Pacific Gas & Electric Co. (PCG) Earnings

Management highlights

- Safety Performance * Extended strong safety performance for serious injuries and fatalities, with zero public safety incidents resulting from asset failures * Fourth consecutive year with no major wildfires linked to PG&E equipment and zero structures destroyed by utility-caused wildfires * Continuous grid monitoring has avoided nearly 20 million outage minutes, 28 potential ignitions in high-fire risk areas, and over 5,000 emergency response hours since January 2025, while saving over $11 million in lower-cost repairs * AI-enhanced monitoring and sensor technology detects potential faults before failure, enabling planned, lower-cost repairs and faster wildfire response - Affordability and Operational Efficiency * Residential bundled electric rates are down 23% since January 2024 for the most vulnerable customers; five rate reductions have been implemented in the past two years * On track to deliver 2-4% annual reductions in non-fuel O&M, with more than $40 million in cost savings already achieved in 2026 from targeted sourcing and procurement initiatives * Grid reliability has improved 23% year-to-date versus 2025, driven by fewer outages and faster restoration times - Data Center Load Growth Pipeline * Updated total pipeline now stands at over 12 gigawatts, up from 10+ gigawatts last quarter, following the 2026 cluster study * New project categorization rules require a signed work performance agreement and 10% upfront financial commitment for inclusion in the final engineering stage to prioritize project quality * The company expects approximately 1.8 gigawatts of data center load to be online by 2030, with upside potential from faster-connecting projects * Pricing is structured to be attractive to data center customers while delivering rate reductions for existing customers; the company projects a 1% rate reduction per gigawatt of new load connected - Capital and Financing Plan * Total 5-year $73 billion capital plan through 2030 remains unchanged; at least $5 billion in additional customer-beneficial investment opportunities exist outside the current plan * The company's equity needs are fully satisfied through 2030, with no additional equity financing required, avoiding up to $10 billion in extra financing costs compared to a typical utility payout ratio * S&P upgraded PG&E's credit rating to one notch below investment grade, citing wildfire risk reduction progress; underlying credit metrics are already consistent with investment grade ratings * Targeting a 20% dividend payout ratio by 2028, up from an implied 12% in 2026, and maintaining that level through 2030 - Wildfire Liability Reform * The company's current plan assumes California will deliver on the SB 254 commitment to establish a durable wildfire liability framework * A constructive outcome will accelerate progress to investment grade and lower financing costs for customers; inaction will slow progress and increase system financing costs

Guidance

- Full year 2026 core EPS guidance is maintained at $1.64 to $1.66, with a midpoint that represents 10% earnings growth over 2025 - Annual core EPS growth of 9%+ is reaffirmed for the 2027-2030 period - The $73 billion five-year capital expenditure plan through 2030 is maintained with no changes, and no additional equity financing is required for the plan - The target of reaching a 20% dividend payout ratio by 2028 is reaffirmed - The company reaffirms its target path to flat customer bill growth of 0-3% annually - 2-4% annual non-fuel O&M cost reduction guidance is maintained - A proposed decision on the Kincaid and Dixie wildfire cost recovery cases is still expected in November 2026; a proposed decision on the 2027 GRC is expected in March 2027, with a final decision in May 2027

Segment performance

PG&E does not break out separate product segment financial performance in this earnings call transcript. Aggregate core earnings per share (EPS) is 40 cents for Q2 2026 and 83 cents for the first half of 2026, representing a 19 cent year-over-year increase in core H1 EPS. The core drivers of 2026 year-over-year earnings growth are customer capital investment contributing $0.09 per share, and net O&M savings and redeployment contributing $0.03 per share. Remaining growth is attributed to timing-related items expected to reverse in the second half of the year.

Risks & headwinds

- Failure of the California legislature to enact a durable, financeable wildfire liability framework this year is the primary key risk; unresolved or insufficient liability reform would force PG&E to reevaluate its capital allocation priorities and long-term investment plans * Inaction on wildfire liability would slow progress toward investment grade ratings, increase financing costs, and ultimately lead to higher customer bills; current wildfire-related charges already add $20-$40 per month, or 14-19%, to customer monthly bills if no reform is enacted - Uncertainty remains around the final outcome of regulatory proceedings including the 2027 General Rate Case (GRC), Rule 30, and the Advanced Rate Design rulemaking at the CPUC, as well as FERC and KISO interconnection rule changes - Not all projects in the 12+ gigawatt data center pipeline will necessarily move through to completion, introducing uncertainty around the timing and magnitude of future rate-reducing load growth - Wildfire risk remains even with enhanced monitoring and mitigation, and severe fire weather conditions could still lead to utility-caused wildfire events

Analyst Q&A

• Q: What core requirements does PG&E have for an acceptable wildfire liability legislative outcome, and how quickly would the company pivot its capital plan if the outcome is inadequate? /

  A: PG&E requires a durable, financeable, predictable framework that is affordable for customers and enables access to low-cost capital from debt and equity markets. If the legislature takes no action or produces an insufficient outcome, the company will take concrete action to reallocate capital, and will release details of its revised plan shortly after the legislative session concludes. There is no scenario where the company takes no action in response to legislative inaction.

• Q: If wildfire liability reform fails and PG&E moves to a Plan B capital plan, how would this impact the already-filed 2027 GRC? Would the filing need to be modified or delayed? /

  A: Any capital plan adjustments would need to be integrated with the GRC filing, but the company does not expect changes would require formal modifications to the existing GRC filing, nor does it expect the GRC timeline to be pushed back. Safety, reliability, and compliance obligations will remain the top priority regardless of any capital shifts. Approximately $20 billion of the $73 billion total capital plan falls under FERC jurisdiction, not CPUC regulation, so the full plan is not tied to GRC proceedings.

• Q: What is the quality of projects in the updated 12 gigawatt data center pipeline, and how much new data center load does PG&E expect to bring online by 2030? /

  A: Cluster study projects are vetted first on whether they can be priced to deliver rate reductions for existing customers, which is the company's non-negotiable top requirement. A 10% upfront financial commitment is now required for final engineering, which improves project confidence. PG&E currently plans for approximately 1.8 gigawatts of data center load to come online by 2030, with upside potential for larger, faster-connecting projects.

• Q: What is the sustainability of PG&E's 2-4% annual O&M cost reduction target, and where can additional upside come from? What is the target timeline for the company's capital-to-expense ratio? /

  A: The 2-4% annual O&M reduction target is very achievable, with significant remaining room for improvement. Key upside areas are expanded strategic sourcing for materials and services, which has already delivered early savings, and broader implementation of AI to streamline operations. The 5-year plan targets a capital-to-expense ratio of 1.7 by 2030, and management expects to potentially exceed this target due to ongoing employee-led efficiency improvements.