Prepared remarks
Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to PG&E Corporation's Second Quarter 2026 Earnings Release. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a Q&A session. If you would like to withdraw your question during the Q&A, you may do so. I would now like to turn the conference over to Jonathan Arnold, Vice President of Investor Relations. Jonathan, please go ahead.
Good morning, everyone, and thank you for joining us for PG&E's Second Quarter 2026 Earnings Call. With us today are Patty Poppe, Chief Executive Officer, and Carolyn J. Burke, Executive Vice President and Chief Financial Officer. We also have other members of the leadership team here with us in our Oakland headquarters. First, I should remind you that today's discussion will include forward-looking statements about our outlook for future financial results and other matters. These statements are based on management's current expectations, assumptions, and estimates. Some important factors that could cause our actual results to differ materially are described on the second page of today's earnings presentation. Today's discussion will also contain non-GAAP financial measures. The slides provide important information regarding these measures, including reconciliations between non-GAAP and GAAP. They can be found online at investor.pgecorp.com along with other relevant information. We also encourage you to review our quarterly report on Form 10-Q for the quarter ended 06/30/2026. With that, it is my pleasure to hand the call over to our CEO, Patty Poppe.
Thank you, Jonathan. Good morning, everyone. Our core earnings per share are $0.40 for the second quarter and $0.83 for the first half of 2026. These results reflect consistent, disciplined execution enhanced by our Lean operating system and the durability of our simple affordable model. Halfway through 2026, we are well on our way to extending our run of double-digit earnings growth for a fifth year, which supports my confidence in reaffirming our financial plan today. That includes our full-year core EPS guidance of $1.64 to $1.66, which at the midpoint is up 10% over 2025; our 9% plus annual EPS growth from 2027 through 2030; our $73 billion capital plan through 2030, which does not require additional equity financing; and our target of reaching a 20% dividend payout by 2028 versus an implied 12% in 2026. At the same time, we remain intensely focused on customer affordability for the Californians we serve every day. We are committed to achieving our path to flat, targeting 0% to 3% annual customer bill growth. A key enabler is electric load growth. One of the most exciting opportunities in front of us is large load demand coming from our data center pipeline. As you will see in a few minutes, we have updated our pipeline this quarter, folding in new projects from our 2026 cluster study. We continue to see our current plan as the best plan for our customers and for California. As we like to say, performance is power, and I am proud of the improvements we are delivering for our customers across multiple dimensions. We have extended our safety performance on serious injuries and fatalities and have had zero public safety incidents from asset failures. On affordability, our residential bundled electric rates are down 23% since January 2024 for our most vulnerable customers. On wildfire safety, we are in our fourth year of no major fires linked to PG&E equipment and no structures destroyed. On reliability, our performance has improved 23% year to date versus the same period last year, driven by fewer outages along with faster restoration times. As I will discuss shortly, we are continuing to see significant load growth opportunities associated with data centers looking to locate in our service area, which includes Silicon Valley, home to the world's technology sector. Turning to slide 4, we know that California wildfire liability reform is top of mind for us and for policymakers. While important work remains, we are encouraged that California's leading policymakers have made it clear they recognize the need for a durable solution. This is a critical moment for California. As the California Energy Agency emphasized in their April report, the cost of inaction is too high to ignore. We could not agree more. A constructive outcome would accelerate our path to investment grade and lower financing costs for customers. Conversely, inaction would slow that progress and ultimately make the system more expensive to finance. That is why getting this right and getting it done this year matters so much for the long-term affordability of the California energy system — for the customers we serve and for our investors. Our five-year plan assumes that California will follow through on the commitment made in SB 254 to strengthen the wildfire liability framework. For us, this means a durable and financeable framework that provides greater predictability and supports access to low-cost utility capital, thereby protecting customer affordability. While our preferred path is to continue executing the plan we have laid out, we have a responsibility to investors and customers alike to ensure capital is allocated appropriately under whatever framework ultimately emerges. If the framework remains unresolved or insufficient, then we would need to reevaluate our capital allocation priorities and long-term investment plans. Our objectives would remain unchanged: safely serve our customers, preserve affordability, and attract the low-cost capital necessary for any regulated utility to deliver the expectations of policymakers, regulators, customers, and, of course, fulfill the expectations of those of you who have entrusted your capital to us. Turning to slide 5, our continuous monitoring capabilities are a key driver of wildfire safety, reliability, and affordability. We are on track for a fourth consecutive year with zero structures destroyed. More broadly, our mitigation investments and disciplined execution continue to reduce risk and strengthen safety outcomes. Continuous monitoring is also delivering tangible operational benefits for the Californians and communities we serve. In fact, I was just at our command center on Monday. Since January 2025, our team has helped avoid nearly 20 million outage minutes, 28 ignitions in high-fire-risk areas, and over 5,000 emergency response hours, while saving more than $11 million through lower-cost repairs. We are in pursuit of the first completely predictive electric grid — no more waiting to see what breaks. Continuous monitoring is enabling our next level of extraordinary operational performance at PG&E. On slide 6, we are showing once again our simple affordable model, which continues to give us line of sight to our path to flat, keeping annual customer bill growth at 0% to 3%. We are delivering results through disciplined execution across each of the levers in the model. We have built a strong track record of exceeding our annual O&M cost reduction targets, and that focus continues. For example, we have saved more than $40 million already this year through targeted sourcing and procurement initiatives, and we are not stopping there. At the same time, we are laying the groundwork for future load growth by advancing our data center pipeline and enabling new business connections. We are also continuing to pursue efficient financing, building on progress we have made restoring investment grade credit, which will lower the cost for our customers of financing the needed long-term investments we are making on their behalf. We are working every day to bring this model to life for Californians: delivering better service to our customers at a lower cost, and demonstrating that affordability is enabled by investing in the right infrastructure. Looking forward, we remain confident in our ability to deliver affordable service for customers alongside consistent high-quality results. Turning to our data center pipeline on slide 7, we shared last quarter that we had over 10 gigawatts of additional pre-application interest coming out of our 2026 cluster study, illustrating the strength and breadth of demand across our service area. This quarter, that demand is coming into focus with new projects moving into our pipeline, which now stands at over 12 gigawatts. As we continue to build our pipeline, we are focusing not on size, but on quality. To that end, with today's update, we refined how we categorize our projects, raising the threshold for inclusion in both the preliminary and final engineering stages. A signed work performance agreement and the associated financial commitment, typically around 10% of overall project cost, are now prerequisites to be included in final engineering. We have also restated our March numbers so they are shown on a comparable basis. At the same time, we remain very focused on pricing this load correctly — attractive to data center customers, but still rate-reducing for our other customers. We support efforts to achieve this on a national level and believe that FERC's recent order to show cause is a positive step. We are collaborating with external stakeholders, including CAISO, to respond by next month's deadline. On the state level, we continue to engage with stakeholders and the CPUC on both Rule 30 and the Commission's advanced rate design rulemaking. Our focus across all venues is simple: create clear, transparent, and durable frameworks for new large-load customers while improving affordability for the customers we already serve. Done right, these efforts can help build a high-confidence pipeline that lowers electric bills, drives economic growth, and keeps California at the forefront of technology and innovation. With that, I will hand it over to Carolyn.
Thank you, Patty, and good morning, everyone. On slide 8, we are showing our earnings block for the first six months of 2026. Our core EPS of $0.83 is $0.19 higher than this point last year. As a reminder, prior-year results through the first half were impacted by dilution from our December 2024 equity financing, as well as the CPUC cost of capital Phase 2 decision from October 2024. The core drivers of this year's earnings growth are coming in as expected, with customer capital investment contributing $0.09 year over year and O&M savings and redeployment contributing a net $0.03. While some of the remaining growth reflects timing-related items that we expect to reverse over the remainder of the year, this quarter's performance reflects the consistent underlying execution you have come to expect from our team and positions us well for the year. As we look forward, we remain confident in delivering our 2026 core EPS guidance of $1.64 to $1.66. We continue to see opportunities across the business to drive efficiency and manage cost, supported by the same disciplined execution and operational vigor Patty discussed earlier. On slide 9, there is no change to our five-year $73 billion capital plan through 2030. We continue to see at least $5 billion of customer-beneficial investment opportunity that sits outside the plan. These opportunities, largely for capital, have the potential to improve the plan by facilitating incremental rate-reducing load, which is consistent with our current preference — namely making our plan better in terms of affordability or longer in terms of duration, rather than making it bigger. Moving to slide 10, our five-year financing plan remains unchanged from our prior call, and that includes reaffirming that our equity needs are fully funded through 2030. Additionally, our current dividend payout ratio enables us to grow earnings in line with rate base without the need for additional equity financing. This is allowing us to avoid as much as $10 billion of financing over the planning period versus if we had a typical utility payout ratio. Our combination of a disciplined capital allocation program, a focus on affordability, and a self-funded growth profile positions PG&E to deliver premium results for both our customers and our investors well into the future. In June, we completed a $2.2 billion utility bond issuance, bringing our total utility debt financing to $4.4 billion for the year and covering the annual financing needs that we previously shared with you. As we look ahead, our financing priorities remain unchanged. We continue to focus on achieving investment grade ratings, sustaining FFO to debt in the mid-teens, and targeting a dividend payout ratio of 20% by 2028 and holding at that level through 2030. We believe our plan is the right plan for California and for our customers. That said, our plan is premised on achieving a constructive legislative outcome. On slide 11, we continue to make progress toward investment grade credit ratings. As shown, following our first quarter call, S&P upgraded our rating, bringing us to just one notch below investment grade. Importantly, S&P cited the progress we have made reducing wildfire risk through our mitigation efforts and operational execution. They noted that the improvements we have made in the last seven years — like PSPS, EPSS, system hardening, vegetation management, and the continuous monitoring Patty talked about — are meaningfully reducing the likelihood of utility-caused wildfires. That recognition reinforces an important point: safety and financial performance go hand in hand, benefiting both customers and investors over the long term. Additionally, our underlying credit metrics continue to be at levels consistent with investment grade ratings. Achieving investment grade remains a critical milestone because it enables more efficient access to capital, which in turn translates directly into lower borrowing costs and lower bills for our customers. Both S&P and Moody's also continue to highlight the importance of a durable legislative solution to wildfire liability as the catalyst for additional upgrades. On slide 12, we remain on track to deliver 2% to 4% annual reductions in nonfuel O&M. As our history shows, reducing costs while improving safety, reliability, and customer outcomes has become a repeatable capability at PG&E. Over the last several years, we have consistently exceeded our cost reduction target, and we continue to see opportunities across the business by taking a systematic approach to eliminating waste, improving productivity, and finding ways to better serve our customers. While no single initiative drives the outcome, literally thousands of improvements large and small all across the company give us confidence in our ability to continue delivering both operational excellence and customer affordability. On slide 13, we are showing major regulatory and legislative milestones. In our 2027 GRC, we are making steady progress with hearings and opening briefs taking place this quarter. We also filed for interim rate recovery effective January 2027, which if approved would help smooth customer rates. This request is consistent with our broader approach of pursuing every available lever to support affordability for our customers while making the investments needed to operate the systems safely and reliably. On Kincade and Dixie, we continue to expect a proposed decision in November. As a reminder, this is the first wildfire recovery case where a utility had a valid safety certificate and a corresponding presumption of prudency. I will close here on slide 14 by reiterating that our simple affordable model is working. Our focus on affordability keeps customers at the center of our decision making. Our capital plan is designed to deliver the right customer outcomes while offering premium growth and avoiding the need for equity. With that, I will hand it back to Patty.
Thank you, Carolyn. As you have heard this morning, we are continuing to deliver on our simple affordable model. We are driving disciplined execution today while further advancing customer affordability, building on the five rate reductions we have already implemented in the past two years. That performance is showing up in our business. We have maintained a strong safety culture, improved reliability, and improved customer satisfaction across a wide spectrum of experiences, all while reducing rates. While we continue execution and operational performance, we are encouraged to see the state continuing to do their part by working toward a constructive solution on SB 254 Phase 2. I am confident that we have the right team with the right plan at the right time to deliver for the millions of Californians we serve. With the right wildfire liability framework, we can fully realize the benefits of that plan for our customers and for our investors. With that, operator, please open the lines for questions.
Questions and answers
Thank you. We will now begin the Q&A session. We do ask that you limit yourself to one question and one follow-up. For any additional questions, please re-queue. Your first question comes from Shahriar Pourreza with Wells Fargo. Please go ahead.
Hey, good morning, Patty. On legislation, you have been clear that if you do not get what is needed from the legislative process, you will rethink capital allocation priorities. What are you looking for from legislation as we are approaching the tail end of this process? What is a fair outcome for you? And how quickly can you pivot capital should the outcome not be adequate at the end of August? Thanks.
That's a great question, Shah. We need a durable, financeable, predictable, and affordable legislative framework for how to deal with wildfire liability. That is a pro-affordability message at a time when that is top of mind in Sacramento. We think the framework needs to be affordable for customers, and attracting low-cost capital from the equity and debt markets is an essential ingredient to affordability. So whatever the final legislative action is, it needs to make investment in California's utilities attractive to the capital markets while remaining affordable for customers. Regarding pivoting the capital plan, there is one thing people should understand: there is no case for no action. If the legislature does not act or acts in a way that does not actually solve the problem, we will have to take action and reallocate our capital plan. I am not going to provide detailed racking and stacking of what that would look like on this call, but I want you to know there will be action in the event of inaction by the legislature.
Got it. And then on Dixie and Kincade cost recovery, the ALJ set a settlement conference for July 31st and evidentiary hearings for August 17th to the 20th. Is there anything to read into this? Can you settle? What could a settlement look like?
Hi, Shah. That settlement conference date is part of the schedule that is standard in almost every case. As we have shared previously, we are always open to settlement, but at this point in time we are very focused on presenting a strong case. The next steps you mentioned are correct: hearings in August, briefs in September, and we still expect a proposed decision in November.
Got it. Thank you. Appreciate it.
Your next question comes from Steven Fleishman with Wolfe Research. Please go ahead.
Morning. Do you feel policymakers are seeing the improvements you're delivering across safety, reliability, and affordability and understanding that these improvements are real? Perceptions can lag performance. If legislators do not act, some parts of your plan might have to change. Do you have a sense for that?
We have worked hard to make the case that our simple affordable model works. The proof is being realized, but perceptions do lag actual performance. I appreciate that legislators get pressure from customers who want more, and expectations of us are high. We believe we can meet those expectations best with our current plan. We think our capital plan and simple affordable model are the right path. I am seeing our communications break through; for example, a legislator told me they were aware we have reduced rates five times. Wildfire legislation is complex, and the legislature has a lot on its table, but they have given good signals that they need to find a path that works for customers. The case for inaction is clear: the CEA study showed wildfire-related charges now account for approximately $20 to $40 per month, as much as 14% to 19% of monthly bills. That is a legitimate cost of inaction. We believe a good outcome is possible, but we are prepared if it does not occur.
Okay. A couple of follow-ups. First, there are a number of items on the table besides cost of capital, like tort and insurance reforms. Any sense on progress in those areas? Second, any takeaways from the investor letters you sent to the commission the other night?
Tort reform and insurance reforms are still on the table; nothing is off the table yet. What matters most to us is what constitutes an acceptable outcome for utility customers and investors. The governor's executive orders specifically pointed to the financial health of the utilities, so investment-grade status is very important for customers and for California, particularly given the growth era we are entering and the state's need for low-cost capital. There are specific steps that can make the framework more durable, predictable, and affordable for investors without requiring an all-encompassing societal approach. Regarding the investor letters, we appreciated investors speaking directly to us about what they see. We felt it was important that the CPUC hear from the capital markets as well. The CPUC has been interested in understanding what steps are necessary to attract capital in California, and those letters were a way to share investor views directly with the commission.
Your next question comes from Nicholas Campanella with Barclays. Please go ahead.
Good morning. On reevaluating the plan, how does that intertwine with the GRC that has been filed? If you go to a Plan B, would you materially update the GRC? Are you too far along, or would timing be pushed?
Good question, Nick. As we consider the GRC and any shift to the capital plan, we would integrate any changes. We do not know that it would necessarily require an additional filing or modification, but we would ensure that whatever capital we prioritize enables us to meet our first-order obligations: safety, reliability, and compliance. We would fulfill those obligations. So while we would integrate any changes, we do not think it would necessarily require changing the GRC filing, and we would not want it to affect GRC timing.
I'll remind you of two things, Nick. One, we always plan conservatively, so our filing does not necessarily represent every element that might be in our plan due to conservative assumptions. Two, remember that FERC-related capital represents about $20 billion of our $73 billion plan; it is not all CPUC capital.
That is great. On the $73 billion, can you say how much is reliability and resilience versus growth-oriented spending to facilitate economic development?
If you look in the appendix, we show about $16 billion related to resiliency, which is system hardening, and another $23 billion related to capacity and new business.
Your next question comes from Carly Davenport with Goldman Sachs. Please go ahead.
Good morning. Two questions on the data center pipeline updates. First, how do you think about the potential of the cluster study load to move through the pipeline versus prior studies? I'm trying to characterize the quality of the projects and applications.
We learn every day about which projects are highest quality. Not all will flow all the way through. The number one criterion is they must be rate-reducing, so pricing them right matters. If you get pricing right, that can convert into roughly a 1% per gigawatt rate reduction or more. The cluster study process provides pricing visibility. We've added the requirement in final engineering for a work performance agreement and a financial commitment, typically around a 10% fee, which increases confidence as projects move through the pipeline. When you see projects in final engineering, they have a higher probability than pre-engineering. Right now, our planning assumption is about 1.8 gigawatts of this pipeline will be online by 2030. Some earlier projects have faster speed-to-power or direct connections to our 500 kV in the Central Valley, which could increase that number, but 1.8 gigawatts is our current planning assumption.
Great. As a follow-up, on interconnection, do you see potential changes coming from CAISO's response to the FERC show-cause order relative to what has been ongoing with the Rule 30 process?
It could be. Our process has improved a lot in the last several years in California, and that has made interconnection less of a deterrent. We look forward to collaborating with CAISO and seeing what they file to FERC. Improvements would be helpful. We cannot help but think AI can help us do more simultaneous engineering faster. We're hopeful to see improvements in the engineering portion, which we own. Anything that reduces cost and improves speed to get rate-reducing load online faster is very welcome.
Your next question comes from Richard Sunderland with Truist Securities. Please go ahead.
Morning. The number of projects in preliminary versus final engineering seems to imply a larger average size from the latest cluster study. Can you speak to the type of projects you're seeing now? Is this changing or more reflective of where projects sit in the pipeline overall?
We are starting to see interest in some larger projects. Historically, we've had many smaller, 'Goldilocks' projects — expansions of existing facilities concentrated in the Bay Area. As the cluster study process became more visible and people realized we have more capacity and transmission in California, we've seen more applications for larger projects. However, we still see many projects around 1.5 gigawatts or smaller, and the bulk remain sub-gigawatt projects.
Got it. On the GRC and perception lag, how do you see the rate case process playing out given the rate reductions and affordability focus? Any thoughts on where you stand to date and how that is factoring into the GRC?
The GRC was well received. It is the lowest general rate case we've filed in over a decade. If fully implemented with our full ask, rates would be flat from 2027 to 2029, which is a marked departure from the past decade of significant increases. Combined with our simple affordable model, this supports our path to flat, which targets 0% to 3% annual increases, well below inflation. We are in process: reply briefs are due tomorrow, and we expect a proposed decision in March 2027 and a final decision in May 2027. We've requested interim rate relief so implementation can begin in January and avoid the midyear spike customers experienced in the last GRC. We hope the commission sees the value in interim rate recovery to smooth customer experience.
Your next question comes from David Arcaro with Morgan Stanley. Please go ahead.
Morning. As you iterate on O&M cost reduction efforts, how do you see the sustainability of the 2% to 4% savings? Any potential areas of upside emerging?
Hi, David. The 2% to 4% nonfuel O&M reduction guidance is sustainable and does not keep me up at night. We still have significant room for savings. Our capital-to-expense ratio improved to 1.0 last year, and our peers are over 2.0, so there is opportunity to improve further. Areas with real potential include strategic sourcing — we are beginning to see meaningful savings there — and AI. We've only scratched the surface on AI solutions to change how we do work. These are exciting opportunities.
Thanks. And could you touch on the current fire season and how it is shaping up in your service territory through the rest of the year?
This year's conditions and actual ignitions and acreage have been similar to last year. We prepare and remain ready every day, 365 days a year. Continuous monitoring has improved our visibility to the grid and potential faults. So far this year, continuous monitoring has resulted in about 1,080 good catches of potential issues; 13 of those could have been potential ignitions. Technology and innovation from our wildfire team and continuous monitoring center continue to advance prevention. The sensors tell us when something is going to fail before it fails, preventing ignitions. For example, while I was in the continuous monitoring center, there was a fault alert that a pole was leaning. We used to inspect poles infrequently; now we have daily monitoring of poles with sensors. That enhances safety, reliability, and cost because we can plan and bundle work to resolve issues before they become incidents. In short, the fire conditions are what they are; we are ready.
Your next question comes from Anthony Crowdell with Mizuho. Please go ahead.
Hey, good morning. A couple of cleanup questions. On Slide 24 you identify buckets of the future capital plan. Which bucket of spending would be most at risk under a Plan B?
The only thing we are willing to say is we'd evaluate all of it, but we would never sacrifice safety, compliance, or our obligation to serve. Customers' well-being is number one. Second, we recognize the capital that has come from the equity markets — it is your capital — and we need to think about how best to treat it. Beyond that, we need time to evaluate and will act accordingly if necessary.
Follow-up for Carolyn: you talked about the capital-to-expense ratio and targets. What timing do you expect to get to higher levels like 2x, 3x?
In our capital plan, we reach about 1.7x by 2030. I would hope to beat that. Teams are using our Lean playbook, and we have thousands of improvements coming from employees that are making us more efficient. So right now the plan shows 1.7x by 2030, but I am hopeful we will exceed that.
Your next question comes from Gregg Orrill with UBS. Please go ahead.
Good morning. Regarding the rate case and the request for interim rates, what is your case there and how does that affect the financial plan whether you get it or not?
It does not affect the financial plan; it affects customer experience. Under California's ratemaking construct, whenever we get the final decision, we capture those earnings for the calendar year. The difference is implementation timing for customers. If interim rates are not provided, customers could face a ‘pancaking’ effect where they pay both for the new rates and amounts that were not collected earlier, which happened in our last GRC and was notable for customers. In this affordability environment, we prefer to spread rate collection throughout the year. We proposed interim recovery at 55%, 75%, and 85% of requested revenue and hope the commission sees the value in interim rate recovery. If we over-collect, we would return that amount, but the total revenues are captured in the calendar year per regulatory accounting standards.
Your next question comes from Ryan Levine with Citi. Please go ahead.
Two follow-ups. First, are you seeing any unlocks from new AI models that reduce wildfire risk? Second, should we expect a meaningful update in the data center outlook as Rule 30's outcome becomes determined?
On Rule 30, we were allowed interim implementation, so that is reflected in our current pipeline. Certainty would be helpful, and FERC's order to show cause may prompt alignment between what we've implemented and any further action. On AI, we are already using AI for wildfire-related applications. We continually improve our technology adoption. Our biggest AI utilization is in meteorology for predicting fire conditions and in machine learning with our smart meters. We take signals from meters that were previously unutilized and triangulate them with sensor technology to identify faults on service lines to homes. That is a significant advancement for wildfire prevention.
In addition to that, we have over 650 high-definition cameras in our service territory, which has allowed us to be about 18 minutes faster in response compared with traditional methods.
Those cameras send automatic notifications to our wildfire responders across the state. In the past, fires often required someone noticing and calling it in. Now these cameras automatically notify first responders, enabling an 18-minute faster response, which can be the difference between a catastrophic fire and a containable fire.
That concludes our Q&A session. I will now turn the conference back over to Patty Poppe for closing comments.
Thank you, everyone, for calling in today. We remain encouraged by the progress on SB 254 Phase 2 and the continued focus on a durable solution for California. In the meantime, our team is focused on delivering safe, affordable, and reliable service every day. This is the team for the time, and we have a plan to serve. Thank you for joining us, and please stay safe out there.
Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and you may now disconnect.