Michael Lonegan: Great, thanks for taking my questions.
Pedro Pizarro: Thanks, Michael.
Operator: Thank you. Our next question comes from Gregg Orrill with UBS. Your line is open.
Gregg Orrill: Hi, thank you. Just wondering if there’s anything to be watching for in terms of trends on transmission CapEx through the Cal-ISO planning process or otherwise that you’re thinking about? Thank you.
Pedro Pizarro: Yes, maybe I’ll start on that. And Steve Powell might have thoughts as well. So, you’ve seen that Cal-ISO, really, over the last few years, fully engage in the long-term planning process. I think they recognized, along with other parties in the state, that in order to help the state achieve its net zero goals by 2045, there’s a lot of work to be done. And our own countdown to 2045 whitepaper, last fall, had a pretty significant investment need statewide for the wires to make all of this work. So, we estimate that the rate of transmission additions will need to be four times what they’ve been historically. So, you’ve seen that there’s been now a couple of plans that the Cal-ISO has cycled through in the last couple years.
I think, Maria mentioned already or surely it’s in our materials, but you see there’s something like $2 billion of capital for something like 17 projects, where SCE is entitled to right of first refusal as an incumbent to the reward. So, we expect that SCE will do that work. In addition, Cal-ISO has a competitive solicitation process for projects that are new that are not extensions of existing projects. And SCE now has one application pending waiting to hear on in this current process. But Steven, I know that as you engage with Cal-ISO on your team, maybe comment more on what’s next in terms of their continued planning process?
Steven Powell: Yes. So, the CAISO runs its annual transmission planning process each year, and so you can look to each year having that plan come out. In the most recent plan that was released for the 23-24 cycle, most of the projects are up in Northern California, although there was about $90 million of incumbent projects for SCE to build in our territory. So, each of those plans will identify additional opportunities for us, we’ll evaluate if we participate in future competitive solicitations on those. In the longer term, the CAISO also does a 20-year outlook, and the last 20-year outlook, which came out a couple years ago, pointing towards about $30 billion of investment needed in transmission over the next 20 years, the CAISO’s in the process of updating that outlook.
They put out some draft information recently, but really they’ll have a final report in June that’ll give you more of the 20-year outlook, but it continues to show a need for more and more resources to fulfill the clean energy target that is backed by a whole lot of transmission.
Gregg Orrill: Okay, thanks.
Pedro Pizarro: Thanks, Gregg.
Operator: Thank you. Our next question comes from Jeremy Tonet with J.P. Morgan. Your line is open.
Pedro Pizarro: Hi, Jeremy.
Jeremy Tonet: Hi. Good afternoon. How are you?
Pedro Pizarro: I’m well. How are you doing?
Jeremy Tonet: Good. Just want to start off with, I guess, a broader question, and just with summer approaching, can you provide an update on fire conditions you’re seeing across your territory right now and, I guess, overall expectations into the season given all the de-risking that has been accomplished over time?
Pedro Pizarro: I’ll answer your question quickly, and then I’ll follow up with the real message I want you to walk away with. The quick answer is, I think the latest stuff I have seen published suggests that it seems to be an average or maybe even a little bit below average risk season. That’s not the real message I want you to walk away with. We know that in the years ahead with climate change, we’re going to see increased, not decreased, climate-driven wildfire risk conditions. Our Adapting for Tomorrow white paper a couple years ago pointed to something like a 20 percent increase in climate-driven wildfire risk to 2050. And so, the real headline here is the stuff I talked about in my prepared remarks, right? The amount of hardening we’ve done, the 85% to 88% risk that we’ve taken off the table, and that doesn’t even include the risk taken off the table by the state having doubled down on its firefighting capabilities.
So, obviously, it’s interesting, and I know investors ask us from time to time, how does this year look or how does any given year look? But frankly, I think that is less and less the question, and more and more the question you should be asking is, how are we continuing to do in our hardening and our other measures? And I think we’re doing well there.
Maria Rigatti: Thank you, Jeremy. With all of the risk reduction, we’re constantly vigilant, so just to underscore that point.
Pedro Pizarro: Absolutely.
Maria Rigatti: We’re continuing not just to do more and more grid hardening, but also refining our models, looking at new technologies. I think that’s some of what you can see when you look at the S&P report as well. It’s just that ongoing attention that we are paying to every aspect of mitigating the risk.
Pedro Pizarro: And using new technologies at it, right? So it was nice, as you said, Maria, to have S&P recognize that. Think about PSPS. That’s been an important tool, but now it only accounts for something like 10% of our overall risk reduction. And we continue to look for ways to refine that and minimize the potential impact to customers. The other thing I’d share is that, and Steve Powell is playing a leading role in this, we’re making sure we’re sharing our learnings with the rest of the industry, because this is no longer a California problem, it’s no longer a Western issue, it’s a national-level issue. And so, we’re proud that through EEI, which I’m chairing EEI through June of this year, but Steve is co-chairing a CEO taskforce at EEI that’s helping to share best practices across the industry as well as have a discussion on whether other states or the federal level we could find a way to have liability protections like the things that we were able to achieve in California through AB 1054.
So, we take leadership here seriously. It’s not just about protecting our customers, but making sure that we’re sharing that with the rest of the industry.
Jeremy Tonet: Got it. That kind of hits my second question, but maybe just to continue with that, on the national level, do you see movement in D.C. and could we actually get policymakers moving in that direction to develop something that comprehensive nationwide approach here? Just wondering given how divisive politics are today, if you think that could actually be in motion at some point?
