how youre thinking about.
Yes.
Helping stand versus.
Last few years thanks.
Yeah. It's a great question, Steve I know a lot of people have been wondering that so.
I'll share a couple of things one we know that.
In some ways the storms were beneficial from the perspective that trees, aged and dying trees came down and at a time when fire was not a risk so.
Certainly that was an advantage, but we also know that the fuels the grasses have a rich crop this year, but here's the thing that I want investors to really understand is the mitigation that we've put in place and the technology that we have deployed with Etfs.
It gives us the ability to know and two kilometer blocks across our entire service area. What the conditions are real time, whether that's fuel moisture levels when conditions temperatures et cetera grass levels, we know our system and so EPS puts us in a position to regardless of weather and regardless of conditions.
<unk> be prepared and de risked the system.
It gives me a lot of confidence heading into wildfire season that we are prepared.
Okay.
Good and then.
Second question just.
I have to ask again on the fire if you can trust any.
On their kind of strategy or timing from here or in theory, I guess here.
Close to the end.
Any sense on that.
Well.
Suggests we are close to the end, Steve there less or will there just over a 6% holder.
And in their annual report they've they've described there.
Their intentions and.
We know that it's just less and less of a factor for us and were gratified and I think.
The agreement worked out well for the beneficiaries.
We've been as they've been able to sell their shares at an increasing value. So we feel like we've done our part to make it right, which has been a big priority for us.
Makes sense, great and then just lastly on the <unk>.
Yes.
Those decisions are you getting any sense of.
The timing within the second quarter and just the likelihood that it will actually come out in the second quarter in multiple ways.
Well I think we've been really clear with our stakeholders and I do appreciate that the commission has a lot on their plate, but we all understand and they want what we want which is a safe system, which requires investment in the infrastructure.
You know, we just continue to reinforce the timely outcome on the JRC is really important and.
We expect that they'll keep to the timing that they've published.
Great. Okay. That's it for me thank you.
Awesome. Thanks, Steve.
We'll move next to sharper etsy at Guggenheim.
Okay.
Hey, good morning, guys.
Good morning Shar.
Steve's comments around Caroline and Chris Congrats guys on the phase II much much. Thank you.
Just wanted to maybe if it's okay just start off on the dividend, especially as we're getting closer to the eligibility threshold I guess, what adjustments should we be thinking about beyond non gap to get to that $6 4 billion net income threshold and then more importantly, just in terms of timing how long do you kind of anticipated it would.
Take after meeting the threshold to actually kind of initiate the dividend. So if you meet the threshold in <unk> would you have a tentative plan in place for framework board approval et cetera, or is there more back and forth that you anticipate.
Think about the actual payment date.
Yeah sure Hi, this is Caroline I'll take that question. So we've been pretty consistent as you know that we would do we do expect to meet that eligibility in the third quarter.
Our current plan suggests continues to suggest that on the adjustment so our plan of reorganization.
Has a very specific calculation for that dividend eligible earnings and it is different from what we report as non-GAAP core earnings. There are some very specific line item adjustments and our IRR team would be happy to walk through that methodology with you separately, but I just want to make sure that you know that it is separate it is.
Grant.
On a practical matter, we want to have our audited financial statements to be able to support the eligibility of that calculation. So the earliest our board would have the opportunity to declare a dividend would be with our third quarter earnings call.
So.
That's the.
<unk> at this point in time if of course it is subject I will just say too.
The JRC decisions from various.
Regulatory decisions that were expecting in the third quarter, Yes, Shar. This is Kathy I'll just I'll just pile on here with Carolyn and that our capital allocation decisions are always about investing in the system, making sure that our priority is to make the system safer faster meet the needs of our customers and so we're going to continue to balance.
That as we factor in the decision about <unk>.
And pacing of growth.
Got it and then just on the <unk>.
Underground program is in place PMO has engaged I guess, how are your thoughts evolving around longer term underwriting plan and your expectations for that filing and do you see any constructive variances.
This is the last update on the geography.
Yes.
Getting excited as we continue to make progress and build out this program at such an exciting part of the company and the team leading it.
Just doing an incredible job.
Turning new things and getting best practices from across other utilities and getting started and so we're excited to file that 10 year plan.
We expect that the 10 year plan will very much reflect our DRC in the four years that are included in our <unk> and just to remind that that pending filing shows us doubling our mileage here in 2023 getting to 350 miles ramping up to 450 miles in 2024 of 550 miles in 2026, and then 750 <unk>.
Miles in 'twenty in 2020.
Six 550 miles sorry in 2025, and 750 miles in 2026 that ramp.
We will be consistent with what we file in our 10 year plan and so based on the timing of that 10 year plan.
We are waiting on feedback from OIS on when they will receive that plan, we're ready to file that when they are ready to receive it they're staffing up so that they can receive it but I do think it's important for people to know that the first four years, including this year or the next four years, including this year.
Our reflected already in our GIC, including obviously the cost recovery associated with that and so.
Depending on the timing of the OIS as availability to receive our 10 year plan has little bearing on the initial years of our underground program.
Perfect that was very clear cut congrats guys position I appreciate it thanks Shar.
And we will go next to Julien Dumoulin Smith at Bank of America.
Hey, good morning team.
Again, congrats Carol linear and wherever you are.
Your days at that as well and welcome aboard.
Yes.
Good morning Julien.
Hey, Good morning, Patty Let me, let me start off with this I mean, you guys have this analyst day coming up and I want to call out you have your earnings growth rate through 2006, and you guys have been very careful to acknowledge the specific.
Discrete growth rates in each year, you have your rate base growth through 2007, how are you thinking about addressing if at all some of the earnings considerations.
The upcoming analyst day, I know that you've really placed an emphasis here on understanding the core of what you guys are doing specifically in underground and get this analyst day, but I just wanted to call out that discrepancy between Robin earnings growth for instance.
Adding into this analyst day, if there were any expectations.
Well Julien we take great pride in giving you multiple years forward expectations on earnings I would suggest that there are some especially with the JRC coming out.
Later after Investor day that it's unlikely that we'll forecast any further than 2026, but.
We're pretty proud of the fact that we're giving you guidance through 2026.
No I hear you I just wanted to test that I appreciate it though and very much appreciate the considerations. There separately related you can we talk about the specific gen sale and I understand and sorry in your prepared remarks here some of the tweaks in timing with the ALJ et cetera, but can.
Can you specifically address a little bit more your expectations today, where the conversations are with potential buyers and any of the consternation that might be coming up through the process is welcome to regulatory side.
Yeah no.
I'll take that it's Carolyn we've actually seen pretty robust inbound interest in the asset and so we do expect a fairly competitive process.
<unk>.
I will say that the opportunity seems to be most interesting to those long term infrastructure investors, but we have seen a wide range of interests.
The portfolio, obviously, it's pretty unique in that it offers.
Pressure to the full cost of service regulated clean generation in California, and without the direct risk of wildfire wildfire, so it's pretty attractive.
And timing as we've already mentioned I mean, it's really we do we've upped that updated that we're going to be going to market.
With investor with our with our process are coming up in June is the expectation. So early summer and then we would still expect that process to go forward through the balance of the year simultaneous with the regulatory process and wouldnt expect to be.
Closing until the first half of 2024.
Excellent Alright, I will leave it there and we'll see you guys sooner right.
Awesome. Thanks Julien.
And as a reminder, if you would like to ask a question. Please press star one we will go next to Anthony <unk> at Mizuho Securities.
Hey, good morning, just hopefully two quick questions one on the.
Cost of capital triggering mechanism I believe the utilities kind of file if rates stay where they are for an increase in the.
Cost of capital for 2024 do you expect.
Parties to file for a waiver similar I think with the utilities filed for a waiver for 2022 for the mechanism not to get reset lower is there an expectation that you do get parties also filing for a waiver.
Hey, Anthony I think it's really a couple of considerations first there is a phase II piece of this to keep in mind. So the commission is examining both the trigger itself and its treatment as well as an issue we raised which is the yield spread adjustment in particular, so those are two that will be considered in the phase two there is not actually a specific timeframe around it.
What's the trigger to the upside that could actually just strengthen our plan further and provide us more capability to put more into the system.
Great and then lastly, how do you it's on your.
I guess the story of the month I think you framed it.
Savings a month with you on the ground right and I understand the savings that you get by not having to borrow or the conduit.
I have a 36 inches and now Youre at 26.
I think of probably a large component of the cost of on the ground.
Maybe labor.
And if I think of P. G&A is probably on the gas side has been bearing gas pipe for 100 years.
Ken I expect any efficiencies in.
Digging trenches and putting a conduit down that great considering you've been you've probably have mastered the trenching.
Our conduit from the gas side of the business.
Anthony that's a great question and first of all I do remind people that all the time that we've been bearing on pipe for a long time.
However, that I would say the synergies that exist or that we can deploy our workforce. We actually have a program called <unk> E gas to electric where we're enabling our gas work for us to do a lot of that civil work all that to say this underground of electric lines.
It has new technologies that we can deploy today.
We're pretty excited about and you'll get a chance to see those at our Investor day, the actual equipment whether it's.
Iraq wheel or a cloud type.
Piece of equipment or even at grade.
Conduit and what something called K rail, which will be able to show you. All these things at Investor day, there is still much much efficiency that we can gain.
And we're really excited about all of the progress and the ideas that we're getting both from our partners as well as from our own work team and.
And our gas division, so there's definitely a great synergy there too to leverage.
Great. Thanks, so much.
And we'll take the next question from Ryan Levine of Citi.
Hello, I, just want to follow up on Ryan or wasteful and good morning to follow up on the waste elimination center comments can you expand what type of projects or initiatives youre tracking beyond mail postage how material or some of these opportunities.
Or any way to frame the business.
The scale.
Yeah, well there the scale is really massive Ryan it starts I think the book ends of the the mailing which is $4 million of potential savings with just one mailing all the way up to the story that I shared about the underground that's all born out of waste elimination some other.
Important focus areas for us in the waste elimination center are things like.
Our new customer connection process improvements I know thats, an area of interest for a lot of people and we've been making significant progress there and identifying waste in that process that we can eliminate and make a better outcome faster outcome for customers at a lower cost.
As well as other things like just bundling work we have.
Work, often done and silos so on one week.
Crew might go out and change across arm and two weeks later they might go out and change that very same Paul and so bundling work so that we get out there once and do it at the lowest cost possible.
And least disruptive for customers the potential here Ryan I cannot described is almost infinite and when we get 26000 of my coworkers, all being proficient and being able to see waste for what it is and then eliminated on a daily basis. This thing just runs itself. That's a it's a great future that lies ahead for this team.
Therefore, our customers.
Good to hear in terms of the sema exposure in the early part of the quarter, whereas for balance for that as at the end of the quarter.
Any timeline for recovery.
Through the regulatory process.
Sure just to help give you a feel for that but we had filed earlier Ryan was a little over $300 million of impacts so far I will offer to you that it's early but that number is going to go up I would assume we're going to be in total if you look at all of these storm impacts we're talking about 13 atmospheric rivers of impact here. This is probably going to be over $500 million and impact the sema <unk>.
Weighted account, though is very consistent recovery mechanism that as you go forward, we would typically complete the work order to work make that filing and you typically get around an 18 month to two year.
Timeline for resolution.
Really here in California for many years.
Great. Thanks for taking my questions.
Okay.
And that does conclude our question and answer session. At this time I would like to turn the conference back over to Patti Poppe for closing remarks.
Thanks, Andre and we really wanted to be mindful of everyone's time today and keeping this call short so I'll just wrap with one couple of thoughts one our best wishes to Chris as he embarks on his next professional step we're going to Miss him, but we're excited and proud of everything that he has achieved and what he is going to achieve next and thank you everyone for joining us today, we look forward to.
Seeing you at our Investor day on May 24th and 25th we're excited to see that many of you have already registered a high demand for this event. So we're excited about that there'll be much for you to see live it will not be possible on the webcast and so we still have room, if you'd just like to join US just make sure you Register we are <unk>.
Definitely seeing progress here at <unk>, and we want to be able to share that with you.
At our Investor Day, we want you to know that an investment in <unk> as an investment and serving people the planet and prosperity of many millions and we're very proud of the progress that the team is making here I want to share that with you at Investor day. So we look forward to seeing you. There please be safe out there everyone have a great day.
And that concludes today's conference call. Thank you for your participation you may now disconnect.
Yeah.