Q3 2024 PG&E Corp Earnings Call
Hello, and welcome to the P. G. Any corporation third quarter 24 earnings release Conference call. Please note that this call is being recorded after the Speakers' remarks, there will be a Q&A session. If you'd like to ask a question during that time, each fresh start and then one on your telephone keypad.
Speaker Change: Note that we have a lot to 15 minutes or the call. Thank you I'd now like to turn the call over to Jonathan Arnold you May now begin.
Jonathan Arnold: Good morning, everyone and thank you for joining us for <unk> third quarter 2024, adding school with us today.
Jonathan Arnold: <unk>, Chief Executive Officer, and Thailand.
Speaker Change: <unk>, Vice President and Chief Financial Officer.
Speaker Change: We also have other members of the leadership team here with us.
Speaker Change: I should remind you that today's discussion will include forward looking statements about our outlook for future financial results. These statements are based on information currently available to management.
Some of the important factors, which could affect our actual financial results are described on the second page of today's earnings presentation.
Speaker Change: The presentation also includes a reconciliation between non-GAAP and GAAP financial measures.
Speaker Change: Along with other relevant information can be found online at Investor PG equal Dotcom, we don't encourage you to review our quarterly report on Form 10-Q for the quarter ended September 32024, and with that it's my pleasure to hand, the call over to our CEO Bobby Thank you Jonathan.
Bobby: Good morning, everyone.
Bobby: We have seen another quarter of solid progress and I'm pleased to share our third quarter results and some updates to our guidance and financial plan.
Bobby: Our core earnings per share for the third quarter were 37 cents, bringing us to $1 six for the first nine months.
Bobby: We're narrowing our 2024 guidance range lifting the low end by a penny and firming up our 10% growth over 2023 estimates.
Bobby: 2024 range is now $1 34 to $1 37.
Bobby: Reflecting growth in current customer demand, we're also adding $1 billion to our five year capital plan, which is now $63 billion through 2028 previously we said we'd grow earnings per share at least 9% in 2020 with this additional capital. We're now right in 2025 guidance from 9% to 10.
Speaker Change: Perfect.
Speaker Change: And we're initiating our formal 2025 EPS guidance range of $1 47 to $1 51 in.
Speaker Change: In addition, we're reaffirming our longer term earnings per share growth of at least 9% in 2026, 2027, and 2028 and Thats now from our new 2025 guidance midpoint.
Speaker Change: We remain firm in our commitment to no new equity in 2024, our equity guidance of $3 billion from 2025 through 2028 is also unchanged. We still expect this to be issued ratably over the period likely through a routine utility aftermarket or ATM program.
Speaker Change: Youre seeing in these numbers is growing customer demand for electrification and California from housing developments to electric vehicle charging station data centers commercial project and local infrastructure.
Speaker Change: Much of this is beneficial load growth, meaning it will help us achieve our affordability goals once completed.
Speaker Change: Consistent with what we've told you we're able to add this new capital to the plan because it meets our criteria what it's been approved by regulators to its affordable for customers.
Speaker Change: It's beneficial for investors, meaning accretive to EPS and four we were able to finance it efficiently with our recent holdco offering of junior subordinated notes.
Speaker Change: This is the same disciplined approach you can expect from us going forward.
Speaker Change: Moving to slide four and our power Peerman, let me reiterate that it all starts with safety.
Speaker Change: Our layers of physical and financial protections are working as intended.
Speaker Change: Our simple affordable model is how we can make critical infrastructure investments affordable for our customers and building on these first two layers, we intend to deliver a growing and decarbonize energy future in California.
Speaker Change: As you know our stand here at <unk> is it catastrophic wildfire shelf stock. We are laser focused on doing just that every day and days like tomorrow, which is the anniversary of the 2018 campfire further reinforce what's at stake our strategy starts with understanding the risks each and every day we.
Speaker Change: And implement layers of operational protection, we operate with a mindset of continuous improvement keeping safety at the heart of every decision we leverage our technology to partner with first responders to speed up and improve response submission from any source.
Speaker Change: And we advocate for climate resilient long term infrastructure solutions, such as underground the highest risk miles on our system all of which create a fundamentally safer, California for citizens and investors.
Speaker Change: I'll fire risk was elevated this year and the ignition count is up as a result as shown here on slide five the ignition right in high fire threat areas under our three plus condition is standing at 144 for the Rolling 12 months through November four.
Speaker Change: This is notably lower than 2017, and 2018, demonstrating that even under higher risk conditions, California is safer in.
Speaker Change: Incidents affecting 10 acres or more for California, predominantly non utility cost Ignitions have also increased more than threefold. This year versus 2023, given the more challenging weather conditions. Despite this backdrop, here's the metric that matters.
Speaker Change: Multiyear trend of no major fires due to P genie equipment.
Speaker Change: While we're never satisfied this summer was one more proof point that our physical risk mitigation are working.
Speaker Change: While our operational mitigation have proven effective they do come with a reliability tradeoff. That's why we continue to believe that strategic under grounding and the highest risk locations is the right solution for our service territory.
Speaker Change: Turning to slide six related to the Dixie fire. We were pleased to share last month that the state wildfire fund have paid our first set of claims for $39 million.
Speaker Change: Our second monthly request for $34 million was paid on October 28, and we intend to continue submitting our claims on a monthly cadence going forward. This is another proof point of Assembly Bill 10, 54, working as designed.
Speaker Change: As you know, we're also working everyday to execute on our simple affordable model shown here on slide seven.
Speaker Change: Simple affordable model of how we plan to keep customer bill growth at or below assumed inflation as we continue to invest in critical infrastructure. This.
Speaker Change: This is a proven winning model supported by our lean operating system and bolstered by California's leadership in the transition to clean energy.
Speaker Change: We have a strong existing plan as shown here on the left and as we announced today were pulling some additional capital into the plan to better serve our customers, while maintaining balance sheet health.
Speaker Change: We continue to see opportunities for further amplifications, you're incremental O&M reductions in electric load growth.
Speaker Change: We're working each element of this model every day with no big bets approaches Carolyn will discuss.
Speaker Change: First let's dive deeper into the PGA need performance playbook in action as we turn to slide eight and my story of the month.
Speaker Change: Our Dublin Innovation Center was created to drive better outcomes for our customers last quarter I shared how <unk> was reinventing the inspection process identifying the right work completing at 50% faster than our previous standard and delivering cost savings, which we look forward to passing along to customers in our next rate case.
Speaker Change: With the incremental <unk> capital spend top of mind I thought I'd share how our service planning and design team is using our performance playbook to rapidly implement regulatory decision and deliver for our customers following.
Speaker Change: Following the CPUC approval of our initial SP, <unk> filing and an incremental $1 billion of funding the team immediately mobilized.
Speaker Change: Looking across a number of factors, including customer readiness permitting agency timelines and materials availability. The team quickly identified over 3000 incremental customer requests that can be completed this year. The team is also implementing process improvements that lead to labor and cost savings for our customers.
Speaker Change: For example, we've re imagined the application process, which we estimate will reduce our customer cancellation rate by 70% and we updated the job packaged preparation and estimating standard cutting processing time for electric design work by 40%.
Speaker Change: These are classic examples of waste and rework that we're eliminating to the benefit of customers.
Speaker Change: I could not be prouder of this and all the other examples IC of coworkers using the tools of our performance playbook to cause better outcomes for our customers and predictable growth for our investors with that let me turn it over to Carol. Thank.
Carol: Thank you Patty and good morning, everyone. Today I'm looking forward to cover three main topics with you our results for the first nine months of 2024.
Carol: Second our growing capital plan as John financing plan.
Carol: Third we continue to execute against our simple affordable model as you know performance in power and our path to investment grade and constructive regulatory outcomes depends on consistently delivering against our targets.
Carol: Starting here on slide nine we are showing you our earnings for the first nine months through September our core earnings of $1 <unk> or up 30% over.
Speaker Change: Over the same period last year remember that last year, our general rate case was not approved until the fourth quarter and that is when we book the revenue catch up for all of 2023.
Speaker Change: Adjusting the first nine months of 2023 for the juniors be tiny RV sales were up 19% year over year.
Speaker Change: The main driver of our year over year increase continues to be higher customer capital investment, including the change in ROE from 10% in 2023.
Speaker Change: 10, 7% for 2024.
Speaker Change: We continue to drive non fuel O&M savings throughout the business.
Speaker Change: This performance is contributing to our results and includes savings achieved with various programs such as profit improvement for inspection as well as lower contract spend with strategic sourcing.
Speaker Change: We also remain committed to reinvesting these savings and they are really upside back into the business to support incremental customer investment.
Speaker Change: <unk> steadily since I believe deployment, including the programs, which support risk mitigation, such as corrosion maintenance and emergency preparedness and response.
Speaker Change: As a reminder, we redeploy as a way to either go into years and deliver consistent performance year in year out.
Speaker Change: Turning to slide 10, as you saw earlier, we pooled an incremental $1 billion of capex into or I can use that as a result of the <unk>.
Speaker Change: <unk> funding for new energy station projects approved during the third quarter.
Speaker Change: This increase is a five year compounded growth in our rate base from 95% to 10% our share of rate base already authorized picks up to 93% in 2026, including the additional Mongolian for energy patient spend and $900 million of crews.
Speaker Change: Our Oakland General office.
Speaker Change: Also we are still signaling an incremental at least $5 billion of additional customer investment opportunity.
Speaker Change: There is no shortage for customer beneficial work on our transmission and distribution systems and even after putting an $8 billion capital we still see at least 5 billion potential I'll remind you that incremental transmission work would fall under our FERC formula rate.
Speaker Change: Back in July the CPUC issued a decision in the second phase of our general rate case implementing provisions of Senate Bill 410, The commission encourage them to be quite incremental funding for 2025 and 2020.
Speaker Change: If necessary to attract customer education needs.
Speaker Change: In response to the demand we're seeing from customers. We filed a supplemental request on October four proposals to add $3 $1 billion of work for 2025, and 2026, including timing adjustment. This would announce further net addition of $2 8 billion.
Speaker Change: This represents another proof point of the growing load and demand we've seen in California, and we stand ready to serve this demand with.
Speaker Change: The Commission's amended scoping memo and will now call for a proposed decision in the first quarter of 2025.
Speaker Change: Once we have the final decision, we will affect implications, but forever and for financing.
Speaker Change: I discussed last quarter, we'll make the devaluation in context of our financial guideposts, namely the incremental capital investment must be beneficial and affordable for our customers accretive to earnings per share and also helpful to our balance sheet.
Speaker Change: Here on Slide 11, you can see that our updated five year financing plan now reflects $63 billion of capex over the period.
Speaker Change: No no change to our dividend and equity component no change to our commitment to reduce $2 billion of corporate debt by the end of 2026 and no change to the flexibility that we built into the plan.
Speaker Change: Our updated financing plan continues our commitment to achieving investment grade ratings and prioritizing customer capital investment.
Speaker Change: On this slide you'll see that comparison plan that we shared with you on our second quarter earnings call. We've increased utilities long term debt issuance and the corporate debt hybrid and other bucket each by a half billion dollars.
Speaker Change: These changes reflect the impact of the $1 billion in junior subordinated notes issued in September.
Speaker Change: I'll remind you that the Giants and received 50% equity credit from S&P and Fitch and an example of our commitment to pursuing the most efficient financing possible.
Speaker Change: Proceeds to mid hybrid instrument were used in part to pay down $500 million of our term loan b, resulting in a transaction that is neutral to credit rating metrics.
Speaker Change: The remaining $500 million J S and proceeds will fund the equity portion of the capital additions to this plan.
Speaker Change: Lastly, our plan still calls for $3 billion of equity from 2025 through 2028, which we expect to issue on a ratable basis under normal utility ATM program.
Speaker Change: This amount is easily achievable for utility of our site and is in line with many of our industry peers, who also utilize the ATM program.
Speaker Change: As we've indicated before this equity need is already factored into our multi year earnings per share guidance of at least 10% now extended through 2025 and at least 9% each year and 2026 2027 to 2028.
Speaker Change: Turning to slide 12, as Patti mentioned, our simple affordable model assumed a no fee that approach. So we are laser focused on executing every day to make our industry, leading capital growth affordable for all our customers.
Speaker Change: Here's why I considered it and no big bet model and why we see further opportunities for amplification.
Speaker Change: First in terms of O&M cost savings.
Speaker Change: We are currently working nearly 200 initiatives to reduce material contract and other costs to more efficiently plan execute and automate our work our savings are not dependent on any one initiative.
Speaker Change: Reducing waste across the enterprise.
Speaker Change: We have ample runway to improve our capital to expense ratio.
Speaker Change: Such as reducing annual repairs were ongoing insurance for a minute.
Speaker Change: Thank goodness activity with durable long lasting capital improvement, which also benefit customer rates.
Speaker Change: And we exceeded our O&M reductions of two years in a row, reducing operating and maintenance expense by 3% in 2022 and five 5% in 2023.
Speaker Change: This project will be excitement and momentum you can feel whether you're out in the field at our Dublin Innovation Center for one of our command center here in Oakland.
Speaker Change: We as a way of thinking that is grounded in improving customer experience at a lower cost we're proving out the philosophy. This philosophy is well placed to Pee G&A and it's delivering meaningful results.
Speaker Change: With yearend insight I'm confident that in 2024, we will meet or exceed our 2% target.
Speaker Change: Second loan growth our loan growth will come from electric vehicles data centers and building electrification, it's not dependent on one mega customer or project.
Speaker Change: And state policy and decarbonization goals are driving increased electrification.
Speaker Change: I'm also excited about the innovations taking place that will help us leverage new load in ways beneficial to the grid.
Speaker Change: For example, our partnership with the open School District in June.
Speaker Change: Deploy the nation's largest bi directional metric school bus fleet.
Speaker Change: This evening fleet would be quick with groundbreaking vehicle to grid technology, enabling the buses to return annually.
Speaker Change: Two or more gigawatt hours of energy that secret we're not mute.
Speaker Change: Lastly, efficient financing in addition to our recent convertible and J F N financing future opportunities could include other hi, Brad.
Speaker Change: My own grant programs, working capital improvement and credit rating upgrades.
Speaker Change: Turning to slide 14 in terms of credit rating I'll remind you that we're just one notch below investment grade at both Moody's and Fitch and on positive outlook.
Speaker Change: With our strong performance, especially through this challenging fire season, we continued to demonstrate the effectiveness of our mayors of physical risk mitigation, coupled with improving financial metrics and maintaining strong governance, we see a near term path to achieving investment grade credit at the parent company.
Speaker Change: Growing cash flows drive balance sheet health supports our credit rating improvement and in turn will help to make our critical customer investment and affordable.
Speaker Change: You can see here on slide 15, we grew our operating cash flow by one 8 billion in the first nine months of 2024.
Speaker Change: <unk> for the first nine months of 2023.
Speaker Change: And we're on course to deliver over $3 billion more operating cash flow for the full year consistent with prior forecast of course, the geography is a key driver of this improvement as well as the interim rate relief and we've seen from the CPUC in our 2020 to Lindsay and the 2023 WG SD applications.
Speaker Change: Turning to slide 16, we continue to work well with policymakers and stakeholders, we saw constructive final decisions and our first SB four tenths island, our Oakland headquarter purchase and our request for interim rate relief for our 2023 months at all in the third quarter.
Speaker Change: I'll end here on slide 17, with a reminder of our value proposition.
Speaker Change: One killed by differentiated performance, a constructive operating environment and placing the customer at the heart of everything we do and it's allowing us to deliver 10% rate base growth through 2028.
Speaker Change: At least 10% core EPS growth in 2024, and now through 2025 and at least 9% core EPS growth each year from 2026 through 2028.
Speaker Change: I'll hand, it back to Patti.
Speaker Change: Thank you Carolyn.
Speaker Change: Im excited about our differentiated story here at <unk> are powered pyramid is the path forward. It starts with a foundation of physical and financial safety that foundation gives us permission to focus on our simple affordable model when.
Speaker Change: When we saw you in New York in June we talked about our model and how it can be amplified.
Speaker Change: <unk> is another step towards that being realized ultimately we share California's aspiration for growth and to Decarbonize the economy at a lower societal costs.
Speaker Change: We are proud to be leading the way and delivering results for our customers and for you our investors.
Speaker Change: We're looking forward to seeing you in just a couple of days at EI.
Speaker Change: With that operator, please open the lines for questions.
Speaker Change: Okay.
Speaker Change: We are now opening the floor first question and answer session. If you'd like to ask a question. Please press star followed by number one on your telephone keypad.
Speaker Change: Your first question comes from Shar <unk> from Guggenheim Partners. Your line is now open.
Speaker Change: Hey, guys good morning.
Speaker Change: Hey, good morning.
Speaker Change: Good morning, obviously, congrats on the quarter I'm, just starting on the incremental Capex one billings, obviously accretive to plan was that the core driver of the 10% EPS growth is implied by the 'twenty guidance and how should we think about the level of capex upside in the context of.
Speaker Change: The approved customer connection cost caps is there more more to come as you fully utilize that construct.
Speaker Change: Yeah sure Great question.
Speaker Change: The.
Speaker Change: $1 billion definitely a what's the key driver for our increased to 10%. You know this is the disciplined approach we're talking about to make sure that we get the the Capex approved it's affordable for customers, it's accretive to EPS and then we can finance it efficiently. So we were able to meet all of our criteria are in this case.
Speaker Change: So as we look at the the next phase of our filing the supplemental.
Speaker Change: A mental S. Before 10, we see.
Speaker Change: See that we're going to need additional funding to keep up with customer demand.
Speaker Change: And so that's great news I think for California, I think it's great news for our customers and so.
Speaker Change: That's why we filed the supplemental we want a build that into the plan until we know we meet our criteria of our disciplined approach however, but I do think that bodes well for both customers and investors.
Speaker Change: Got it perfect and then you noted there is no incremental equity needs from the new Capex from card junior subordinated funded are there any other embedded assumptions around timing of future equity your dividend that helps you absorb the $1 billion of new Capex and how do you offset the $1 billion of Capex.
Speaker Change: With no equity and does it sort of does it do anything to the timing I don't get a sense of it does but just curious.
Speaker Change: No. It doesn't say that the $1 billion of additional Capex was funded that was funded by the junior subordinated notes that was a billion dollar issue and so its a very efficient financing. It had 50% equity content. We were pleased as to the response to that.
Speaker Change: I will say I'll, just remind you yes, we had no change it no further changes to our equity plan in our in our financing plan, we're still looking at issuing a routine a T. M program next year and over that five year plan. It's.
Speaker Change: In total of $3 billion and again, no new equity in 2024.
Speaker Change: Fantastic guys. Congrats on a few a couple of days I appreciate it.
Speaker Change: Thanks Shar.
Speaker Change: Your next question comes from Steve Fleishman from Wolfe. Your line is now open.
Steve Fleishman: Yes, hi, good morning.
Steve Fleishman: Yes.
Speaker Change: Hi.
Speaker Change: Just a governor newsome.
Speaker Change: Oh, I guess executive order.
Speaker Change: Affordability initiatives just could you talk to.
Speaker Change: I guess your thoughts on that and the things I know you've got the simple affordable models here obviously.
Speaker Change: Addressing it but just maybe some perspective related to your plan.
Speaker Change: Yeah, you know, Steve we definitely want what the governor wants and what our policymakers want and that's affordable energy for the people of California, and not really you answered. The question for me by mentioning our simple affordable model that is the pathway and I think as the states start to see us truly implementing and delivering those savings.
Speaker Change: Especially when we talk about our rate case that we'll be filing next year for 2027 will be able to show the impact of the simple affordable model through that filing and so we do look forward to helping earn the well to earn the trust of the regulators and policymakers in this process, but also give them good ideas about what can really drive.
Speaker Change: Affordability here in California, you know I think the idea that we can continue to reduce our cost and grow load I think the growing load is something that is a big change here and I think that's gonna be exciting and welcome news to our policy makers when they truly understand what the implications are for customer afford.
Speaker Change: Ability as we invest in the infrastructure to grow load here in California.
Speaker Change: Okay and then one other question you mentioned one source of funding the deal.
Speaker Change: Loans potentially.
Speaker Change: Any thoughts on how you're mentioning outcome might impact that.
Speaker Change: If at all.
Speaker Change: Yeah, you know it unfortunately, it's in a very confidential process. So I can't say much about it Steve, but obviously, there's still time before the year end for their a resolution on that deal with funding and the OE along the thing that we like about the D. O a long is it.
Speaker Change: Just net net savings for customers. However, we have not built our financial plan, assuming anything associated with that that would be upside and accretive to the plan.
Speaker Change: Okay, Great alright, thank you.
Speaker Change: You.
Speaker Change: Yeah, you're welcome have a great day.
Speaker Change: Your next question comes from Jeremy Tonet from Jpmorgan Securities LLC.
Speaker Change: Your line is now.
Speaker Change: Hey, good morning, it's actually rich Sunderland on for Jeremy can you hear me.
Speaker Change: I read China right here Yep.
Speaker Change: Great. Thank you.
Speaker Change: I'm curious where things stand on the underground and guideline she approached from amortization what are the next steps thereafter for harmonize or your plan to those guidelines once once that process is completed thank you.
Speaker Change: Yeah. Great question, we continue to work with O I S to understand and establish what those filing requirements will be to date, they've been more extensive than we expected and so our filing will.
Speaker Change: If if the current guidelines as published.
Speaker Change: Are the final guidelines that could very much delay our filing but we are hopeful to make that underground filing by mid next year. We continue to stand in our highest risk areas underground. It is the right solution. It's not all are miles, but it is definitely our highest risk miles and so we do believe.
Speaker Change: S as directed by the legislature. This underground in a filing we'll be able to demonstrate the longer term cost benefit savings for customers. We know we know that it is the most affordable way to make our customers safe and to have them not have to choose between having reliability and.
Speaker Change: Being safe and so we look forward to making that filing will continue to work with the only I guess, but I expect our filing will be a mid 2025 are likely at the earliest.
Speaker Change: Great. Thank you very helpful and then picking up the <unk> conversation.
Speaker Change: We're doing that we're clearing the backlog curiously simply comes down to I guess, what the CPUC authorizes who your supplemental request any other thoughts there.
Speaker Change: Yeah that obviously, the big driver it does cause something to do the work, it's not free and so the proposal the filing that we made reflects actual customer demand to both a clear.
Speaker Change: Clearly any kind of backlog, but also to maintain the growth rate that we're seeing we're seeing about a 10% year over year growth rate of new customer connection requests, which is exciting news I mean, I just think it really bodes well for California, and so we want to fulfill that demand and the good news is much of that demand can be fulfilled.
Speaker Change: At a continually improving unit costs, which will be driving for by improving how we do our work.
Speaker Change: Way, we contract for that work the way, we schedule and bundle that work all.
Speaker Change: All of those are process.
Speaker Change: Process improvements, we've been making will be beneficial to customers, but that's fully reflected in the filing that we made and we look forward to being able to continue to fulfill our customers' expectations.
Speaker Change: As the commission has a they're all to play and going ahead and are approving that important investment in our customers' expectations.
Speaker Change: Great. Thank you so it's hard to see you all soon.
Speaker Change: Yeah, great. Thanks rich.
Speaker Change: Your next question comes from Julien Dumoulin Smith from Jefferies. Your line is now open.
Speaker Change: Hey, good morning team, how you guys are doing.
Speaker Change: Good morning, I really and how are you doing.
Speaker Change: Great top in the morning for you guys.
Speaker Change: Just moving back to where that's how rich was the second ago here.
Speaker Change: The <unk> side.
Speaker Change: We saw <unk> get fairly at least in the proposed decision get a fairly de Minimis number.
Speaker Change: To that a little bit I mean, what do you read out of that I mean, obviously, you're sort of surgery, a little different here, but anything to note out of that again as you planned towards mid next year is the filing here if you will.
Speaker Change: Yeah keep in mind that was their G. R. C. We're talking about are underground filing which is based on the the new legislation that was passed about a 10 year filing so two different things.
Speaker Change: I will say at a minimum we have the underground that's been approved and are JRC, which was a total of 200 miles.
Speaker Change: And we are on track to continue to build those miles through 2026. So we have under grounding and our plan through 2026, B O I S. A filing that we'll be making will be supplemental obviously to that and longer term. So I do think that here in California, we do need to understand and I.
Speaker Change: I do think there's a lot of misinformation, that's being spread about the cost effectiveness of underground.
Speaker Change: And we very much believe in the certain conditions. It is the right mitigation.
Speaker Change: And it is the most cost effective mitigation and people are forgetting how much we spend on tree trimming and overhead inspections year after year after year. So for example in customers' bills today.
Speaker Change: And our customers bills, we spend about a dollar a month on underground at <unk>, and we spent $20 a month.
Speaker Change: For vegetation management and inspections.
Speaker Change: Customers don't understand that and honestly I think some of the policy decision makers and certainly the intervenors clearly do not understand the actual math and so we're going to continue to try and make that math clear, but it is in the best interest of customers not just for safety and reliability, but affordability for underground and our highest.
Speaker Change: Risk miles. So we continue to advocate and we will continue to do that and try and make the case.
Speaker Change: Yes, no I thought if did you may got like 6% of the miles and the PD, but but actually Jason here just last quarter, we talked about the three gigawatt datacenter pipeline right and you you spoke about potentially.
Speaker Change: <unk> will talk about being related to one one counterparty here, where are you on that pipeline and moving forward and maybe diversifying it out if you will.
Speaker Change: Yeah, Let me clarify that Julien we definitely we're completing our first cluster study what we should be communicating with those customers are hereby December and it was a much more efficient way to study the interconnection of all of this new demand and it was multiple customers and multiple.
Speaker Change: Rejects adding up to an initial request a three five gigawatts keeping in mind, we only had a couple of hundred.
Speaker Change: Gigawatt or megawatts in our plan to begin with so the $3 five gigawatts with a nice increase but that's not been our last request to be clear that was just what was in this cluster study and I feel like the most popular girl in school. These days that I get a call every week about some other projects somebody wants us to squeeze into.
Speaker Change: Our plan in our study and so one of the things Julian that I think about for California and for <unk>, specifically being here in the Bay area the demand for being having access to this fiber network. That's here in the hub that's in the Bay area and Silicon Valley. The demand is real they thought that we were out of power and we have been able to confirm.
Speaker Change: But we actually have significant capacity available on our system. We've added both generation and transmission capacity here in California on the generation side. We added just last year nine five gigawatts of new supply.
Speaker Change: In California, 10, Gigawatts of supply now us as battery storage that really is a great complement to our excess solar that we have mid day. So we are open for business in California, and I kind of think of think of us as like.
Speaker Change: The perfect mix like you can have too much demand that's too expensive to supply and you can have too little so you don't get the benefit of low growth I put us right. There in the sweet spot kind of a goldilocks of load growth.
Speaker Change: Here at <unk>, we have just the right amount that we can fund that's affordable for customers and I'm excited to build that and we're excited to be able to deliver for these customers who are more and more interested by the day.
Speaker Change: Excellent I liked the Goldilocks alright, good luck with you shortly.
Speaker Change: Thanks, Julie Thank you.
Speaker Change: Your next question comes from Greg <unk> from UBS. Your line is now open.
Greg: Yes, hi, good morning, Thank you.
Speaker Change: Hi, Greg Hi, Greg Hi.
Greg: Could you.
Greg:
Speaker Change: Just update us on where you stand with.
Speaker Change: <unk> to debt and how that positions you with the agencies.
Speaker Change: Yeah.
Speaker Change: Sure. So we don't normally give intra year updates, but there is no no change to our outlook, which is the mid teens, but I'll point you to is our operating cash flow.
Speaker Change: Which is absolutely on track to increased $3 billion over 2000 $23 billion to $8 billion in 2024, and we still see it growing after 2024 sitting here on November 7th I'm, feeling confident that by year end, we'll be at or very close to that mid teens guidance that way.
Speaker Change: You've put out there showing significant approve improvements over 2023.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Thanks, Greg.
Speaker Change: Your next question comes from Carnival, given parts from Goldman Sachs. Your line is now open.
Speaker Change: Hey, good morning, Thanks for taking my questions.
Speaker Change: Hey, good morning.
Speaker Change: Thanks again for the time, maybe just a quick follow up too.
Speaker Change: To the prior question just as you think about moving through another wildfire season here.
Speaker Change: Are there any updates you can share in terms of your recent conversations with the agencies on what they're focusing on with that kind of risk aspect.
Speaker Change: Yeah, well I think the our real focus is just what do we need to do to make the system safer faster I think we have shown that our current mitigation are working and this is the case that we really wanted to make sure it's clear.
Speaker Change: There is no doubt that the conditions here in California, our at a heightened risk level. This year and we're seeing that in the number of 10 acre fires caused by any number of things predominantly not utility caused fires, but 10 acre fires across California are way up this year and understanding that and looking.
Speaker Change: At how effective our mitigation have been is a real conversation that we're having and people are really starting to see that the.
Speaker Change: The disadvantage of these mitigation so when I'm talking about these mitigation I'm talking about our enhanced powerline safety settings, and I'm talking about the public safety power shut offs, which we are continuing to shrink their scope and get them very targeted and restore customers as quickly as safely possible and all of that is good but it's still an outage.
Speaker Change: And so I think the conversation is what is an acceptable amount of outage given the risk. So we know that.
Speaker Change: There's only one mitigation that eliminates the risk of both our public safety power shut off and a wildfire and that's underground which is why we're so bullish on that however, I think we're also seeing that.
Speaker Change: There are certainly miles and miles and we've done a thousand miles already have covered conductor we think that's important.
Speaker Change: Certain areas that aren't so tree dance and making sure that we do the right inspections and the right evaluations of the safety of our equipment. So I would say are our discussions with our safety regulators and our financial regulators are very constructive and they're very complementary of the progress we've made and there is no.
Speaker Change: Doubt that across the state people feel that change and we're very proud of our multiyear trend here of no major fires and a two year specifically with.
Speaker Change: Limited to no structural damage that's the real test of our system and our safety measures. So just real progress and I think people feel that I think the the healthy debate about what's the right mitigation for the long run what's the right infrastructure fit for purpose for the long run that conversation continues and we.
Speaker Change: You need to keep educating and advocating for the right work for that for our customers.
Speaker Change: Yeah, and Gary I'll, just to be clear, we remain absolutely intently focused on improving our credit quality and we have ongoing conversations with the rating agencies.
Speaker Change: As we've noted we're just one notch below an inverse.
Speaker Change: <unk> grade at Moody's Dave.
Speaker Change: They've been pretty clear that we are already meeting or their financial metrics and we're looking at our performance through another wildfire season.
Speaker Change: This season was particularly challenging and as we've noted on the call today are performance was.
Speaker Change: It was.
Speaker Change: I don't want to start with.
Speaker Change: That's all very strong and I think Moody's is going to see that we're on an annual cycle with Moody's we're on positive outlook with them.
Speaker Change: And we're looking forward to having conversations with them and were optimistic.
Speaker Change: That's super helpful. Thank you for that and then maybe maybe shifting gears a little bit just as we think about the $5 billion of incremental investments you've highlighted in the context of the changes you've announced today related to the $1 billion of capital just how would you frame out the potential around rate base and earnings growth over that 26, plus 26 to 20.
Speaker Change: What kind of timeframe.
Speaker Change: When we're looking at the your question around the timing, but oh around a $5 billion and we would expect to bring that in.
Speaker Change: So maybe I'll just start with the latter point as we did say we do have an additional $5 billion of incremental capital that we could bring into our plan as Patty indicated it needs to be authorized I call. It the four ace for everybody sway remember it has to be authorized has to be affordable for our customers has to be accretive to our earnings.
Speaker Change: And we have to be able to finance it efficiently for our balance sheet. So when we think about that we've already talked about seeing a outcome.
Speaker Change: SB 410 supplemental sometime in the first half of 2025, and so we were at.
Speaker Change: One is we see a positive outcome then we would look at it to ensure it meets our guidelines and roll that in there's additional and in the pipeline as we look at that $5 billion. There's additional transmission capacity build out we talked about the data centers and were seeing more request. There we have some it improvements that we're looking at.
Speaker Change: At and then Theres just the additional work in both generation at our Hydro's and EV related capital. So all of that would be brought in as we said over the course.
Speaker Change: Of the five year plan as it meets our criteria, but we have a very robust pipeline I will just note we bought in $1 billion.
Speaker Change: This quarter and yet we didn't change the 5 billion, we don't put that $5 billion of potential down to 4 billion, we kept it at five.
Speaker Change: We have a very robust pipeline.
Speaker Change: Great. That's very helpful. Thank you.
Speaker Change: Thanks Carl.
Speaker Change: If you'd like to ask a question. Please press star followed by number one on your telephone keypad. Your next question comes from David Arcaro from Morgan Stanley. Your line is now.
David Arcaro: Oh, Hey, good morning, Thanks, so much.
Speaker Change: Alright, David kind of a follow up.
David Arcaro: I had a follow up on a prior question just on the executive order related to affordability one of the.
David Arcaro: Maybe topics that was mentioned or called out was a wildfire safety programs and I'm just wondering how you.
David Arcaro: You've mentioned a lot about especially how effective they've been so far for sure but is there an approach there that you might consider fat to cut in certain programs or any kind of affordability perspectives that you add too to that program.
Speaker Change: You know I think the bigger question is do we have alignment between the safety regulator in the financial regulator on scope and cost and what's most effective and I think that's really what's being discussed is how do we streamline the process of getting our safety regulations signed off on and then how does that feed into the.
David Arcaro: <unk> approvals.
David Arcaro: And so I think it's more process than specific mitigation.
David Arcaro: That are being discussed.
Speaker Change: Got it okay. Thanks understood Yeah and on the on the financial side I was wondering would you expect the plan going forward to be re basing EPS off of actual numbers.
Speaker Change: Numbers as you finish up years.
Speaker Change: Absolutely.
Speaker Change: Okay perfect clear enough. Thanks, so much.
David Arcaro: Great. Thanks, David.
Speaker Change: Your next question comes from Michael <unk> from Evercore ISI. Your line is now open.
Speaker Change: Hi, good morning, Thanks for taking my questions.
Speaker Change: Good morning, Mike.
Speaker Change: Good morning. So you spoke about sources of efficient financing highlighted various categories. I think you said no other hybrid Bowie loan and grant programs working capital improvements and trading credit rating upgrades.
Speaker Change: So he left out potential asset sales just wondering if that's something you've ruled out for now.
Speaker Change: If not what you could monetize and given that attached to them was rejected.
David Arcaro: What would give you confidence in approvals going forward.
Michael: Yeah, Michael as itself has not been on the list it's not.
Michael: We've seen we've done the sale.
David Arcaro: Sale of the towers in the past patch on its definitely not something we're moving forward with so we don't really see that as a primary source of efficient financing in the future.
Speaker Change: Got it great. Thanks, and then secondly, you've you've continued to highlight the the opportunity set.
Speaker Change: In months and years to come that you reiterated today for the higher non fuel O&M reductions increased load growth lower customer bills. Just wondering if you could share.
David Arcaro: Just thoughts on <unk>.
David Arcaro: <unk> when we could expect some of that to roll into your formal plan.
Speaker Change: Well, we just rolled into 1 billion of it. So we'll be looking forward then to the next over the next year when the right time to meet Carolyn for Ace.
Speaker Change: That's for as is good disciplined business and that's I think this is just such an important takeaway for this call today. So thanks for reiterating it you know <unk> is in a position where we have demand and we have a disciplined path forward. We have the ability to finance our work we have the ability to grow our <unk>.
David Arcaro: Business, we have the ability to better serve our customers and given a variety of conditions all around us I'm. So proud of the progress that the team has made.
David Arcaro: To truly move forward with growth industry, leading we're going to continue to do that and we're going to continue to be disciplined in how we do that for the benefit of customers and consistent financial results for you.
Speaker Change: Great. Thanks, I was I was referring to the like the O&M reduction like the one to three to the two to four and then the electric load growth going up and the customer bills going down that their quote unquote opportunity versus the formal plan. That's what I was wondering what we should expect to see that potentially enter your formal plan.
Speaker Change: Yeah, So you're seeing some of that as we speak now the O&M reductions will be reflected in our G. R E filing because that's how we pass those through to customers directly. So you'll see that then we definitely are trying to signal here today that we see that amplified simple affordable model materially.
Speaker Change: Rising so we started with the capital rate base growth that we've grown here, we were seeing the O&M savings internally in fact, just yesterday or earlier. This week I was in our waste elimination.
Speaker Change: Centre and I have to tell you if I could bottle up that enthusiasm that our team is demonstrating actual joy at work in improving how our business is operated a.
Speaker Change: Carolyn mentioned over 200 projects that are being implemented a there was a total of 500 projects that were also.
Speaker Change: Really looked at across all different types of improvements some of them directly related to O&M some related to other things, but the team is learning how to transform this business. So we definitely see the amplified simple affordable model being realized in.
Speaker Change: And the next near term as we're able to pass along those savings and reflect them this load growth.
David Arcaro: In our forecast for next year, she as well so that's really the mechanism that we have to pass those along to customers.
Speaker Change: Great. Thanks for the time.
Speaker Change: Yeah. Thank you.
Speaker Change: We've reached the end of our time I'd now like to hand back over to Pat keep heartbeat for further remarks.
Pat: Thank you Allie well everyone. We appreciate you joining us today.
Pat: You know and we appreciate your ongoing support we really feel the momentum our PGA is delivering the right kind of progress at the right time, and we hope you feel that too and we look forward to seeing Eddie I have a great day.
Speaker Change: Thank you for attending today's call you may now disconnect have a wonderful day.
David Arcaro: Yeah.
David Arcaro: Okay.
David Arcaro:
David Arcaro: Yeah.
David Arcaro: Yeah.
David Arcaro:
David Arcaro: Yeah.