So, at this point in time, we’re — we believe Pac Gen is a good transaction. We’re going to continue to advocate for it, and we are waiting for the final decision or an approval to do the second phase. I will just add that we provided our financing plan. Again, I’ll note that it was without Pac Gen. But with Pac Gen, that current plan would certainly be strengthened.
Carly Davenport: Got it. I appreciate that color. And then maybe just on the balance sheet, thanks for the commentary before on the FFO to debt levels. Just curious what your latest views are on sort of the milestones or the time line to get back to the IG rating?
Carolyn Burke: Yes. Both — thanks for the question. We’re very proud of the progress that we’ve made there and rating agencies, both Moody’s and Fitch have us just one notch below investment grade and have us on positive outlook. Both have indicated that they’re continuing to look at the way we — our wildfire risk mitigation. And as Patti has noted that we continue to make really good progress there. And so we would expect another action by both of them over the course of the next 12 months. And I think they’re both looking at maybe another season and our financial metrics continue to improve, and they’re continuing to watch those as well.
Carly Davenport: Great. Appreciate all the color. Thank you.
Patricia Poppe: Thanks Carly.
Operator: Your next question is from the line of Jeremy Tonet with JPMorgan Securities.
Jeremy Tonet: Hi, good morning.
Patricia Poppe: Hey good morning Jeremy.
Jeremy Tonet: Just wanted to come back to the financing plan a little bit more, if I could, parsing through there. And just want to make sure I understood things right, think about the right way. If I think about the holdco debt, our understanding is it’s more of a commitment to pay down as opposed to an obligation, which would seem to imply some flexibility there. And if that is the case, how do you weigh that versus, I guess, equity dilution or even capital deployment pace? Just wondering how this all kind of mixed together. It seems like that could be a lever to reduce fees there, Pac Gen doesn’t materialize as hoped.
Patricia Poppe: Again, the plan assumes that does not include Pac Gen. Pac Gen would only strengthen the plan. That’s number one. Number two, the plan does include paying down $2 billion of parent debt by the end of 2026. And so again, we are managing a couple of things in this plan. As you said, our capital investments. We have more capital than needs on the system than our plan of $62 billion. We are managing the equity — the utility equity ratio of 52%. So — but what’s really important as we look at equity, I just — again, we’ll say that we will always look to access the most efficient financing alternatives, and we’ll be very mindful of market conditions. And so I think those are the key points to be mindful about. Does that answer your question?
Jeremy Tonet: Got it. Yes, just curious if I had the understanding of the holdco debt paydown being a commitment, not an obligation.
Patricia Poppe: That’s right. It’s a commitment. We’re — and as we said, we’re very focused on our balance sheet health and reaching investment-grade status.
Jeremy Tonet: Got it. That’s helpful there. And then maybe just kind of pivoting here, given continued national attention wildfires and everything that’s happened as discussed on the call, could you talk to PCG’s kind of leadership role in the industry engagement with peers to socialize best practices? Clearly, PCG has really advanced in this mitigation and wondering how you think about your role within the industry at this point?
Patricia Poppe: Yes, Jeremy, thanks for asking the question. We feel compelled to play our part. We’ve learned a lot through some tough times. And so it would be a shame if we didn’t share those learnings with others, just like other energy and utility providers have shared with us, and we have learned from them. So we do feel that we can play an important role nationally. I do think California can serve as an important model for how perhaps a regional or national solution might be able to be implemented. California has scale on its side so we can have a regulatory and financial protection that goes with our physical protections. But at some of our smaller states might benefit from a national solution. And we certainly will have a voice in that.
I’m thankful for EEI as a good platform where we work together as an industry. It’s one of the things I love about this industry that we share lessons with one another. We’ve been spending time together in the recent months, learning from each other and sharing best practices. And so we will continue to do that, and I do believe that PG&E and I intend to personally work hard to make sure that the nation learns the lessons that we’ve learned. We’ve taken a stand here at PG&E that catastrophic wildfire shall stop. And when we took that stance, some people thought we were a little overzealous, but I see that stand coming to life every day. And we didn’t say in California or we didn’t say California — or catastrophic wildfire caused by PG&E’s equipment, we think catastrophic wildfire shall stop, just like the nation learned to mitigate risk of earthquake and hurricanes, we can learn to mitigate the effects of drought that cause wildfire conditions.
And so we certainly will be active nationally to help others know. And I’m just gratified by the people of California who have done the hard work to put in the mitigations that exist today here as we speak, that we don’t have to wait for those mitigations to be in place. They exist here in California today, and they serve as a blueprint for the nation.
Jeremy Tonet: Got it. That’s very helpful. And just want to go a little bit more with that. I guess, on the national level, how do you think about the potential for some national policy here? Conversations really starting, moving in earnest or how do you think about the possibility of that over time?
Patricia Poppe: Yes. I think there is a possibility. I think one of the things we lack at the national level is a national safety regulator for wildfire. Like we have FEMSA on the gas pipeline. FEMSA did a great job of bringing together all the parties and establishing safe practices that have then been implemented nationwide that regulators can look to and know that their utilities are not gold plating, but their utilities are doing the recommended safety standards. We need the same thing on the electric side. So I do think that’s something that we’re having a lot of conversation about who is that appropriate safety regulator and how do we establish standards because right now, plaintiff’s attorneys are setting the standards and they use whatever the highest standard that someone else did, and that might not be the appropriate standard in certain states.
And so we want to make sure that the safety standards are clear, and then some sort of national fund makes a lot of sense to us that mirrors the California fund that exists today.
Jeremy Tonet: Got it. That’s very helpful. Thank you.
Patricia Poppe: You’re welcome. Thanks Jeremy.
Operator: Your next question is from the line of Gregg Orrill with UBS.
Gregg Orrill: Yes, thank you. Good morning.
Patricia Poppe: Morning Gregg.
Carolyn Burke: Morning Gregg.
Gregg Orrill: Just maybe a clarification, please, on the equity guidance of sort of up to $3 billion. What would change that? Or should we just think about the $3 billion? And then is there — should we also sort of assume that the FFO to debt metrics continue to show improvement through the plan? Or is there a plateauing there?
Carolyn Burke: Yes, I think let me just take the second one first, and then we can go back. I think on the FFO to debt, as we mentioned answering Steve’s question. So, yes, so our FFO to debt does is one, we — one we’re hitting our target for this year. And two, as you look at our operating cash flow, that’s where I really draw your attention to. You can see that our operating cash flow continues to improve throughout the five-year plan. And our FFO to debt is really improving across the plan as our operating cash flow improves. So, you can see that. Now does it plateau? We haven’t given you that information at this point in time. No, the $3 billion in equity is what’s in our plan. That is the amount. And how you should think about that, as we’ve said, is that we will be very mindful of market conditions, and we will always be looking to access the most efficient financing alternatives available to us.
And I think that’s the bottom line. Is there any other question on that?
Gregg Orrill: No, understood. Got it. Thank you.
Carolyn Burke: Thanks Gregg.
Operator: Your next question is from the line of Ryan Levine with Citi.
Ryan Levine: Good morning.
Patricia Poppe: Hey Ryan.
Ryan Levine: Hi. In terms of cost-cutting initiatives, how much visibility do you have in achieving your goals? I know you’ve been making a lot of progress there, but trying to get a sense of how many quarters or years out you have line of sight to achieving these goals?
Patricia Poppe: Ryan, this is my favorite question. Thank you for asking it. We — I swear, we have unlimited line of sight for places where we can continue to do more for customers at a lower unit cost. And I have the most gratifying visit this week to a place in Dublin, California, where we say we’re reinventing inspections, where the team was completely data-driven and focused on how can we do the right inspections that predict the right failures and do the right repairs at a lower cost using technology and process design. And it was just unbelievable how fast this team is learning to embrace our lean operating system and our performance playbook our safety management system, combined with our lean operating place and our breakthrough thinking is unlocking extraordinary ideas from this team.
And I am so proud of what I see them doing and I can see that we are just getting started. I have a lot of experience in this area, and it has long been my experience that no process is ever finished. That we will always find ways to improve what we do, do it smarter, do it for less, save customers’ money while we’re improving the service we deliver to them. And we are just unlocking that potential. We are in the first inning of unlocking that potential here at PG&E, and it has the opportunity to provide benefits for customers for decades to come.
Ryan Levine: Great. And then one on financing to the extent you’re able to comment. So with the stated intention, correct me if I’m not hearing this correctly around a programmatic ATM starting in 2025. To the extent that Pac Gen were to be monetized in some way or form. Would that — is that viewed to be direct offset to equity? Or are there other considerations that we should take in mind?
Carolyn Burke: Yes, I wouldn’t necessarily assume that. I think, one, a Pac Gen approval certainly strengthens the plan. And so it’s better for our balance sheet, and it’s better for our customers. It’s going to allow us to consider a number of different elements in the current plan, but particularly how much customer work we get done, because as we’ve said, we have more customer work than the $62 billion. And we’ll also consider our debt financing assumptions. I think what’s important, again, I go back to is that we will always look at the most efficient financing, and we’ll be mindful of market conditions.
Ryan Levine: Thanks for the clarity.
Operator: Your next question is from the line of David Arcaro with Morgan Stanley.
David Arcaro: Hi thanks. good morning.
Patricia Poppe: Hi David.
David Arcaro: I was just — maybe a bit of a follow-on that. As I’m thinking about the $5 billion in potential upside CapEx opportunities, how would you think about financing that in terms of potential equity needs incremental to the plan?
Patricia Poppe: We’re — on the $5 billion. So thanks for the question. So what’s important for us on the $5 billion is that it is affordable. It needs to be affordable both for our customers and fitting within our target of bill increases in line with inflation of the 2% to 4%. And then it needs to be affordable on our balance sheet. And so I go back to — our plan has a reasonable balance of the debt, both utility debt and company debt and dividend and routine equity. And as we implement that plan, we will again be very mindful of market conditions and look for the most efficient financing for that $5 billion. And David, I’ll just add that, keep in mind, things like, for example, a 1% reduction in O&M is $100 million of additional — or additional cash flow.
And so as we think about we continue to do more for less, that frees up cash flow to do more work and pull in additional capital and fund it through efficiencies through some of our more efficient financing. One of the things we wanted everyone to really hear today is this financing plan is a conservative plan. It’s a good plan. And it can only improve from here. So this is a good starting point, a good baseline, and we’re excited to share it with you today.
David Arcaro: Got it. Yes, that’s helpful. I was wondering, as we think about the load growth outlook and the potential for data centers, could you speak to maybe just how long it takes to connect a new large load to the system? And any initiatives that you’re involved in that could reduce that time and increase the efficiency there?
Patricia Poppe: Yes, it’s a great question. I will say that I think there’s a national challenge with the supply chain and being able to access some of the necessary equipment to build out that capacity as well as timely cash recoveries and cost recoveries for that investment. We’ve got the cost recoveries improvement here in flight in California with SB 410. We’re looking forward to that process coming so that we can have certainty about the cash flow recovery associated with building out that new capacity. So that’s been a delay for — certainly for some people and certainly for us. But I’d say the biggest delay right now is the supply chain. And so we’re doing something called a cluster study where we have brought together, that was one of the reasons we had all those customers at the [indiscernible] with us the other day is we’re doing a study with them collectively so that they can understand there, instead of one project at a time, looking at a suite of these projects, really understanding their growth forecast, and we can get way further ahead in the planning for their ability — their plans to build out and our ability to serve that load.
