PG&E Corporation (PCG) Earnings Call Transcript & Summary

Welcome to Investor Relations for PG&E. We're excited to be here today at the New York Stock Exchange. We do, as we take safety very seriously at the company. I just want to cover some safety notes here in the room. And also, at this moment, just maybe take a quick time to silence any cell phones before we get going. So we just ask you maintain situational awareness of what may be going on around you in the room. The stock exchange does have an AED on-site. Susan Hunter from the IR team is going to be responsible for getting that if we were to need it. And then we have a number of people with us who are CPR trained, David McCulloch from our team and Carla Peterman, is going to be his backup. So with that, I think we're good for what we need to cover in the room. Are we ready, Susan, for -- so we're going to go live, I think, right now. All right. So welcome to everyone in the room here. Welcome to everyone on the webcast. I'm Jonathan Arnold, Vice President of Investor Relations from PG&E. We're delighted to be here at the New York Stock Exchange this afternoon, thank you for making the journey downtown. We do need to -- just before we invite our CEO, Patti Poppe, onto the stage, we've got to cover some looking statements. Those statements, as you know, we may make statements that are -- that cover our future outlook and future financial results today. Those statements are based on information currently available to management, some of the factors which could affect our actual financial results, you'll find detailed on the second page of our presentation. That presentation also includes a reconciliation between our GAAP non-GAAP measures. And those slides along with other relevant information can be found online at investor.pgecorp.com. So with that, it's my privilege to introduce Patti Poppe, PG&E's Chief Executive Officer. Over to you, Patti.

Thank you, Jonathan. Well, hello, everyone. So good to be with you. We love coming to New York, it's so much fun. We have good things to share with you. I think you're going to enjoy what you hear today and we're going to get started, but I wanted to take a minute and just highlight some of the team. Some of the team is here today. Some of the team is not here today, but there's a couple of things to know and love about this team. Thing one, this is a team that is steeped in a variety of experiences that makes us, I would suggest unique. One, we have some people with deep experience at PG&E like Sumeet and you'll get a chance to meet Mark Quinlan here, our SVP of Wildfire Operations. You'll see Marlene Santos who was at NextEra for almost 39 years and now has been at PG&E for almost 4. Then we have folks who are in the industry, Carla Peterman, who's here, our Chief Sustainability Officer and our EVP of Corporate Affairs, who has experience inside and outside PG&E. And then you have people like Kaled Awada, who's our new Head of HR; and Carolyn Burke, our CFO, who have competitive experience. Jason Glickman from Bain, who has deep utility experience. I have experience in a competitive industry plus a utilities landscape. So all that to say, this team, John Simon, we can't forget. John Simon, our General Counsel is here with us today. But what I want you to know about this team is it is a diverse and experienced team at the helm. And the second thing to know and love about this team is that we have a performance playbook, and this team is aligned around that performance playbook. All great programs have a playbook, and we do too. We don't want to have a winning season. We don't want to have a great game. We want to have a winning program that every single year, we are in the hunt. And this is the winning team who leads it. I do have to tell you about Sumeet though. He's not here today because, he's at MIT studying more about nuclear operations as if we need Sumeet to be smarter, but he wanted to be smarter. He's studying because we owned Diablo Canyon power plant. They're learning about power plant operations and nuclear operations. So just definitely proud of the team, and you'll get to see some of them in action today. As we think about the future of PG&E, the foundation is always about safety, physical safety for our coworkers, for our communities as well as financial safety for our investors. We firmly believe there's no trade-off between customers and investors. What's good for customers is good for investors, what's good for investors, it's good for customers, and it all starts with the physical and financial safety. So we're going to spend some time today, just reorienting where are we on wildfire safety, where are we on the safety generally? And what are the financial protections that are in place, uniquely in California? You'll hear more about that. But that foundation allows us to deliver an affordable and resilient energy system for customers. Our customers are demanding that from us and our simple affordable model is the way that we can do that, and we're going to spend some time on that today. And all of that leads us to a decarbonized energy system. Now I'd like to refer to this as the hierarchy of opportunities. Some of you might be familiar with the Maslow's hierarchy of needs. And as an engineer, I'm proud of myself that I actually know that, that exists. But this is the hierarchy of opportunity. And that's what we think PG&E is all about. And I'm so excited to be able to share with you the elements the make up this hierarchy of opportunity. So we're going to first start with the physical and financial safety update. Mark Quinlan, our SVP, come on up Mark, is our SVP of Wildfire Operations and Emergency Preparedness, John Simon, our General Counsel; and Carla Peterman, our EVP of Corporate Affairs and our Chief Sustainability Officer, are going to join us to talk about the physical and financial safety elements that are in place at PG&E. And we're going to start with Mark. All right. So Mark Quinlan, has been at our company for many years, but he started actually at ComEd as a meter reader and he worked at ComEd for 22 years before coming to PG&E, how many years ago?

10.

10 years ago and I had an opportunity a couple of weeks ago to see Mark in action with a conference that we held with utilities from around the world literally came to PG&E to learn about wildfire safety and wildfire prevention, which in and of itself feels like we've come a long way for that. And Mark was here when -- in 2017, which I think we would think as a starting point, and I had a chance to see Mark share with all of the attendees much of what he has learned what we as a company have learned and what is in place that is now different than what was in place in 2017. So tell us a little bit about the conference, Mark, and some of the things that you shared.

Yes. Thanks, Patti, and thanks, everybody, for being here. The conference was a really good opportunity to talk just about wildfire risk most of the industry conferences that we have, we're talking about load growth and other things that we'll cover here today, but this one was dedicated to wildfire mitigation, specifically operational mitigations. So as Patti mentioned, very well attended, nearly 50 different utilities, Chilean delegation, Canadian delegation, our partners in Hawaii, all out to learn what was going on in the industry with respect to this space. So I will say that, in my opinion, our story is one of change at PG&E. And I believe all utilities, including us, have the ability to make those changes happen. And we also love to learn. We love to learn what's working, what's not working, and why, so that we can all get better collectively in the industry. And that's really what the conference is really all about was to talk about what are the lessons learned, right? What have we learned over the several years that we've been at this effort? So one of the roles that I had was to talk about the PG&E journey and the PG&E journey started in October of 27 -- the 8th of October of 2017. And we were -- that evening, we were preparing for a windstorm. And so as most utilities do when they see some unfavorable weather coming, they start activating their staffing plans, they start opening up their local emergency centers where we're doing that, we were anticipating outages, a lot of power outages. And so the windstorm that we were anticipating turned into a buyer storm a massive firestorm that we were under matched and not prepared to deal with because we had not seen that. And so I reflect on that day and the days that have passed since then, and I think about what we've done from that point, we really didn't have good visibility into what was coming our way that evening. And so I think about lessons learned from that and all the things that we've done along the way. The intent of the conference was to talk to our peers, my peers, our peers as all the wildfire mitigations what are the most effective and the fastest to implement. How can we close the gap and increase the speed to safety? And that's really based on operational mitigations and we'll get into that in a moment. Today is very different, very different. We have put a lot of time and effort into situational awareness and expanding our ability to see into the future. I want to talk a little bit about what that means. Since 2017, we have installed 1,555 weather stations in our footprint. We had 0 weather stations in 2017 on our footprint that were owned and operated by us. And those 1,500 weather stations give our team the ability to see real-life conditions on the ground every 10 minutes and 80% of those have the ability to be toggled on to provide 30-second observations. Think about that. Well, we're in the middle of an event, and we have the ability to look very specifically at an area and get live weather data every 30 seconds, it really helps inform operational decision-making makes it very, very effective. So that, coupled with big advances in our meteorology capability. Back in 2017, we knew we had a wind event, but we didn't understand the fire risk. Now we have the ability to look forward on a 129-hour moving forward basis and understand fire conditions, the conditions of the fuel, right? And so those two things together, it just provides so much more visibility and allows us to prepare. I'll give you an example. Right now, as we sit in this room back in California, we have over 600 circuits that are EPSS enabled right now because the fuel conditions dictate we need to be in that posture. All week, we have been monitoring a potential PSPS event that's anticipated to enter the PG&E footprint on or around Sunday into Monday. In our high-resolution model, the 129 moving forward, our model can now start seeing into that and provide the team intelligence to appropriately posture the system and to respond. This is how we are getting ahead of it. None of that was available in 2017. It's all available now, and we look at it every single day. 365 days a year. Wildfire season is 12 months a year in California according to us, we have a peak season and a nonpeak season. And right now, we're just entering peak so we are laser focused. So that was what we were providing to our peers in the industry. If you're going to go somewhere first, invest in situational awareness and invest in operational mitigations because that's the fastest, most effective way to get where you need to be quickly.

And then, Mark, there's physical protections. Our layers of protections we also have in place that were not in place.

That's right. So in 2018, after the 2017 firestorm, that's when we established our Community Wildfire Safety program. And from that program, we established the concept of layers of protection. And I know that this team has heard that before. And so what that is, these are all different programs that are designed to take away the wildfire risk, right? Every day at PG&E is safer than it was the day before. And every tomorrow is going to be safer than it was today. And why is that? Because our crews and our folks back at home are working really hard, really hard installing underground, another day, another mile, cover conductor, system-hardening poles, removing veg risk. All of these are layers of protection. But given the size and the scope of PG&E's electric transmission and distribution system, it's huge. And these programs take a little while to do. So to cover us while the system becomes more resilient, this is where the operational mitigations come into play. This is EPSS enhanced power line safety settings and public safety power shutoff are last resort option. Those 2 operational mitigations cover us while the system gets more and more resilient. And with respect to results, Patti, our performance last year, we're starting to see good results. Our CPUC reportable fire ignitions in the high-fire threat areas is down. 68% from 2017 levels, 68%, and no catastrophic wildfires last year. So we're very pleased with that as we move into this year.

And so we're not resting on that laurel, however, and there's more we're doing. What's going to be new in 2024?

Yes, absolutely not. We've come a long way. We got a long way to go, working very hard, always learning. I will say that for 2024, we're looking at a new approach or expanding an approach called post-ignition layers of protection. So everything that I had mentioned earlier all the asset work. These are preignition layers of protection. These are designed to prevent the ignition from happening. But once the ignition happens, we have to have defenses and depth on the post-ignition side of the equation. So it starts with our 24/7 hazard awareness and warning center. This is a group of individuals that monitor the PG&E system and identify any threats to the business or to our coworkers. We have a group of safety infrastructure protection team members and public safety specialists. These individuals came from the fire service from police departments, from public agencies, and they've started a new second career with PG&E to help us interact with agencies to help us prepare to speak the fire service language. These crews are out there every day responding to events. If there's an active fire they're pretreating our assets. They're interacting with the agencies and really providing that direct line of contact with them. And it's proven to be very, very effective. Two, I want to touch on to close. AI, a lot of buzz about AI, we have 1,000 wildfire cameras in the state of California, and of the 1,000, 600 of them exist in our footprint. AI was enabled on all 1,000 cameras last year and the results are tremendous. AI is picking up wildfire hits faster than the human. I can see them. Imagine sitting there and trying to monitor 600 cameras versus AI doing it. It's so effective that CAL FIRE, the state fire department for California is actually dispatching their crews to fires off of AI hits. They're not relying on a phone call. Hey, there's a fire at this intersection or over here. They are actually dispatching right off of AI hits, and I will tell you, they have several examples where a call was never received and they're knocking these fires down under an acre, 2 acres. And if left unsuppressed and waiting for a phone call, this could have been more catastrophic. So that's a very effective post-ignition layer of protection that we intend to move forward and install more cameras. Finally, the last one I'll talk about is also in the area of initial attack. So we have 4 Black Hawk helicopters at PG&E. And we use them typically for construction activities, setting poles, setting towers in our footprint doing construction work. But what we've done this year, we have placed 1,000-gallon tanks that could either be filled with water or fire retardant. And we have -- so we've tanked 2 of the Black Hawks and we've made arrangements with 2 counties, Marin County and Butte County to dedicate the ship for the fire season, the peak part of the fire season for their use. So we'll make do with the 2 that we have left. You can have these 2. They're dedicated for initial attacks. So those are examples of additional things that we're doing, and we're really excited about that.

That's all great, Mark. And I just want to thank you for staying and for seeing this through. And I think it's pretty incredible to think about not just PG&E, California is postured differently, both physically because of all the preparedness that we do and the partnerships that we have and the work that we do, but all the work that the state is doing, but California did some pretty heavy lifting, John, you were here pre-AB-1054, pre-2017 and now after what are these financial protections that we're talking about for investors? What's the legal construct that makes us so confident?

So I wanted Patti talk about the liability risk piece, but the lawyer loves the operator. What's happened here is amazing. And as a PG&E-er, I can't overstate how gratified I am about these changes. And I think the liability world in some ways has changed to that degree as well. So thinking back to 2017, I think there were a number of people in the room who were with us on this, we didn't have much at our disposal. What we had was really expensive liability insurance. And that was really uncomfortable for investors. I'm sure it was for the company. Today, it's totally different. Today, there's an entire regime of financial protections just in monetary terms. Let's start with the $1 billion of self-insurance for catastrophic wildfires that's supplemented by $21 billion in liquidity from the wildfire fund created by 1054 and AB 1054 is comprehensive. It's why I think you were alluding to sort of the model, California, well, it's some model on liability, too. And I know a lot has been written about this, but maybe just to cover some of the high points. So in the law, there's a presumption that a utility is prudent if they have an approved safety certificate or an approved wildfire mitigation plan, both of which we have with then looking further at 1054, the California legislature did something very specific. They set a legal standard on what a reasonable utility is. And in the law, it actually says it is not optimum or it's not perfection. And they did that very intentionally because the legislature was addressing the criticism of the CPUC for rejecting San Diego Gas & Electric's application for cost recovery on the 2007 wildfires. So the law reverses that problem. And then it goes further than that because the law has several elements of what makes a reasonable utility, which is very important to us and others in California, and it should be to you. For one thing, there needs to be a relationship between what caused the fire and what the utility did. That's also trying to address the uncertainty of the earlier decisions involving SDG&E. The law says that in considering reasonableness, 1 should consider factors outside the utilities control. Now this is not a minor thing either because we're talking about things like the weather conditions that no matter what the utility does there's nothing you can do about it. And then the third piece that the legislature did was talk about reasonableness is not being an all-or-nothing proposition, but it's a scale of activities that a utility might make. And I think Mark did a good job of outlining how we're approaching that. And then the last thing would be the liability cap. So when you take all those things together, it's complete. And it's why we think 1054 and for California, we have the model that solves the liability risk.

And that's something when you think about a known risk aka wildfire and known protections, that is a known and knowable construct. And I think it's really important for people to understand those protections in place for investors and to remember always that our first priority, our foundation is around physical safety of our system and use of the mechanisms. Now, Carla, you both studied PG&E when you did your PhD at Berkeley, you regulated PG&E when you were at the CPUC, and now you're part of the PG&E team. You've seen a lot since 2017 as well. What, from your perspective, is in place now in terms of the regulatory and legislative construct in California?

So first, I guys say, I love you, too, Mark because as a regulatory person, nothing gives me more comfort than knowing we have our operations intact, and I can actually go talk about that with the policymakers. And so when I think about what I was doing in 2017, I was at the CPUC. And we didn't have visibility either into what the wildfire risk was. And so very quickly, just like PG&E, the commission, the state had to respond. So we didn't have wildfire mitigation plans. So we didn't know what good looked like or what to expect. We didn't have PSPS protocols. So knowing how to respond and what was reasonable to expect. We didn't have the clarity of SB 901, AB 1054, understanding the prudency standard. And we didn't have actually the human capability on the regulatory side to deal with this. There was no office of energy safety. So not only do we have all of that, but we have several reps under our belt of actually going through the process of having these plans, having them approved. So that's been the real change I've seen. And so now I would say we're in the point of slower to mundane, but necessary regulatory execution. And so for example, almost 2 weeks ago, we got a draft approval of our change order from energy safety. And the change orders are part of the WMP process where we can request changes to update our WMP and we requested a change to update our WMP to align with our general rate case funding. And so seeing energy safety get to that alignment, our safety regulator aligned with our economic regulator, which is an important step. We've also seen progress on our filing of our undergrounding plan. We have now guidance from the PUC that's really clear on what we need to do to get cost recovery, and we're finalizing guidance with energy safety about what we're going to file. And then we're not seeing the state back off in terms of investment. This has been a challenging budget year for California. The governor has had to make billion-dollar decisions about what not to fund. What has not changed from the initial budget put out was investment in wildfire risk reduction. The state is investing $50 million in additional resources to CAL FIRE, 200 new firefighters, and then the budget also tees up plans for future investments over the next few years. And then I'll highlight 1 recent rule-making, the PUC just opened because I think it's -- so it's interesting how wildfire procedures are going to evolve. They put out a proceeding saying they want to look at their oversight of distribution and the policies that are meant to drive safety, reliability, and resilience. And they specifically said we want to make sure these policies that we have are updated enough to deal with the emerging risk of climate change, wildfire, equity, and electrification making sure that the policies, these general orders are harmonious. And so I see that as them continue to integrate and have continuous improvement in their policies and getting ahead of any concerns.

Well and so Carla, something we talk about, there's a book called California Burning, some of you might be familiar with. We -- say we're writing the next chapter and the next version is called California Learning, because we have learned so much as a state, and we want you to know and for you to have confidence in all of those learnings, but as we think about risk more broadly beyond even wildfire risk, Carla, how does the commission and our regulatory body and our policymakers, how are we in California thinking about risk more broadly?

So I would say, I think 1 macro lesson is you need to take the long view on risk and identify what your risk is going to look like, not just a few years out, but a few decades out. So we just filed our climate vulnerability assessment, which looks at the risk of climate change on our assets through the next 50 years. And that's giving us insight about what investments we need to be making, what policy we need to have in order to address risk, not just actually mitigate risk, but to do it affordably. And when we started addressing wildfire risk, that risk came on quick. So we had to respond in a short period of time. And now the more we learn about wildfire risk, the more we're able to identify longer-term more affordable solutions. We're learning from that and getting ahead of that with climate risk. And so that is something that started in 2018. I was there when that proceeding was launched. And so it takes time to develop that capacity, but now we've done that. We've got the modeling to support us making better decisions.

Well, definitely much has changed. Starting with the foundational functional safety of our system and the people who operate it the legal constructs and the regulatory body of work that has been done and continues to be done, I couldn't think the three of you more for the hard work that you have put in to help the people of California be and stay safe, and protect investors as they help us invest in the infrastructure. So thank you. Why don't we thank the panel, please? So this foundation of physical and financial safety enables us then to focus on affordable and resilient energy for our customers. And that affordable and resilient energy system is underpinned by our simple, affordable model. So our simple affordable model starts with capital. Capital deployed. We've talked about our 9% capital implementation. We've got these key enablers. Our O&M cost reductions. We've got our electric load growth. We have our other efficient financing. All of these things contributing to customer bills, rate of change at 2% to 4%. And in fact, in our general rate case, it was just approved from 2023 through 2026, the average CAGR is 2% to 4%. In fact, closer to 2% than 4. So this plan is good, and we're not making any changes to this plan today, but I want you to know that we think there is opportunity in this plan in the months and years to come. So starting with the opportunity for capital investment. We see potential, there's demand. We can't express our capital deployment meetings inside the company are like come on, everybody has work that they want to do for our customers and our customers are asking us to do it. There are mechanisms like SB410, that's a live proceeding right now that would add incremental approvals for revenues to serve new capacity and new load. So that's a big opportunity, and we think we could do more, but we can only do more. If we know that it will allow our customers' bills to be more affordable and for it to be accretive to earnings. So we need to make sure that we deploy the right capital at the right time. So we know that with our performance playbook, we're seeing the O&M savings. I've shared many times with you that our capital to O&M ratio is a huge opportunity uniquely for PCG. Our capital to O&M ratio is 0.85. That means we spend $0.85 on capital for every dollar we spend on expense. The average utility is $1.40 of capital for every dollar of expense. The best-in-breed are $2 of capital for every dollar of expense. That is headroom for us. That is room for us to grow, and we know that our processes can be more efficient. We know that we can have more savings. You're going to hear more about that actually from Carolyn and Jason here in just a couple of minutes. There is potential in our O&M cost reductions. Our electric load growth, you're going to hear more news. I know everybody wants to know what's the news. What's the data center story? What's -- we will share with you what we see in the data center front and what we see in electrification generally. So we'll talk about that some more here today. And then obviously, other financing costs and financing costs going down. Carolyn will talk about our commitment to investment grade. Given that we're sub-investment-grade, you know that we'll continue to move in that direction and lower our financing costs, but there's other mechanisms that will help us lower those costs, too, which you'll hear more about today. All that to say, our winning simple, affordable model can, in fact, be amplified. It's a winner in the plan. Our plan today is a winner, and we're excited that in the coming months and years, we'll be able to get the full value of this affordable and resilient energy system for customers powered by the simple affordable model. And I know it sounds simple, sounds obvious, but I think you also know that everybody doesn't do it. We have the potential to do it. So with that, I'm going to invite Carolyn. And so Carolyn Burke, our CFO; and Jason Glickman, our Chief Engineer, are going to share with you and break down the simple affordable model into more detail that I think you'll enjoy.

All right. Thank you, Patti.

You're welcome, Carolyn.

So I just want to extend my warmest welcome to everybody here in the room and on the webcast I am thrilled to see all of you here, and I'm thrilled to be here and tell you a bit about our story. Jason and I are going to use the simple affordable model to walk you through where we see additional opportunities for even better outcomes, stronger outcomes for both our customers and for our investors. And we're going to start with customer capital investment. It's currently in our plan at growing at 9.5%. You're going to hear from us where we see opportunity to actually lift that up to 10%. And how do we see that? It's in each of those key enablers that Patti walked through. We actually see headroom in each and every 1 of them. We see additional savings in O&M. We see diverse load growth, and we see multiple paths to efficient financing. Now there's going to be 1 key message that you're going to hear throughout this presentation. Patti mentioned it as well. This model does not depend on any 1 single element in the plan. We see upward flex in each and every one. This is part of our no-big-bets approach to how we manage the business. We work every possibility, every opportunity, and we embed flexibility throughout each and every element of our simple, affordable model. So let's talk about capital, okay? Now this slide should look very, very familiar to you. It is unchanged from our last earnings call. We have 9.5% rate base growth over the 5-year plan. We have a $62 billion capital plan. And we continue to see at least $5 billion of incremental capital opportunities. Now we will only pull in those opportunities into our plan if they are affordable for both our customers and for investors. What that means in very practical terms, for you, in particular, our investors, is that we will pull in capital into our plan only if it is additive to our earnings. Now I'm going to hand it over to Jason, who's going to provide you with a little bit more color on our capital plan.

Thanks, Carolyn. Good afternoon, everyone. So the last page was a page you've seen, but I want to share a little bit of new news and some more color in terms of what sits behind that $62 billion over the next 5 years. First and foremost, if you look at the mix functionally, $35 billion over half in electric distribution, the next largest category in electric transmission, so between those 2, almost 75% of the capital plan over the next 5 years is in electric T&D in the wires business. And then you see the balance of the investment throughout the remainder of our infrastructure and enablers. Importantly, this investment delivers value for customers across a broad range of value drivers. There's, of course, our safety investments, which you heard Mark and the team talk about at length, whether that be wildfire mitigation or other safety investments. There's bread-and-butter utility reliability improvements from our largest hometowns in San Jose to our whole service area. What we're also seeing, though, is growth. Patti talked about, alluded to it, we're seeing a ton of growth and opportunity in capacity upgrades and new service connections. Over the course of this plan, we're going to connect thousands of residential customers for new housing, thousands of small businesses, and commercial industrial customers who want to get on to PG&E system to power their prosperity. And of course, their energies needs to be clean. And so we're continuing to invest in the clean energy transition, whether that be our own battery storage at grid scale enabling storage at the distribution level, interconnecting utility-scale renewables, and of course, charging and powering EVs. And so when you look at this and you look at this mix of investment, again, the important thing to note is it's balanced across customer needs, and we have the ability to adapt and flex as those needs evolve and we're not making any 1 single big bet to enable it.

Okay. So how are we going to afford that capital? Let's talk about our first enabler in a simple, affordable model. O&M savings, which happens to be my favorite one, okay? And I will specifically speak to where we see additional opportunities for above and over the 2% target. So let's start with our track record, okay? So in '22 and '23, we exceeded our target of 2%. This was largely driven by top-down really good business decisions, right? Our self-insurance program, how we manage our vegetation program. You can see those savings in the line item there. It's called efficiencies and insurance. But I want to draw your eyes to another line item, planning, execution, and automation that's been growing. That is where we track our savings from the bottoms up from our field operations and our planning teams. Now let's look at where we think our long-term O&M plan could grow. Thanks to the performance playbook and the implementation, particularly of lean and wasting elimination by our field operations and by our engineering and planning teams, we are seeing more savings. And we believe that, that's going to power ourselves up to the 2% to 3% of O&M savings. And I'll just remind you what Patti mentioned earlier. Our capital to expense ratio was 0.85. Industry average is 1.4. There's plenty of improvement for us there as well. Now it's been a year -- a little bit over a year since I've been CFO. And I was 3 weeks into the job when we had our last Analyst Day. And I share with you some reflections on the adoption of lean at PG&E based on my experience. And I was impressed that I really felt that it was being embraced by all of our coworkers. And I also asked you to imagine what it would look like for 28,000 employees or coworkers to actually be armed with the lean mindset. Well, this is what it looks like. It looks like 2% to 3% of O&M savings year over year over year. This does not keep me up at night, we can get this. Now we have real examples as well. And in fact, 1 of our teams is working on initiatives today that will save $100 million a year. That's 1% of O&M. I think Jason is going to kick us off on the one.

All right. Well, thanks, Carolyn. Well, everyone, we're going to take a look at our performance playbook in action. So why don't we roll the video? [Presentation]

Well, what an amazing example of our performance and playbook at work. I'm so proud of the team. When we look from engineering, from operations around the company, where we've been able to make sure we're using the right technology and the right processes to get the right work done at the right place at the right time so that we're delivering value for customers. And I'll tell you that that's just 1 example. We're taking the same approach, bringing our playbook to bear across every one of our major workflow processes. So we see lots of opportunity on the road ahead. And this is a great example, as Carolyn mentioned, $100 million of savings just in this workflow, lowering O&M, and improving our O&M to capital ratio over time. Okay. Let's shift to the second driver, the second enabler of the simple affordable model in electric load growth, where we've talked about in our plan, we see a 1% to 3% growth rate. We're sharing today that we see additional opportunity there over time. We see opportunity for beneficial load growth for customers. As we look out to 2040, we can see that our load growth has the opportunity to nearly double, nearly double demand for our product. And when you translate that into a growth rate into a CAGR, it's about a 4% CAGR at the high end to get that doubling over that period of time. It's driven not by any 1 factor, it's driven by a number of factors. Electric vehicles are about half of the growth that we anticipate over the course of that time frame. Data centers also contribute significantly provide a nice source of baseload load growth. And then over time, we'll layer on more building electrification, which can like EVs be a flexible load. Now you'll see the range here, and I think the range is important to note in the sense that any one of these drivers, the pace and the adoption of the technology and customer behavior and policy, we know it's not going to be a straight line. It never is in a transition. But our plan doesn't rely on any one of those, and our plan works under this whole range of scenarios from a load growth perspective. So I want to take a couple of minutes now and talk about each of these drivers, so you can see what we see in terms of the growth opportunity. We'll start with EVs. What you're looking at here are the number of electric vehicles that are on the road in PG&E service area and the growth over the last few years. Today, on the road in our service area, we have 580,000 electric vehicles. Let me say that again, 580,000 electric vehicles. It outpaced our plan. Actually, our plan what we were expecting was 525,000 by the end of last year, early this year. We now have, in our service area, 25% of every -- of new cars sold are electric or battery electric. In some Bay Area counties, that's just the average, the 25%, in some Bay Area counties, that number looks more like 40%. So nearly 1 in 2 new cars sold is electric. We're past the tipping point for electric vehicle adoption in those locations. And you don't get to that type of adoption without confidence that the infrastructure is there today and that we're going to continue to build the infrastructure to be there tomorrow. In fact, earlier this year, the state announced that California had achieved its goal of 10,000 DC fast charging ports a year early, a year ahead of schedule. We're very proud to have contributed to thousands of those chargers, and we're continuing to do so in our work plan this year, next year, the year after through the duration of this plan. So that's where we are today. Now as we look forward, we see continued growth. We see continued growth for EVs. And the thing that we look at is the fundamentals for our customers' work, the economics work, driving an EV versus a gasoline-powered car in California, the math works for customers, the customer experience, whether it's charging related or otherwise when you see your neighbors driving EVs, it gets better every single day. And of course, that's underpinned by robust state policy heading towards a mandate around 100% sales of electric vehicles by 2035, but I'll note, again, our plan doesn't rely on those policies come into fruition at exactly the right point in time. We're on 100% of consumers complying at exactly the right point in time. We have flexibility and adaptability to however that pans out. Okay. So that's EVs. It's not old news, but we wanted to remind you of it. Now we're going to share some new news. I'm going to talk about data centers. So one thing that I think is really important to remember and something we're very proud of is, we're the hometown utility for Silicon Valley. We get to serve the home of technology innovation for the world, and we're really proud to do that. We have, in our pipeline over the course of this plan, now demand for 3.5 gigawatts of new data centers, 3.5 gigawatts of new data centers, and we'll double click into that a bit in a minute. But I want to share with all of you why the Bay Area continues to be such a robust location for data center demand. One is history. You've got cloud services providers that have historically located there, including the global headquarters or global center for Microsoft Azure. You've got proximity to fiber, we've got 3 Internet exchange points right in the Bay, which enables low latency and enables volume, particularly for West Coast traffic. And let's also remember, you're connecting -- if you're at one of those data centers, you're connecting to a grid that is already today majority green. That's not something we have to build in the future, invent from scratch. You're connecting to a grid with PG&E and the CISO that is already majority powered by renewables. So this is the start. I don't want you to just take our word for it. Let's hear from some customers. Let's roll the video. [Presentation]

Amazing. So that was two customers you heard from. There's 19 customers that are currently in our pipeline in the Bay Area to bring data centers online over the course of this 5-year time horizon. So this is what sits behind that 3.5 gigawatts that I referenced earlier. And you heard Ashwini on the video, one of our transmission engineers talk about this idea of a cluster study. And I want to just elaborate on that a little bit because it is a new approach. It's part of bringing our performance playbook to bear on interconnecting large loads and data centers specifically. So typically, what you would do with the data center is we would receive an application. We would learn more about that load from the customer. We would study the infrastructure acquired, and then we work together to engineer and build it. The second application comes in. All good goes through the third one, we need a different type of upgrade. And then the process gets elongated with some rework, maybe we don't have the right materials. You study this all at once, and we're able to do 2 things. One is we can validate the demand. This process is really helping us to validate the demand over the course of this year. And it's also really accelerating time to power because we don't have to go back and do those rework from an engineering process perspective or a supply chain perspective. We can work with those customers to meet those timelines. Now I will note, 3.5 gigawatts coming to fruition in our service area in this time frame, we don't need all of this to happen. And we understand, we have, as I mentioned, a history with data centers and the Bay, we understand the market dynamics. And what's currently in our plan is just a few hundred megawatts. So if even a portion of this ends up coming into fruition, it is significant upside opportunity from a load growth perspective. Okay. Let's shift gears to the last driver of load growth, building electrification. And what's unique about PG&E. And you see the map here of our service areas across Central and Northern California. What's unique about PG&E is our scale as an overlapping service area dual-fuel utility, it is not commonplace to have millions of customers in the same locations where we serve both electricity and natural gas. And what that enables us to do from an engineering perspective, from a customer perspective, from a rates and regulatory perspective is go find opportunities where it's beneficial to electrify today, does not require a new policy. And so we're already doing that. We're already doing that. We're in our new service connections, we've got almost 85% of new service connections that are coming in electric only, and we're also doing it on conversions where we've got dozens of gas distribution or transmission projects where we can actually retire that infrastructure in a safe and economical way and convert the customers over to electric. And so what that's doing is it's giving us a model and a capability for how to do this in an orderly manner. Now we're certainly aware and engaged in the policy dialogue, whether that be at the local level or at the state level in terms of building electrification. And we also know that those policies, again, are not going to move forward in a straight line. They're going to zig and zag, they're going to take different shapes. They're going to come on at different timelines. Our plan and our ability to electrify and drive load growth and growth beneficially for our customers doesn't rely on those policies. So I want to tie together the load growth story for you and recap. When you look at through 2040, we have this incredible opportunity to nearly double demand for electricity on our system over the long term. There's multiple drivers. There's multiple scenarios. Our plan does not rely on any big bets or any one of those drivers absolutely hitting the nail on the head at the right time. And I just want to provide a little more perspective where I get excited as an engineer about what this can mean for customers. You have data center demand that's going to come in, you're going to run at a very high capacity, in fact it can be baseload. That's a fact that's baseload demand when that comes in. Then you've got electric vehicles, which are the ultimate flexible load when we think about managed charging and vehicle-to-grid integration, bidirectional flows eventually, and then building electrification as well can be a flexible load. It's interesting, I'm sure some folks may have noticed earlier this week our friends at Apple made announcement as part of the worldwide developers conference, where they announced that they're going to be including in the next release of iOS integrated features within the home widget to be able to manage energy. And that PG&E is the exclusive launch partner for that. Now Apple is obviously a unique partner, and then we will have a lot more to say about that in the months to come, but that's an indication of the potential we see in terms of load management and being able to orchestrate all of this load in a manner that's beneficial to customers. And I just want to leave you with 1 statistic. It's an important statistic about what we see for the electric system and why this load growth can be so beneficial. Today, if you look at our wires and you look at the average day an average spring or fall day compared to the summer peak. The difference between those 2, our average demand versus peak demand is about 45%. In other words, the system on average is 45% utilized. Think about a world where we can drive that utilization, bringing this load on, orchestrating the demand and grow that 45% to 60%, 70% or even 80%, so we're able to deliver more value for every customer dollar that's invested in infrastructure. That's why we think it's beneficial load growth over the long term. And I'll let Carolyn say a few more words about that.

All right. Thanks, Jason. And that's some really cool stuff. And now let's talk about how this growing load is beneficial both to our customers in terms of affordability and to our investors in terms of capital and rate base. So we're going to use data centers as an example here, okay? And based on location and the type of transmission upgrade, 1 gigawatt of new data center load would require capital of about $0.5 billion to $1.6 billion. Based on our transmission service rates and an assumed capacity factor, that equates to about $450 million of new revenue. Now if you net out the return on capital, that results in about 1% to 2% savings to our customers on their monthly bill. This is what we call good load. This is the load we like. Now if you look at EVs and do the same exercise, the results are even better. Adding 1 million new EVs requires capital of about $1.5 billion to $2 billion and results in 2% to 3% savings on our customers' monthly bill. Cool stuff, good stuff. So now let's go to our third enabler of our simple affordable model, efficient financing. We show this as contributing about 2% to the simple affordable model. And we're often asked what falls into this bucket. So let's look at our track record. The answer is quite a few things, quite a few different things. As you can see, we've executed on a lot of small and a lot of large transactions over the past years to capture value from efficient financing. And as we look forward, we see a number of paths to efficient financing. The first and foremost on my mind and the most important to me -- sorry, is achieving investment grade. And that will include, I'll just remind you that we have a mid-teens FFO to debt target out there. It also includes our pending DOE loan and other securitizations. Now let's just sit back for a moment and let's just do some math, okay? So let's just assume that we can save 150 basis points on our borrowing rates. That's $15 million of savings for our customers on every $1 billion borrowed. I don't think 150 basis points is that unmanageable given the opportunities that are in front of us. Now we're planning to raise $25 billion over the course of the next 5 years. So just for easy math, let's just assume we're able to save 150 basis points on half of that. That results in $200 million of savings on interest cost, savings directly to our customers that equates to 2% of O&M savings. Put another way, that is equal to 1% savings to our customer bills or $0.07 of EPS for our investors. That's meaningful. Now we have a couple of examples of efficient financing that we are managing. And we have one that we want to share with you, and it's a message from someone that I think many of you will know. So let's go ahead and queue the tape. [Presentation]

Okay. That's fun to see Leslie. All right. So we're -- let's bring us back to the simple affordable model. So the simple affordable model is quite simple. And there are no changes to our plan as it relates to the simple affordable model. It works and it works quite well. What we think -- what we've shared with you today is that we see additional opportunities and flexibility that make our plan even stronger and we mean stronger in all senses of the world, more customer capital investment, better outcomes for affordability, and more earnings power for our investors. Let me say that again. We see a clear path to more capital investment, lower bills, accretive earnings, while we're improving our balance sheet. So let's go to our guidance. I'm going to end here on this slide before I hand it off to Patti. We are reaffirming -- can we go to our next slide? Okay. We are reaffirming our guidance for 2024, $1.33 to $1.37 with at least 9% growth in each of '25, '26, '27, and '28. We are reaffirming our capital plan of $62 billion, and we are reaffirming our financing plan associated with that to support that $62 billion, which includes a balance of utility debt pay down of our parent debt of $2 billion by the end of 2026, $2.5 billion of dividends which we will ramp up over the course of the plan and particularly in the latter part of the plan, and then $3 billion of equity, which we expect to issue through a very normal ATM program beginning next year, and it will be ratable over the following 4 years. As we have noted, we have built this plan to ensure that we have flexibility because we have significant capital needs on the system for our customers today, and we want to improve our balance sheet. We want to be investment grade. We believe that end in that sentence is extremely important because it's that end that's going to allow us to rebuild our business to be stronger consistently high-performing for both you, our investors, and our customers. And with that, I'm going to hand it off to Patti.

Thank you, Carolyn. Thank you, Jason. Wonderful, thank you. I mean I love the numbers, and I love you doing math live. I really appreciate that. I love when my CFO's doing math. That's good. I want to click back out. So we clicked in pretty deeply on the simple affordable model. I think we've made the case that there's -- I like to say simple affordable model amplified. We have potential to amplify that simple affordable model so that we can deliver this decarbonized energy system. I was thinking -- I was kind of going back in time and thinking about when the utility industry, in fact, transitioned and retired coal plants, I did it myself. We retired coal plants and replaced and transitioned to natural gas and renewables. And I'm going to suggest we didn't do that because it was just a good thing to do. We did that because there was an economic equation that made that work. It made it work for customers. It made it work for the plant. It made it work for investors that transition from coal to gas and renewables. I'm suggesting that we're entering that same era again as it relates to decarbonizing the economy. And let me give you some underpinnings to our logic here. Number one is we look at our own service area, PG&E service area, we can see a reduction of CO2 emissions between now and 2040 of about 65%. That's predominantly driven from fuel switching, specifically gasoline to electricity. So from internal combustion engines, I think Jason well made the case that electric vehicles are selling in California. Electrification of transportation, which incidentally transportation is the #1 form of carbon emissions in California. So that transition is vitally important. And so as we make that transition, household energy spend will go down 20%. That's 20% that a customer, a family, a household can put back into the economy for other things other than energy. And that's because electricity is a more efficient fuel than gasoline. It fundamentally needs less energy to deliver the same value to customers. And so the decarbonization of the economy in California can in fact have a lower societal cost. That's an economic equation that works. That working economic equation fuels our growth. We, at PG&E, are looking at California and seeing us entering a golden era of electrification and decarbonization in the Golden State, I might add. And that golden era will be powered by the people and equipment of PG&E. That's an exciting future. As we talk about the building blocks of safety, our simple affordable model, and the ultimate aspiration of a decarbonized energy system. This is a winning value proposition. It's a winning value proposition for our customers, for our communities, our home talents, and for you, our investors. So we're so glad you're here today. We're going to now transition to the Q&A period of our program, if you can please.

John, Thank you, everyone. So as everyone comes up, we're going to take questions in the room on the microphones, so please wait until you have a mic and state your name and firm for the webcast. And then if you're on the webcast, you can put in questions in the Q&A box, and we will relay them here in the room. So we're in position?

Yes. Jonathan, we'll hand the mic to the first question.

Nick Campanella at Barclays. You talked about you don't want to add capital to the plan, if it's not accretive to earnings. How are you thinking about accretion to EPS? And then can you just remind us if you added capital to the plan, how to think about that $3 billion of equity in the walk?

Yes. I think let me just start with the latter part of your question, how to think about the $3 billion of equity in the walk. I'll just remind you that we have a fairly flexible financing plan, right? We have the dividends, and we have the pace of ramp-up of the dividends that we could choose to do either more slowly or more quickly and then we have the $2 billion of corporate debt that we could choose the timing of that we've chosen that we're going to pay that off by the '26, but we could pace the timing of that differently as well. So that's how 1 of the methods of thinking about the flexibility in our plan afford the -- bring in that $5 billion or some of that $5 billion into our capital plan. And I'm sorry, I wasn't sure about your first question again.

You talked about you're not going to add capital unless it's accretive to earnings, but I was just asking what about EPS?

Yes. No. Well -- and that's on the EPS is very similarly. As we've said, we have 9% for '25, '26, '27, and '28 and we would -- that is including with our current financing plan, which embeds a lot of that flexibility. And so we're committed to that. As we think about bringing in new capital, we're certainly thinking about how that EPS might grow as well.

Yes, EPS as well.

Stuart Zimmer from Zimmer. So we see PCG grow trading at about 80% of the industry average multiple despite being the fastest-growing utility in the country, I might argue the best managed utility in the country.

No argument here.

That's correct. And I'm curious to hear your thoughts on why and to the extent you think it might relate to perceived fire risk. It's funny because while Warren Buffett criticized the company for fire risk, it seems to us that it is actually the very best prepared and most technologically advanced utility in dealing with fire risk in the country so much so that when utility CEOs come to visit with the Zimmer headquarters like today, where Head of Arizona Public Service came to sit down with us and talk about fire risk in Arizona. He actually cited things that they're copying off of PCG's paper, like they've recently implemented PSPS for this summer. They are in the midst of rolling out weather stations. You heard about how you have 1,555 built so far. They talked about how they're implementing and putting cameras in place much in the same way that you have. And this sets aside the fact that California has AB 1054, which provides financial support case things does have. So I'm curious to hear your thoughts on how well PCG is prepared for fire. When we see other states starting to feel it. Obviously, Warren Buffet is complaining because he got hurt hard with his ownership of PacifiCorp with the Hawaii Electric deal with the consequences of the island of Maui basically burning down. We've seen Excel deal with 2 fires. And now it's not just California, but people are seeing other states have to deal with fire risk. So I'm curious for you to address that and how PCG stands relative to the rest of the country's utilities and why you think this stock would have to go up 25% just to trade on top of the average even though it's probably the fastest-growing utility in the country.

So Stuart, thank you, and certainly, thank you for your ownership over the years. We -- a couple of things: One, I've been pretty clear, I think Warren got it wrong. I don't think his letter reflected the current state of California, which is why I invited these incredible people to join me today to make sure you know that we believe that we have a construct in place and we have the physical protections and the financial protections that change the game for investors and PCG. We feel strongly about that. We feel -- we know -- and when you run an operation, you're going to be the first to know. And I think our commitment to self-insurance reflects our recognition that our system is safer than it has ever been before, and that's in the best interest of customers, our self-insurance program, and we're going to reflect the cost of that insurance to our customers much better than a commercial insurance company is going to. So we know the risk has been reduced at PG&E. We know that we have the systems in place, and we know that California is a partner in that readiness and in that safety posture. All that to say, we took a stand as a leadership team when we took -- when I took over the helm and we gathered and built this new leadership team, we took a stand at catastrophic wildfire shelf stop. And we didn't just take that stand for -- we didn't say as a result of PG&E equipment, we didn't say in Northern and Central California. We said catastrophic wildfire shelf stop. So it is the cause of our lives to make sure that every utility knows. And so when Mark hosts this event with all of these people, and I went to it and I met all these people from utilities, I do think they're learning that this risk exists in other places. And we're humbled and we definitely are not finished. We're not done yet. There's more that we want to do. And just as Mark said, the system has never been safer than it is today, and it's going to be safe for tomorrow still. All of that's true. Now the valuation is up to investors. And I think I have a fundamental belief about this that performance is power. And as we perform, people will come to understand what has actually happened at PG&E and the tremendous turnaround that is on track and picking up steam. So we just feel like our job is to run the business, and that's what we're going to do, and we'll let the valuation stand on its own.

Jeremy Tonet at JPMorgan. Just wanted to touch base, I guess, the path to investment grade could offer some notable savings there. I'm just wondering if you could frame a bit more, I guess, how you see the path or timeline to that? And is more on FFO to debt? Or is it wildfire risk mitigation. It seems like that's pretty well-advanced, given everything discussed here. So just wondering how you see -- what's most important here, the need to pay down the $2 billion upstairs at the holdco. Is that really pressing here? Or just curious for your thoughts on this.

So I'll hit some high points and then turn it to Carolyn. Number one, the rating agencies, first of all, have been very clear that certainly, wildfire risk is something they've got an eye on. So they're watching another season. As Mark described, we've had significant improvement, we can point to those things, but they also want to make sure that we do have the cost structure that's right, and we have the management in place and the governance in place. And so we're continually taking off each of those boxes. And again, same answer, performance is power. When we perform, we have the power to influence those ratings. We have the ability to help our rating agencies be confident and comfortable in putting their name on our performance. But Carolyn, I know you spend a lot of time on this.

No, that's right. I mean we -- Mari, our Treasurer, and myself, we have ongoing discussions with the rating agencies. As you know, we're 1 notch below investment grade with Moody's and with Fitch and two notch just below with S&P, but we've seen -- and we're on positive outlook with both Fitch and on Moody's. And so we're extremely focused on the simple affordable model, which as Patti said, is getting those O&M reductions and focusing on our FFO to debt metric. I think it is the qualitative measure still, it is the wildfire risk, but it is also improvements in our financial metrics.

That's very helpful. One quick follow-up, if I could. Just with regards to any incremental thoughts you might share as far as national wildfire policy, the potential for that to come through. Anything you could share?

Yes. John, I'll pivot to you. On National wildfire policy, what are your thoughts about that?

There's a lot of discussion about it. I think it's a good thing that that's happening. We like what we have. And so we've been advocating as part of those discussions, the 1054, AB 1054 should be the model, devil's in the details. I think it's good that people are talking about it. Additional financial backstop is a good thing, but it's important to us that 1054 be the model. And I think discussions are ongoing. And there are several different groups who are looking at this. EEI is looking at this, Michael Wara at Stanford, just published a proposal with the Brookings Institution. Interestingly, all the different pieces are pulling elements out of AB 1054. They have very similar concepts. But as I said, the devil is sort of in the details and they're not that far along at this point.

And so our intention would be -- we're sticking with AB 1054 until something is better. We're not going to sign on for a change that is not superior. So we're very clear in the benefits that it provides. And we're experiencing how those benefits materialize for investors and for our customers. And so we're definitely involved in helping and talking and making sure and sharing and John has spent countless hours with his peers helping them understand some of the nuances based on our experience.

Steve Fleishman of Wolfe. So a couple of questions on the load growth information, and thanks for kind of connecting that with the investment opportunity, too. But just on the data centers. I think you said you have a couple of hundred megawatts in your plan, but there's potentially 3.5 gigawatts. Could you give more color on kind of what are the obstacle? How much of that is in your control in terms of connecting people quicker that want it and so things that you can do versus not sure if that demand is really committed yet or not? Like how much of that is in your control?

Yes, you want to go ahead, Jason, why don't you take that and I'll pile on.

Yes. Thanks, Steve. Well, one, I would say, the nature of the process that we've undertaken here where we're looking holistically across all the applications around the Greater Bay Area and the nature of the information we're gathering. Part of what we're trying to do is make sure that we can focus on the levers we can control. So we have -- we know the sites that folks are looking at from a land and permitting perspective. We're looking at what are their electrical needs and what that will require in terms of long lead time materials. So this process -- this cluster study process is actually intended for us to get more of that forward visibility is one that I would say. I think the second piece to note, that's what we're seeing in the pipeline. That demand what customers are signaling to us is that they would expect that to materialize over the course of the next 5 to 6 to 7 years. So it's not like it's all at once. And so what will really be working hard with them in collaboration is to understand what it means in terms of, in particular, the transmission system in those areas, and we'll get a better view of that over the course of this year.

Yes, I don't have any.

And just on the kind of 1% to 3% load growth and the 2% to 4%, maybe just over this year, the next 5 years? Kind of how should we see that load growth progress? Does it kind of start at 1 and then start accelerating higher or any thoughts on that?

I would say over the time frame, we do see acceleration. We're not going to get too hung up on month-to-month or quarter-to-quarter even on a normalized basis because we know there will be fits and starts as we get new technology in place and these data centers come online. But we do see some acceleration, particularly towards the back half of this decade into the early 2030s. But that will start to come on. We think that range will start to progressively kind of ratchet up over the next couple of years and then accelerate through the back half of the decade.

Well, and I think one of the things that's interesting about this load growth and the forecast, and I love how Jason shared this grid utilization rates. There's capacity to add new load without having to do the upfront investment today that gives us time to get those plans in place to build -- to buy -- to procure that equipment and meet their needs over time. But as we look at that load growth at the same time that we're talking about doubling the load growth, we're also looking at only a 13% increase in peak because of the dynamism of electric vehicles. And we think that's very exciting. This app with Apple was a great indication that how load and supply are going to be managed in ways that never were before. There wasn't, number one, like a resource, a demand on the grid that was so flexible as electric vehicles. I tell people all the time when they ask me, is the grid ready.? Not only is it grid ready, the grid needs these EVs. It's the best thing that's ever happened to the grid is this electrification of transportation. Just as an example, open public school district, just electrified their entire fleet of buses. That fleet of buses is not operating at 06:00 p.m. on an August night, right? That's a perfect resource. We can use those batteries as a vehicle to grid resource. I was just last week at our San Ramon Center with our distributed energy resource management team, and they're going through all their plans about what are we doing to enable and digitize the way we operate the grid. Mark's team was there in full force. This is the team who operates our distribution and transmission system, and they are deploying new technologies to make new load and load management possible. We've got use cases in place right now, for example, on our new distributed energy resource management system for what we call a flex load. So I think some of you have heard me tell the story that Tesla wanted a 3.8 megawatt supercharger, and we said in our old process, the answer, which we originally gave, which is why it's our old process, was yes, okay, we'll get that powered up for you in 4 years. Now Tesla did not like that answer. We are privileged to serve Tesla and all their superchargers. And so they -- we work together and figured out that 360 days of the year, we could give them 3.8 megawatts, but those handful of days -- handful of hours on those handful of days, we needed a flex arrangement. We had no way of offering that, modeling it, forecasting it before. But using these new digital tools, we can forecast that. We can plan that, and then we can operate that with the customer so that we don't overload the system on those handful of hours. The rest of the year they can have a full and charging. So the idea that we can have a dynamic grid is just going to be a very exciting part of serving this load in the most economic way that benefits customers, both the customer who's electrifying and all the other customers on the grid.

Patti, I just want to hit one more thing about that bus project because there are other buses that have electrified. The Oaklands School District is the first 1 to have VGI-enabled buses in the countries. So they're actually going to be participating in a program with us this year to actually have those batteries serve the grid. And so it's -- we've been talking about this for years, but we're actually naturalizing it now for the first time in the country.

Shar from Guggenheim. Just on the 9% to 10% bucket with potential opportunities, which you're now showing, any sense on kind of timing there? So is it the front end of the current plan, backend of the current plan? And can the balance sheet absorb that. So as we're thinking about that $3 billion number?

Yes. I mean, that is the whole question. We will bring in that new capital when we can do it affordably for customers, and you can see a lot of this load is good for customers. When we can have a balance sheet that is healthy, that can absorb that new investment and it's accretive to earnings. And so that's what we're working. And so we're working this plan every single day to bring that value to you. I don't know, Carolyn, do you want to add anything else?

No, I don't think I have anything else to add, Shar, I mean I think that is our plan, and that's how we're thinking about it.

It's exciting. I think it's exciting. This is a wonderful era in California, in the sector. But I think for us, in particular, position where we are to serve the innovation capital of the world and to the adoption rates of EVs, we're going to see, and we are experiencing the clean energy transition first. And I can assure you, I know you're hearing lots of things in the national news and what have you. California is not afraid to do hard things. California is not afraid to innovate. California has taken a stand. We've experienced the effects of climate change. The state has taken a stand that we are going to decarbonize the economy, and we get to power that.

Got it. And then just lastly, just on the efficient financing. Obviously, you guys talking about future partnerships. Is that still referencing Pack Gen? What else could you be referencing? And any kind of updates on your strategy there?

No. It's not necessarily -- it is referencing a number of different partnerships that we're open to. Anything that we can do that will allow us to do more work for our customers affordably, we are going to look at. And so that includes a whole array of different types of partnerships.

Ryan Levine with Citi. In terms of the 3.5 gigawatts of data center outlook, how has evolved in recent months and quarters, and in terms of number of clusters, is there any color you could provide around the -- how segmented that is, if there's any big bets that you're levered to?

Yes. I'll speak to that. So we've seen, like the industry an acceleration, certainly. We've historically, I referenced in our plan that our plan was in the low 100s of megawatts going forward. That's historically what we've seen. In 2023, we saw that jump up to almost 1 gigawatt, 800 megawatts. And then we added another 2.7 through this cluster study where we invited applications so we can get a holistic view of the demand. I think we showed it on the slide, but these tend to be in particular, because of local regulations in California for backup generation where for local air quality, there's a 99-megawatt cap for the backup generation. So on average, you can think about this in 100-megawatt increments. It varies by customer, but that's a reasonable way to think about it.

And in the materials, you can see, there is a range, but there's a lot that are just under that 100-megawatt threshold. One of the things that was really important for us to do and maybe some of you noticed DV Rao is in the house. DV has joined the PG&E team, some of you may remember or no, DV, I consider him a financial wizard. And he does very good analytics and he and Carolyn are working together and did a lot of hard work with some of our analysts to figure out what is good load. So when Carolyn talked about what is good load, I think there have been a lot of questions about that. Is this data center good load or not. And so when we look at that, these applications, it gave us courage and enthusiasm to reach out to these data centers and help them know that we're open for business. There were rumors on the street that PG&E was out of power, and who's going to build something in California and all these things. Well, when you sit down with the team and you're not just looking at applications because an application reflects what they think you might be able to do when we sit down with them and say, here's what we actually can do. And when we know what good load looks like and we invite good load, it showed up. And I think that's the thing that makes us pretty bullish that we will find ways of building this into our system because it will benefit our customers and our investors.

And then one follow-up. Patti, you had highlighted automatization and digitalization is an opportunity. Where is PG&E in that journey in terms of automating its system? And where do you see the biggest opportunities? Yes. So for automation, specifically, we know that the digital grid is going to be a lot more automated. But we see automation. We, in fact, ran a hackathon on automation 2 years ago and had our back office teams automating all sorts of forms and work that they do, and they have contests they gave away a waste can as a trophy. We're like figuring out how to automate work. So the things that are available in Microsoft BI tools that people can learn to utilize and automate the standard work. But automating the grid, I don't know, Mark, if you want to talk about what's the grid of the future look like versus -- you're an old operator, grid operator, what do you think?

Well, I think you had hit it on it a little earlier when you mentioned the DERMS potential. So we're just starting to step into the space. Transmission has always been a 2-way power flow generation, a market system that's kind of governed in overseen by the California independent system operator sends pricing signals for generators to come on and off. So flows are always moving around on the transmission system, way more complex and transmission and distribution. Where I see distribution going is equally or more complex than transmission because of all the virtual power plants, viewing all the grid integration, all these flexible loads in that DERMS system that's going to have to be able to control that so that we don't have too much generation or not enough. There's voltage concerns, there's impacts when distribution is all of a sudden having a push upward flow push into the transmission system, it's going to impact transmission planning, right? So it's an exciting time to be in the industry to Patti's point but we're going to have to rely on technology to help us get home here. And we're starting to see that in a wildfire space. I mentioned the AI, and there's probably some similarities there that we can learn from.

I mean I was with one of Mark's supervisors and managers. In fact, that he promoted years ago, who's on this distributed energy resource management team, and she's like, Patti, we finally can get off paper switching orders. We're going to see that we can do this digitally with our crews in the field with their digital tools and our digital tools. So it's just -- I can't express to you enough, first of all, how exciting it is, but what a big change this is, and we get to lead it. There couldn't be anything more exciting than that, in our opinion. All right, I'm getting the -- we're out of time. I guess the webcast has left, but or -- it's over, I guess. I'll let Jonathan give his -- okay, my closing comments. Thank you, Jonathan. I -- he got me all fired up. Okay. So thank you for being here, and thank you to our viewers on the webcast. We're excited, as you can tell. And for those of you who are here at the NYSE, we're going to be around, and we'll be happy to take additional questions. But thank you for signing on, and thank you for being here for our update today. Thank you.