PG&E Corporation 2026 Q3 Earnings Call

Jonathan, please go ahead. Good morning, everyone, and thank you for joining us for PG&E's third quarter 2026 earnings call.

With us today are Patti Poppe, Chief Executive Officer, and Carolyn Burke, Executive Vice President and Chief Financial Officer. We also have other members of the leadership team here with us in our Oakland headquarters. First, I should remind you that today's discussion will include forward-looking statements about our outlook for future financial results and other matters. These statements are based on management's current expectations, assumptions and estimates. Some of the important factors which could cause our actual results to differ materially are described on the second page of today's earnings presentation. Today's discussion will also contain non-GAAP financial measures. The slides provide important information regarding these measures, including reconciliations between non-GAAP and GAAP. They can be found online at investor.pgecorp.com, along with other relevant information.

We also encourage you to review our quarterly report on Form 10-Q for the quarter ended September 30, 2026. With that, it is my pleasure to hand the call over to our CEO, Patti Poppe.

Thank you, Jonathan. Good morning, everyone. Our core EPS were $0.41 for the third quarter and $1.24 for the first nine months. Today, we are reaffirming our 2026 core EPS guidance of $1.64 to $1.66, up 10% from 2025 at the midpoint. We are also reaffirming our 2027 core EPS guidance of $1.78 to $1.82, up 9% at the midpoint. While we are no longer providing guidance beyond 2027 during our strategic review, we already addressed our anticipated equity financing needs through 2030. On the common dividend, we typically set our annual rate for the upcoming year in December, and for 2027, you should expect our recommended increase to be consistent with our prior stated trajectory. Turning to slide four. We know there are two topics that are top of mind today, wildfire policy reform and our previously announced strategic review. First, on wildfire policy. Comprehensive reform has not yet been enacted, and action is needed to address the tail risk that exists under the current framework.

At the same time, it's important to recognize that California's utility wildfire framework has evolved significantly from SB 901 in 2018 through AB 1054 in 2019, and most recently with SB 254 last year. Along that journey, our state policymakers have established important and substantive features, including self-insurance up to $1 billion, liquidity from the Wildfire Fund and Continuation Account, a revised prudency standard, a presumption of prudency for utilities meeting rigorous safety certification, limits on Wildfire Fund reimbursements if found imprudent, and precedent for securitization of claims exceeding fund capacity. Collectively, these protections have strengthened California's ability to compensate wildfire survivors while supporting safe, reliable, and affordable service.

Yet, key voices have plainly acknowledged that there is more work to do, including Governor Newsom, the CPUC, the Wildfire Fund administrator, and the credit rating agencies. We remain committed to working constructively with policymakers and stakeholders to build on the progress California has made to date. We look forward to the governor's requested CPUC report due November 1, which should further quantify the unsustainable impacts of the current framework on California and utility customers. While legislative action has not materialized yet this year, we're moving forward to unlock value for customers and investors. As you know, since 2020, we've been reinvesting nearly all of our earnings into the system to benefit customers. However, sustaining this level of investment requires a wildfire liability framework that supports affordable access to capital.

Reflecting current high financing costs, we previously announced a $2 billion reduction to our 2027 capital plan, and we recently began notifying customers whose projects may be delayed. These changes will affect the connection of new clean energy resources, system expansion to meet growing demand, and new or upgraded customer projects, including those supporting much needed housing in California. We do not take those impacts on our customers lightly, but our current financing cost is too expensive for them. With our strategic review, we've also taken the initiative to start exploring solutions which could add protections and unlock value for customers and investors. As we announced on September 2, we are assessing the full range of options for how PG&E is organized and financed. A key foundational objective is to achieve investment-grade credit ratings, which we view as critical to maximizing the value we can deliver for our customers.

While policy reform through legislation remains the fastest and most effective solution, we're also evaluating other options, including possible regulatory reforms, further reassessing our capital allocation priorities, and revisiting our corporate structure. On structure, options range from corporate ring-fencing to sales and separations. Today, a discount for wildfire risk burdens all of our assets, including businesses with little or no exposure to that risk. Our review is evaluating whether alternative structures could better reflect the value and risk profile of those businesses in order to lower financing costs for customers. We expect to share the outcome of our review and our planned path forward with you no later than next summer. In the meantime, we plan to keep you updated on our progress through future earnings calls, or sooner if there are material developments to share.

The important point is this, PG&E has more than one way to move forward and create value. We have several attractive businesses with unique and hard-to-replicate assets, providing essential electric and gas service to over 16 million people in a service area that includes the heart of the world's innovation economy. Turning to slide 5, the story here is simple. Our investments are producing measurable results. Today, our Hazard Awareness and Warning Center has real-time visibility across our system through more than 700 AI-enabled cameras and 1,600 weather stations. The results are clear. We're now in our fourth year without a major wildfire associated with our equipment, and our weather-normalized ignition rate has declined 74% since 2017 to its lowest level since we began tracking the metric. We're also seeing tremendous progress in our gas business, where aerial and drone inspections have significantly improved leak detection efficiency and safety performance.

Additionally, we remain first quartile in both dig-in performance and emergency response, with first responder arriving on-site in an average of 20 minutes. We're also on track to achieve a 62% reduction in annual methane emissions compared to the 2015 CPUC-approved baseline, continuing to outperform our 2030 target. We've made similar improvements across our large and growing transmission and power generation businesses. Our electric transmission system spans 18,000 circuit miles with $13 billion of FERC rate base, along with significant opportunities to increase investment in the future. While our power generation portfolio includes 7.8 gigawatts of capacity, including our hydro system and top-performing Diablo Canyon Nuclear Power Plant. Turning to slide 6, we're continuing to build a high-quality data center pipeline and providing visibility into how projects advance from application to energization.

This quarter, we're showing a new category for megawatts that are now successfully connected to our system and receiving service. Since 2024, we've brought approximately 174 megawatts of data center projects online. As we look to bring more of our pipeline into service, our focus will continue to be on doing so in a way that will improve affordability for existing customers. We're focused on connecting the right projects, pricing them right, and ensuring large load customers make meaningful financial commitments as they advance through the process. Turning to slide 7, there's a common thread across the themes I've discussed this morning. Whether it's continuing our transformation and strengthening our layers of protection, advocating for durable wildfire policy reform, advancing rate reducing load growth, or progressing our strategic review. We're guided by a simple principle. What's good for our customers is ultimately good for our investors and good for California.

We'll continue to stay grounded in our customer-first approach and pursue opportunities to deliver a safer, more reliable, and more affordable system so that our customers and shareholders can prosper. We're proud of the progress we've made, and we're ready to tackle the work ahead. With that, I'll hand it over to Carolyn to cover our financials in more detail.

Thank you, Patti, and good morning, everyone. Turning to slide 8, we're showing you our earnings walk for the first 9 months of 2026. Our core EPS year to date has reached $1.24, up from $1.14 in the same period last year, keeping us on track to deliver on our full year core EPS guidance. As in prior quarters, customer CapEx continues to be the primary driver of our earnings growth, contributing $0.12 over the first 9 months. We also continue to make steady progress on our O&M savings goal with $0.04 year to date. This puts us on pace to deliver our savings guidance once again while redeploying $0.02. Timing and other items reduced earnings by $0.04 year to date. This mainly reflects the benefit we realized in the third quarter of last year from implementing a tax method change.