PG&E Corporation
Q2 2021 Earnings Call Transcript

Published: 29 Jul 2021

[Operator:]

Ladies and gentlemen, thank you for standing by, and welcome to the PG&E Corporation Second Quarter 2021 Earnings Release. At this time all participants are in a listen-only mode. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mathew Fallon, Senior Director, Investor Relations. Thank you. Please go-ahead sir.

[Mathew Fallon:]

Thank you, Ashley. Good morning everyone. And thank you for participating in PG&E’s second quarter earnings call.

[Patti Poppe:]

Thanks Matt. Hello everyone. Thanks for joining us today. I'm pleased to report that PG&E delivered non-GAAP core earnings of $0.27 per share in the second quarter. We're reaffirming our 2021 non-GAAP core earnings per share guidance of $0.95 to a $1.05. And we're maintaining 2021 equity needs of zero to $400 million. Our rate base grows 8.5% and our earnings growth 10%. Our investments will provide lasting value to our customers, while our new cost reduction efforts will keep our customer bills affordable. All of this is good for customers and investors. Chris will dive into the financials in just a bit. Before I get started, I want to express how much I'm looking forward to seeing many of you in person on August 9, on our Investor Day. You'll get to meet the team we've assembled to lead the transformation of PG&E. We'll take a deeper dive into how we're implementing our PG&E lean operating system across the company with a special focus on our wildfire prevention works, and you'll also get a glimpse into the future opportunities for our company. For today, let's get right to it. I have a feeling I know what's on top-of-mind for you because I know it is for me. The Wildfire season is underway early this year. The Dixie fire started on July 13 and is now 23% contained. My heart goes out to the impacted communities, our customers, and my coworkers who've been affected by this and other fires. I'd like to thank both our crews who are working to make the area safe and CAL FIRE and the U.S. Forest Service for the challenging work that they are doing, in fighting the fires. As of this morning, the Dixie fire has burned 221,000 acres and has impacted about 60 structures. There have been no reported injuries or fatalities, thank goodness.

[Chris Foster:]

Thank you, Patti. As Patti mentioned earlier, we’ve continued to meet our financial and regulatory objectives. I’ll cover the highlights, then go into more detail. We’re on track for our year end EPS guidance landing at $0.27 for the second quarter and $0.50 for the year. We’ve maintained our equity needs guidance of zero to $400 million. And we submitted our 2023 generated case and updated our CapEx and rate-based forecast to reflect this important filing. As I mentioned, we’re on track for the 2021 EPS range we set out of $0.95 to $1.05. Slide 8 shows our results for the second quarter. Non-GAAP core earnings per share for the quarter came in at $0.27. We recorded GAAP earnings, including non-core items that are also shown here. We have made further progress on legacy legal claims. As a reminder, we have resolved the claims asserted by the public entities in both the Kincade and Zogg Fires. We’ve continued to try and fairly resolve claims brought by individual claimants related to Zogg Fire and have reached settlement. We also continued discussions with insurance carriers. Progress on these settlements is about making it right for impacted communities. Based on these updates, we increased our accrual for claims related to the Zogg Fire by $75 million to a total of $375 million. This is within our insurance coverage. And so there’s no earnings impacts from this update. Moving to Slide 9. This shows the quarter-over-quarter comparison for our non-GAAP core earnings of $0.27 per share for Q2 2021 versus $1.03 per share for Q2 2020 or $0.26 per share after adjusting for the increasing shares outstanding. EPS decreased due to $0.03 of unrecoverable interest expense, $0.01 from the timing of nuclear refueling outages, and $0.01 from the timing of taxes that will net to zero over the year. These decreases were offset by $0.04 of growth and rate base earnings, $0.01 from fewer wildfire mitigation costs above authorized, and $0.01 miscellaneous. Moving to Slide 10. We’ve updated some of our non-core guidance. First investigation remedies has been increased by $20 million to $130 million after tax. This reflects the June Presiding Officer’s Decision related to the 2019 PSPS Order to Show Cause that proposes a penalty of $106 million and will be offset by $86 million in bill credits we’ve already provided to customers. We have appealed this proposal. Second, our prior period net regulatory items forecast has been changed to a $50 million range. That reflects the outcome of our July GT&S capital settlement. The settlement will result in a $60 million reduction relative to application and also differs recovery over a five-year horizon starting in January of 2022. As a result instead of $200 million of non-core period recoveries in 2021, we now expect record prior period recoveries of $45 million in 2021 and an additional $100 million in 2022 through 2024.

[Patti Poppe:]

Thank you, Chris. We’re doing the right work for wildfire season and we have a good solid framework in place to mitigate risks and strengthen our financial health. We’re taking risks out of the system each and every day. And we’re prepared to use PSPS as a backstop to keep our customers safe. We have a long-term path in front of us that is focused on people, the planet and prosperity. The triple bottom line is reflected in long-term projections and in our daily work. We can’t wait to show you our progress when you come to see us for Investor Day on August 9. We know we must regain your trust and help you believe what I believe California is a great place for your investment dollars and so is PG&E. We look forward to seeing you August 9 at Investor Day. Ashley, please open the lines for Q&A.

[Operator:]

And your first question comes from Paul Zimbardo with Bank of America.

[Julien Dumoulin:]

Hey, good morning. It’s actually Julien. Thanks for the time and the opportunity to connect.

[Patti Poppe:]

Hi, Julien.

[Julien Dumoulin:]

Hey, congrats on continued progress here. I wanted to come back to where you started the call perhaps on the efforts to underground. How does that complement some of the earlier efforts on carbon conductors and de-energization efforts? I mean, sort of certainly, there’s sort of a belt and suspenders approach here. Can you talk sort of conceptually how it complements or does this replace in part some of the earlier efforts, if you can, as well as speaking to some of the early reception from stakeholders to the proposal?

[Patti Poppe:]

Yes, it is a complement, Julien, because we talk about 10,000 miles. Our highest risk miles would be included in that. But we have 25,000 miles of high fire threat district lines. And so this is an – and it’s a – in some places it’s an ore for the hardening plans we had before, but we know it’s a better solution in many areas, especially when we can do it at the kind of scale and in conditions that I think in the past, we’re perceived is not possible for undergrounding. And we’re seeing in Butte County, the progress that we can make the advancements in equipment that enable us to dig into even areas of granite, the potential for boring instead of trenching. And so I would consider it and there’s still going to be areas where we do hardening. They’re still going to be areas where vegetation management is an important part. But we think for certain areas, the 10,000 miles that we set out are really important miles that need to be permanently de-risked with undergrounding. And I would say it’s been received extraordinarily well by our communities and by all of our critical stakeholders. There’ve been a lot of people who’ve been asking us to underground, and the fact that we could prove to ourselves by the work that we’ve already done, that it can be done in an affordable way. And as well as I do Julien, and the transition from the OpEx that goes to funding veg management, when we can turn that into the capital to underground that it makes sense for investors to.

[Julien Dumoulin:]

Yes, absolutely. Thank you, Patti. If I can, a second question perhaps somewhat unrelated, but admittedly, a big a big issue in California, when you think about a resource adequacy and the dynamics last summer, and more critically going into the peak season here this summer. Can you talk about some of the actions you committed to year-over-year as well as some of the prospective actions you’re evaluating now in the very near term, as well as the longer term to help address the more acute flex alerts and things like that.

[Patti Poppe:]

Yes. You bet. As we look to this summer, and we’ve already had a couple of flex alerts. We have 11,000 megawatts that we planned to have available in August. And our forecasted peak is about 8,500 megawatts. That’s just for PG&E. But as you know, that we are part of the system and obviously part of the California CAISO construct. And so we were able to secure additional storage 700 megawatts of additional storage, including specifically one project that I’m particularly excited about that, I think bodes well for the future is our Moss Landing, utility owned generation, 182 megawatts of storage. It’s one of the largest storage utility owns storage facilities. It is definitely Tesla’s largest project that they’ve done anywhere in the world, and they’ve done it here with us at PG&E. And so I do think long term, however, we’ve got to do a better job here in California of matching supply and demand. And so we’re looking at pursuing additional demand response and leveraging more residential storage, like the Tesla power walls as a virtual power plant. We’ve got a pilot going for this summer to see how much capacity we truly could count on from those residential storage solutions as well. And so when I think about the future, I see all those things coming together, a softened demand peak because of great demand management on the residential and the commercial side, then combined with more distributed resources and storage as the perfect match to our solar duck curve. And so I think we – and at PG&A in particular have the opportunity to really lead in the deployment of storage as a peak resource solution set.

[Julien Dumoulin:]

Excellent. Well, thank you for the time. Best of luck to you and your customers this summer.

[Patti Poppe:]

Thanks, Julien. Look forward to seeing you.

[Operator:]

Your next question comes from Steve Fleishman with Wolfe Research.

[Patti Poppe:]

Good morning, Steve.

[Steve Fleishman:]

Hi, can you hear me, okay.

[Patti Poppe:]

You’re a little quiet.

[Steve Fleishman:]

Hi. So Patti just, this is obviously the first fire event that’s occurred since you’ve been there at scale. I’m just kind of curious how you’ve dealt with the political community regulatory and any reaction to your take on the relations there and kind of reaction to you?

[Patti Poppe:]

Yes, a couple of things, Steve. One, I’ll tell you, everyone is focused on one thing, getting the wildfire stop, particularly support for CAL FIRE and the work that they’re doing to contain Dixie Fire. But it’s not the only fire in the state. I think everybody sees that. There’s just so much more work to do. And therefore, that’s why our undergrounding announcement was so well received from the key stakeholders. All of the feedback I received, some of it was, it’s about times, and a lot of it was thank you. And so I do think our commitment to doing whatever it takes and challenging, perhaps old perspectives has been well received.

[Steve Fleishman:]

Okay. And just one question on the Dixie Fire respect to damages. In your release, you mentioned, or one of the risks is just the damage to trees. Is there any particular kind of special value of kind of trees in the region where it’s at? Is it a logging area or anything like that, or just any thoughts on that disclosure?

[Patti Poppe:]

Yes. No, there’s nothing unique or special there. In fact in some ways it’s a blessing that there were so few structures and people who live in the path of the Dixie Fire. So I would just say that no special additional exposure as a result. In fact, it’s probably less exposure given where the fire has traversed up to date.

[Steve Fleishman:]

Okay. And then just the lesson you mentioned, you’re due for your wildfire mitigation plan approval in the next month, or so. I think, has there been any like recommendations from parties or other things related to that?

[Patti Poppe:]

Well, we – sorry, Steve. Go ahead. I’ll go ahead and answer. Yes, we did receive some feedback as did all the IOUs when we originally filed our plans and we were asked for some improvements, but we’ve made those in the wildfire mitigation plan approval is expected here relatively soon. And we were happy to see the Office of Energy Infrastructure Safety, OEIS, which will be a new acronym for everyone. OEIS is formerly the wildfire safety division. They did announce this week that they will issue the certificates by their objective is to issue them by December, 2021 for next year. And that we will submit our request for the safety certificate by September 13, 2021. And just to remind everyone, we do have an active certificate that carries us through to January of 2022. So we were really happy to see that they’re working toward a timeline so that we can have more certainty in the process. And so that’s good news.

[Steve Fleishman:]

Great. Thanks. Look forward to seeing you soon.

[Patti Poppe:]

Yes, we do too. Steve, thank you.

[Operator:]

Your next question comes from Jonathan Arnold with Vertical Research.

[Jonathan Arnold:]

Hi, good morning.

[Patti Poppe:]

Hey, Jonathan.

[Jonathan Arnold:]

A quick question, Patti, in your remarks, you mentioned having got 91%, I think of vegetation management in the highest risk areas. Could you just square that with Slide 6 where the percentages are obviously quite a bit lower, but I think they are sort of not just the high-risk areas perhaps. And then is there any chance of that updating, well, how much further along you got in July, because I think those are June numbers, right?

[Patti Poppe:]

Yes. Couple of things. Number one, the 91% reflects of all the vegetation management we've done, what percent is in the high risk areas. If you'll remember our enhanced enforcement was reflective of the desire that our actions match the highest risk reduction areas. And so that the point of the 91% is just to say of the veg management, we've done 91% of it is in the highest risk areas, which meets the intent of enhanced enforcement. On the progress front, as you know the – I think in the slide, it says 598 miles today. We're moving miles every single day. And so for in our last 48 hour update, we are up to 754 miles of enhanced vegetation management achieved. We're working at about 10 miles per day, and this is one of those measures that's in our wildfire command center that we're tracking every single day. And so the pace of progress, the slope of the curve, if you will, has increased and is at its highest rate to date, because if you'll remember because of the risk mile we had to –front end, we had to really do a lot of replanning at the early part of the year to make sure that that vegetation management we did was in fact in the highest risk areas. So it's two signs of progress. One the 91% of the work that we're doing is in the highest risk areas. That's great news. And number two, we're up to 754 miles which is five miles ahead of our plan, which gets us to 18 miles by year end.

[Jonathan Arnold:]

Okay. So you feel good about hitting these targets, regardless of where you might be on them today for those?

[Patti Poppe:]

Yes, I feel great about hitting those targets and I'm still thankful for my team. They are just on full force and doing a great job.

[Jonathan Arnold:]

Great. And then just one other, if you could, maybe on the undergrounding plan and the – I think Adam mentioned your briefing last week that you would hope to do sort of 10,000 miles a year. How soon do you think you can get to that sort of level? And secondly can you sort of maybe relate that a little bit to your new rate-based forecast? Is there any, is that sort of some partly in there, or not really at all yet? Or how to think about that?

[Patti Poppe:]

Yes, one of the things we were very careful not to do in our announcement to our local community about the undergrounding effort is to not put a ceiling on how much we thought we could get done by when. Our objective is to do more faster, Jonathan. And so as Adam talked about a day that we could imagine ourselves beyond a thousand miles a year, when we think about today we're closer to 70 miles in a year. We know that curve to a 1,000, it's going to take some time, but we want it. I think of it like this, Jonathan, I think of it is right now. We're building model T's in Henry Ford’s old factory and we're about to turn on the assembly line. And so that's really what's on our mind. And so we're not capping our forecast and that's why we're not given an end date because we're working that plan with our engineers as we speak the reason for announcing it before the plan was all knotted down is because we wanted to get the input of critical stakeholders. We want to engage with our tribal leaders, with our environmental groups, with our local communities and determine the best place to do that undergrounding first. We know there's high demand for undergrounding. And so this is a great opportunity for us to engage with the people of California to change the risk profile of California and PG&E together. So I would say that when we file our wildfire mitigation plan for next year, we'll be filing that in February-ish first quarter 2022. You'll get to see the first couple years of it, but every year we're going to get better and every year we'll do more. And so we really are hesitant to put a cap on it, or set an end date because we're going to be very dissatisfied until we have fully de-risked the system. But I'll let Chris talk about the reconciliation to the rate case as filed.

[Chris Foster:]

Sure. Thanks Patti. Hey Jonathan. It's – at this stage, I guess what I would say is we're already seeing unit costs come down, which I think is impressive as we do some of the work here in the field that we're even just early scoping now and I emphasis on early. What you're seeing today in terms of our financial disclosures is that we are directly reflecting the 2023 generate case filing as well as our most recent wildfire mitigation plan filing from earlier this year that did have limited undergrounding envision. So what we're currently contemplating is, as Patti mentioned, looking at that February filing next year, we'll give you really the first look operationally and how that would roll out over the first few years. And we would anticipate Q1 or the first half of next year providing a more fulsome view of the complete financial impact with updated financial.

[Jonathan Arnold:]

Okay. That's great. Thank you for the clarity though. If I could squeeze one other thing and what's the latest on where you are with the main securitization docket and re-hearing requests and sort of expected timing to move forward there?

[Chris Foster:]

Sure thing, we had just an update this week. So again, this is for context, this is the $7.5 billion rate neutral securitization that we have filed for to the CPC. At this stage, Jonathan just had an update that next week on August 5, the CPC has calendar to do their affirmative vote which is an important next step. What that does is that puts us on track for late this year to early next year for executing those securitizations.

[Jonathan Arnold:]

Great. Thank you.

[Chris Foster:]

Thank you.

[Patti Poppe:]

Thanks Jonathan.

[Operator:]

Your next question comes from Michael Lapides with Goldman Sachs.

[Michael Lapides:]

Hey guys. Thank you for taking my question. Patti, when I look at what other states and I'll use Florida as an example, has done, when proposing a major undergrounding program. They actually went to the legislature to ensure kind of an annual rigorous – analytical process for doing a 10 or 20 year forecast, but also to ensure rate making. Do you think you need legislation at all to get approval for this 10,000 mile program? Would you think it's best done in the wildfire mitigation planning process and how do you think about the – kind of what this, how a cost recovery for that spins occurs? Meaning is this something that gets included in rate base over a long period of time? Or is this something that's outside of rate base?

[Patti Poppe:]

Yes, well, I'm a big fan of what they did in Florida. There's no doubt that was a smart way to do it. I'm not convinced that we need legislation, nor am I convinced that we need funding outside the utility, but I wouldn't rule it out. As we work with our critical stakeholders, we'll talk about the best way to do this work. The reality much like Florida, where they wanted to harden their system against hurricanes. You can bet people in California are very motivated to rebuild and harden our system against wildfire. And so the most important thing is that we're considered a great resource to attract the capital, that we're the resource that can do the infrastructure at this kind of scale. There's very few entities that could be equipped to take on the risk and the work like PG&E for the State of California. And so we do look forward to partnering with those critical stakeholders in determining the best way to make sure that the work is done safely. And we most quickly de-risk the State of California against all the hazards that a wildfire bring.

[Michael Lapides:]

Got it. And then a follow-up on related to that. Just curious, when you're thinking about your 10% EPS growth rate, how are you all thinking about how the cost to capital mechanism could impact the ability to hit that growth rate, especially given the recent move down and kind of treasury – U.S. treasury yields and corporate bond yields and what that means for kind of 2022 and maybe even longer term.

[Chris Foster:]

Sure thing, Michael it's Chris happy to take it. I think there's a couple of things going on there. First is just the cost of capital adjustment mechanism itself. So seeing where the index is at this stage certainly looks complex to get to that. We'd have to average over 4% at this point to be able to stay out of the dead band. And so I think at this point it is increasingly likely that it triggers. So I would just say we're evaluating an options in real time on that front. And second, as you can imagine, we're currently looking at Q3 to provide an update there at that stage. We'll have the view on the impact from the trigger itself. And it will be in a situation where we could look forward for 2022 impacts and beyond. But at this stage, our plan internally is to plan conservatively. And ultimately the goal here is as Patti referenced earlier, and I referenced is we're really looking fundamentally at our five-year plan, Michael. Not just 2022, but the five-year plan and saying, let's think about how undergrounding folds in and at what pace, and let's continue to pursue more aggressive cost reductions so that we're both making room for those investments, but also keeping in mind affordability for customers.

[Michael Lapides:]

Got it. And last thing with the high end of the CapEx been raised for the next five years especially in 2023 and beyond, how does that impact your multi-year financing plans?

[Chris Foster:]

Sure, thanks. So, I think at this stage, we haven't been too specific on equity needs outside of the explicit year. And I think what you would find is that we would have a reasonable growth rate there such that we would have limited financing needs. But I don't want to be too specific at this stage again, Michael, because we're actually working the five-year plan as you can imagine to fold in the undergrounding work.

[Michael Lapides:]

Got it. Thank you, Chris. Thanks Patty.

[Patti Poppe:]

Thanks Michael.

[Chris Foster:]

Thank you

[Operator:]

And your next question comes from Shahriar Pourreza with Guggenheim Partners.

[Unidentified Analyst:]

Hi, good morning team. It's actually Constantine here for Shahriar. Thanks for the very comprehensive update to this point.

[Patti Poppe:]

Hi, Constantine .

[Unidentified Analyst:]

I just wanted to kind of follow-up on the question on the 2021 Wildfire Mitigation Plan progress, and kind of some of the categories showing kind of below 50% and where, as of, I guess, June, and can you just speak to the various categories and how they get prioritized? And maybe how do you plan to get ahead of the curve on these categories and any kind of risk of regulatory action that you may foresee?

[Patti Poppe:]

Yeah, one thing that's – I'm so glad you asked this question Constantine , because one thing to clarify is that the percent complete doesn't – the plan doesn't have a linear line across the year. The plan has a curve to it mainly because of the pre-engineering work and getting the highest risk miles engineered and planned. And so, when we're in our wildfire command center every week, we're looking at that pipeline of work and confirming that we've got the work that'll feed the plan that completes on the finish date, where we're tracking daily targets. And I can tell you I'm feeling very good about our ability to achieve our in-year plan. So, for example, enhanced vegetation management is a good example, the status to date shows 39% complete, but we're five miles ahead of our plan, which gets us home on time by year end. And so that's – I don't want to confuse by those percent complete year-to-date, it's not a linear curve. So, there are some things though that we definitely want to have completed before August, September. And so, some of those things like asset inspections, for example, we've got almost fully completed. So again, all of these areas, system hardening, veg management, we're not trading off, like we'll not get veg management done. And we'll be willing to accept that we miss another area like hardening. No, no, our plan is to get all of them done. Some of them by year end, some have interim dates before year end. And so, we're on track with the plan and that's the power of this lean operating system. I know I'm a broken record on that, but that's because it makes a big difference. And I can tell you, I can assure you this team, this year has more visibility into our performance than ever before. And we know daily, and I'm getting a weekly, boots on the ground, like eyes on the work update of exactly where we are, which is what gives us a lot of confidence that we can complete the plan by year end.

[Unidentified Analyst:]

Excellent. I think that clarifies it quite a bit. Just one kind of follow-up on wildfires, your filings disclosed kind of a potential loss for Dixie. And just to understand the process of how, and kind of when the loss gets recorded and the insurance coverage and AB 1054, can you remind us of the insurance levels? And I think it's around $900 for, for this period and with some self-insured and we'll kind of, what's the timeline for AB 1054 protections and funding to get accessed?

[Patti Poppe:]

Yes, I'll make a couple comments and I'll take it to Chris to cover the insurance and some of the detailed timeline elements. But keep in mind it is early. And there's no way to estimate at this time the value of the damage done on the Dixie fire. Again, I will reiterate that it is a blessing that it's in mostly forested difficult terrain. It's difficult for CAL Fire to access the train, which increases obviously the acres burned, but very limited damage to structure and people for which we're very, very grateful. And we're very grateful for their skill in being able to, in some ways, direct the fire into the less populated areas. But I'll let Chris talk through the timeline when we do know what happens next.

[Chris Foster:]

Sure. Hi, Constantine. It's true. So, the timeline it's traditionally, it's going to take time. I’ll update that. It's ultimately at this stage, certainly even though we have the probable commentary in the queue, it's not estimable at this stage. We need to understand once the fire is contained to be able to understand the total impact. We also need to make sure that we're understanding of the result of the CAL fire investigation and any review that takes place there. So, when you typically look at a timeline and the situation you would have – it could be anywhere up to a year for a CAL fire investigation. You could then have multiple years that are required to complete review and eventually resolve any outstanding claims themselves. So, you're actually looking at a few years before there's any contemplation of interaction with the AB 1054 wildfire fund. So hopefully that provides a bit more color.

[Unidentified Analyst:]

It does. And I think if I may have a last question, just turning to something a little bit outside of wildfire than burying tables, the request from the City of San Francisco for PPC, they're going have to do a valuation of the assets that are within the city. Is there kind of a reasonable level that you would actually consider separating the assets? Is it even feasible? And does the CPC have any power in mandating the sale or is it kind of a lead into a potential common nation and municipalization proceeding?

[Patti Poppe:]

Well, first let me just say that PG&E has served San Franciscans for more than 100 years and we're proud to have that being true. The previous offers made by the city, well undervalued our assets. And so, they are filing just assets the CPC confirmed the value of our assets. And bottom line, we look very much forward to continuing to serve the people of San Francisco.

[Unidentified Analyst:]

That makes sense. Thanks so much for taking the questions.

[Patti Poppe:]

Yes. Thank you.

[Operator:]

Your next question comes from Stephen Byrd with Morgan Stanley.

[Patti Poppe:]

Hi, Stephen, good morning.

[Stephen Byrd:]

Hi, good morning. Thanks for taking my questions Patti. Lots been covered. I wondered if we could just get your latest thoughts on the state insurance market in California for the virus, sort of everything from your own insurance to the ability of the State Wildfire Fund to get the insurance, I know you are not responsible for that, but just curious, and also sort of availability to insurance, to residents and businesses in California. That's sort of the state of play at the insurance market.

[Chris Foster:]

Sure. Hi, Stephen. Thanks for the question. I think there's really a few different things there, as you can imagine. First is a personal residential, small business coverage as you can imagine, that's been limited at this stage, although the state has stepped in, in multiple areas to make sure that there is coverage provided from companies in situations where homeowners really would have otherwise limited to no options. So, I think that's been a great example of the state evaluating that need for individual customers. As it relates to us and as it relates to the Wildfire Fund Administrator themselves, I think, what we're seeing at this stage is, is typically what we'd done. And we went out this year it really in the spring to really revisit some of our coverage as well on purpose to kind of test the market. At this stage, there still remains depth. The re-insurance market is there as well. And this is after the dramatic acreage that was impacted last year in California. So just to put that in context, that's over four million acres that were impacted. Yet we still saw a depth in the market. Now the pricing is substantial, as you can imagine, but we do have good cost recovery mechanisms here, both in terms of the email accounts that we have. But also going forward, we have contemplated actually a self-insurance construct that we have put forward in our 2023 GRC, because really Steven we're looking at this and these impacts over a number of years as it relates to customers. And this is hundreds of millions of dollars, right, that are really critical for us to be able to take on. But they're expense dollars that go really directly through the customers. So, we're actually interested in examining as self-insurance approach, where we could build this up over time, yet, not have to have that $700 million to $900 million plus impact to customers on an annual basis. So, it's a unique construct, and we think it's one that we put forward to the CPC and are hopeful there is a serious consideration there. Because ultimately for us, we are going to need to continue to procure a sufficient amount of coverage that makes us comfortable in any given year to protect against any substantial risks there for the company.

[Stephen Byrd:]

That really helps. And just going back to the large proposed undergrounding, it makes a lot of sense. I can see the efficiency of doing a large program and the benefit. And I wonder if you could just talk a little bit more about sort of the portion of your vegetation management relating to these 10,000 miles over what kind of time periods that could be reduced? Is it fairly linear, meaning as you underground, then your Vegetation Management Program can kind of proportionately declined potentially, or is it just too early to say, how are you all kind of thinking about that?

[Patti Poppe:]

Well, Steven we are obviously in early days of building out the plan and it will determine exactly which miles we're going to underground. But conceivably, you could imagine a mile for mile swap because we're going to continue to – we would have in the absence of underground and continue to manage the vegetation near any of our trees or near any of our lines. And so, as we underground, you can imagine that's one last mile to vege manage a mile for mile swap. And so that's really where the benefits are realized for customers. I mean, a $1.4 billion of annual expense in vegetation management is very expensive for our customers today. And so, to have a permanent repair, a permanent fix, a permanent risk elimination to make it safer and not have that ongoing annual maintenance expense really does benefit customers on two fronts, safety, risk, and affordability.

[Stephen Byrd:]

That's great. Maybe just following up on that, how do you – in terms of the customer bill outlook, it looks like the bill for residence is going up quite a bit over the next few years, and then it slows down. Is there a possibly kind of sculpt this so that there isn't further kind of customer bill pressure in the near term over the next couple of years when bills are going up quite a bit, or how do you – how might this kind of be feathered into the overall bill?

[Patti Poppe:]

Yes, it's a little early to say, though we do know just at the highest order, you can see that in the early years of the swap, there's been the swapping of expense for capital. The benefits are realized earlier that can help soften our curve in the near years. And our big opportunity here, and I can tell you with fresh eyes looking at how we do our work, where we do our work, we have so much opportunity to scrub out costs from our system. And we're building that into our plans and we're starting to build the capability. And it's early days, but I can tell you our lean operating system, we all know will help us provide higher value for customers that are lower cost to deliver and we'll look forward to. And it's probably really to just set expectations properly probably early in Q1, 2022, where we'll show you the long-term financial plan and what are the implications then for customers, what are the implications for capital and how does the whole plan come together? And we'll look forward to doing that.

[Stephen Byrd:]

Great. Thank you so much.

[Patti Poppe:]

Thanks, Steven.

[Operator:]

Your next question comes from Ryan Levine with Citi.

[Ryan Levine:]

Good morning. Thanks for taking my question. What was the process and analysis that led to the proposal to underground 10,000 miles line? And how did he arrive as 10,000 as the right number?

[Patti Poppe:]

Yes, well, as I mentioned in my prepared remarks, there was a series of observations that I had knew on the ground. The undergrounding might be a better solution set, but it was truly working with our team and seeing what we're doing and viewed that really connected the dots. Our cost to achieve has been reduced dramatically. We've got absolute evidence of in the $2 million a mile real time happening as we speak. And we know that's before we even have a full-scale program. So, we knew that the affordability was real. The 10,000 miles matches up to our highest risk miles. As we look at the high fire threat areas, our total lines that are in those areas. And so, we really wanted to make sure that we were both planning for today's risk and any additional risk that might occur as climate conditions become more extreme. And so that's really what drove the aspiration. And that's what's the building block of the plan. But as I've mentioned, we're going to not set a ceiling if you will. That's really just an aspiration that we'll then engineer and rollout a full-scale plan that people can have better visibility. But we want to do that plan with others. This is a significant benefit to the people of California, and we want to make sure we do it in a way that they feel part of the process, that we have an opportunity to build relationships and trust and involvement from our critical stakeholders, how we embark on this really ambitious goal that people have been asking us to do. Everywhere I go, somebody says, can't you just underground it. And so, I'm so proud of this team for being able to see the potential in something that hasn't been done before and say that, in fact, we can do that here at PG&E.

[Ryan Levine:]

Thanks. And the August 5 final vote on securitization, will that be non-appealable, assuming that that becomes a favorable decision for the company?

[Chris Foster:]

Sure, Ryan. Hi. It would actually close out the issue with the CPC. That's the importance of the vote in August 5. There could be judicial review for a limited period of time after that if the intervenor saw to take another step. But again, it puts it's on a good track again, because we continue to aim at end of this year, early next year to execute that securitization.

[Ryan Levine:]

Okay. And then the last question, just to clarify, can you confirm that it would have the company issued any shares so far year-to-date, and if the Victim Trust has sold any shares subsequent to the July 7 final agreement on the grant to Victim Trust decision?

[Chris Foster:]

A sure thing. Ryan, no shares from the company and none from the Fire Victim Trust. In fact, the Fire Victim Trust provided an early July update, public update, where they had indicated they have roughly $5.8 billion cash on hand at this stage and have distributed roughly $430 million, which as you can imagine, puts them in a good cash position to make sure that they're resolving claims for victims.

[Ryan Levine:]

Appreciate it. Look forward to seeing you next week.

[Chris Foster:]

Thank you.

[Mathew Fallon:]

Thanks Ryan.

[Operator:]

At this time there are no further questions. I'll hand the call back for closing remarks.

[Patti Poppe:]

Thanks Ashley. Thank you everyone for joining us. We really do look forward to seeing you. And I can't wait for you to see what I'm seeing here every day. And that's an extraordinary team under extraordinary circumstances. We'll see you August 9. Thanks so much.

[Operator:]

That concludes today's conference. Thank you for your participation. You may now disconnect.