PG&E (PCG) Q4 2025 Earnings Call Transcript

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Date

Feb. 12, 2026 at 11 a.m. ET

Call participants

• Chief Executive Officer — Patricia Kessler Poppe
• Executive Vice President and Chief Financial Officer — Carolyn J. Burke

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Takeaways

• Core EPS -- $1.50 per share, at the midpoint of guidance, representing 10% growth over 2024.
• 2026 core EPS guidance -- Raised to $1.64-$1.66, with midpoint implying another 10% growth.
• Long-term EPS growth outlook -- Annual 9%+ growth projected for 2027-2030, reaffirmed during the call.
• Electric rate reductions -- Fourth reduction in two years; bundled residential electric rates now 11% lower than January 2024, with typical monthly bills down about $20.
• Safety metrics -- 43% reduction in serious injuries and fatalities and 30% improvement in serious preventable motor vehicle incident rate, yielding best-ever results.
• Electric reliability -- Systemwide performance improved by 19% compared to 2024.
• Ignitions and wildfire outcomes -- Ignitions down 43%, achieving three years without a major fire from company equipment despite elevated statewide activity.
• Non-fuel O&M savings -- Achieved $0.20 per share in savings for 2025, exceeding four-year targets, with the O&M savings target now updated to 2%-4% annually.
• Capital investments -- Added $0.07 per share via customer capital investments, with $73 billion five-year capital plan unchanged, and $5 billion of additional potential capital (mostly FERC jurisdictional) beyond the plan.
• Customer connections -- Application intake time reduced 40% (to 45 days), engineering design time down one-third from 2023, supporting increased demand.
• Data center load growth -- Almost 3.6 GW in final engineering as of quarter-end, more than double last update; forecast to have about 1.8 GW online by 2030.
• Rate-reducing load impact -- Each GW of large load expected to reduce average monthly electric bills by 1% or more.
• Electric vehicle penetration -- 18% in final quarter, noted growth despite expiring incentives.
• Dividend -- Annual dividend doubled to $0.20 for 2026, with payout guided to 20% by 2028 and through 2030, and expectation for increases over the next two years.
• Financing plan -- Planned utility debt issuance up to $4.6 billion in 2026; no new common equity required through 2030; parent debt to remain below 10% of capital through 2030.
• Credit rating status -- Fitch upgraded to investment grade; both Moody’s and S&P financial metrics meet investment-grade criteria, pending SB 254 progress.
• Wildfire policy process -- California Earthquake Authority report on SB 254 phase two due April 1, initiating legislative process for wildfire liability reform.
• Undergrounding and hardening -- Preparing ten-year plan for approximately 5,000 miles of new undergrounding (starting 2028), totaling nearly 11,000 hardened miles by 2037, reaching more than 75% of high fire threat areas.
• EmberPoint venture -- Launched with Lockheed Martin (NYSE:LMT) to accelerate wildfire mitigation technologies and facilitate cost savings for customers over time.
• Kincaid and Dixie cost recovery -- Seeking approximately $674 million in wildfire fund claims, $1.6 billion for WEMA, and $314 million for CEMA in pending regulatory proceedings.

Summary

PG&E Corporation (NYSE:PCG) delivered its fourth consecutive year of double-digit core EPS growth, reported a marked decline in customer rates, and continued strengthening its safety, reliability, and operational efficiency performance. Management is maintaining a no-equity financing plan through 2030 and underscored the critical dependency of investment-grade ratings and future capital allocation flexibility on legislative reform, specifically progress on California’s wildfire liability framework. New data center and manufacturing load, together with enhanced O&M discipline and advanced wildfire mitigation, are driving a refreshed earnings trajectory and underpin the commitment to flat or declining customer bills in coming years.

• CEO Patricia Kessler Poppe said, "we are officially updating our simple, affordable model to show a new target future bill trajectory of 0% to 3%."
• Management noted their $73 billion capital plan remains unchanged and additional capital beyond this will be allocated to affordability-driven investment as warranted by load growth and regulatory clarity.
• The company outlined that Fitch upgraded PG&E Corporation to investment grade, and stated that both Moody’s and S&P have said that "our financial metrics are meeting the investment-grade criteria," with ratings trajectory now linked to progress on SB 254.
• Executive Vice President and CFO Carolyn J. Burke said, "our plan is built to require no new common equity through 2030," highlighting focus on sustaining low parent leverage and increased flexibility via FFO-to-debt metrics in the mid-teens.
• Management stated that if legislative progress on SB 254 were to stall or derail, "the entire plan will be on the table," with future capital allocation and operational models subject to review.
• Bills for bundled residential electric customers are now "11% lower than January 2024."
• PG&E Corporation confirmed that its updated O&M savings target has increased to the 2%-4% range, now after absorbing inflation and cost pressures, and that its capital-to-expense ratio improvement still leaves "We still see plenty of headroom for savings, as indicated by our capital-to-expense ratio, which has improved from 0.8 to 1.0 over the past two years. While improving, our ratio remains well below our peer group average of 2.0, while top-decile performers are close to 3.0."

Industry glossary

• GRC (General Rate Case): A formal regulatory proceeding before the California Public Utilities Commission for setting rates and approving multi-year investment and expense forecasts for utilities.
• IOU (Investor-Owned Utility): A privately owned electric or gas utility regulated by state authorities, rather than owned by the government.
• WEMA (Wildfire Expense Memorandum Account): A regulatory account for tracking and seeking recovery of wildfire-related operating costs.
• CEMA (Catastrophic Event Memorandum Account): A regulatory account for utilities to track costs arising from catastrophic events, for subsequent cost recovery applications.
• FFO-to-debt: A credit metric measuring funds from operations relative to total debt, used by rating agencies to assess leverage and financial risk.
• HFTD (High Fire Threat Districts): Specific geographic areas designated as having elevated wildfire risk that require targeted utility infrastructure mitigation.
• EmberPoint: A joint venture between PG&E Corporation and Lockheed Martin aimed at deploying advanced wildfire detection, suppression, and mitigation solutions.
• Undergrounding: The process of placing overhead electric distribution lines below ground to reduce wildfire ignition risk and improve reliability.

Full Conference Call Transcript

Patricia Kessler Poppe: Thank you, Jonathan. Morning, everyone, and thanks for joining us. This morning, we are reporting full-year 2025 core earnings of $1.50 per share at the midpoint of our EPS guidance range and up 10% over 2024. This marks our fourth consecutive year of double-digit core EPS growth. I am proud of how our team stayed focused on our highest priorities: safe, reliable, and affordable service for our customers while at the same time delivering strong results for investors. Looking ahead, we are raising and tightening our 2026 core EPS guidance range. We are increasing the low end by $0.02 which brings the range to $1.64 to $1.66. At the midpoint, our 2026 guidance implies 10% EPS growth.

Looking further out, I am pleased to reaffirm our growth outlook of 9% plus annually from 2027 to 2030. As you have come to expect, we will also continue our practice of basing future growth on our actual earnings. As previously announced, last month, I began the five-year extension of my contract as CEO, which runs through 2030. I am energized by the work ahead. Our priorities are clear: safely keep the lights on and the gas flowing, and keep making bills more affordable. It is a safety, reliability, and affordability trifecta that we are delivering here at Pacific Gas & Electric Co.

On the safety front, in 2025, we had a 43% reduction in serious injuries and fatalities compared to 2024, and our serious preventable motor vehicle incident rate improved by 30%, achieving some of our best-ever safety metrics. On reliability, our systemwide performance improved by 19% from 2024. And on affordability, it is our consistent execution on our plan—our simple, affordable model—which is allowing us to chart a differentiated path for our customers. On January 1, we delivered our fourth reduction in electric rates in two years, with our gas rates also going down. Combined with prior decreases, our bundled residential electric rates are now 11% lower than January 2024, with the typical customer paying about $20 less per month.

That is progress customers can feel. If our pending 2027 GRC were to be approved as filed, combined gas and electric bills would be flat to down compared to 2025. And we are going to keep pushing because fighting for customer affordability is core to our strategy. Looking ahead, we see opportunities to further improve this trajectory through the addition of rate-reducing load, from data centers and other electric growth. This new load can deliver a win-win for California—economic development and affordability. Slide four should be familiar by now and summarizes our consistent execution track record.

Each year brings different headwinds and tailwinds, but our approach is unchanged: plan conservatively and execute relentlessly to deliver consistent, predictable results over the long term. In 2025, we confronted early headwinds with strong execution during the year, particularly on the cost side, ultimately putting us ahead of plan. This allowed us to redeploy and pull ahead costs in the back half of the year. That is our model doing exactly what it is designed to do—deliver consistent results for owners while redeploying outperformance to benefit our customers.

As shown on the slide, over the past four years, savings generated under our simple, affordable model have allowed us to redeploy over $700 million for the benefit of customers while still delivering for our investors. These are dollars which could have shown up as higher profits but which we chose instead to deploy toward better customer outcomes and derisking future years. Said another way, profits and customer savings go hand in hand. Turning to slide five. We remain intensely focused on helping California find a path to address the state’s wildfire challenge.

We will stay constructive and tenacious until we reach a more sustainable, safer, and affordable future for our customers, for our communities, for our state, and for those who commit their capital to us. Since our last call, the California Earthquake Authority stakeholder process for SB 254 phase two has been progressing, and they are tracking towards submission of their report and recommendations to the governor and legislature April 1. I should note that the April 1 CEA report will not be the end of the road for phase two. In fact, it will mark the beginning of the legislative process.

We are not getting specific today on which policy choices might be most effective, but be reassured our team is actively engaged. In terms of core principles, our goal is to address the open-ended and unknown risks which the current construct puts on the IOUs and our customers. For California to attract much-needed capital, you must be able to quantify and price the risk. Our customers and hometowns need us to access affordable capital as a prerequisite for the safe, resilient, and clean energy system they expect. Turning to slide six. Ignitions were down 43%, which resulted in a third year without a major fire caused by our equipment. This was achieved despite elevated fire activity statewide.

As we do every year, we are looking to drive further safety in 2026. We expect to further expand our continuous monitoring capabilities, including our smart meters, which are helping us get ahead of potential issues—anticipating failures before they happen. In late January, we announced the launch of EmberPoint, a new venture between Lockheed Martin and Pacific Gas & Electric Co. Marking a critical milestone in our mission to end catastrophic wildfires, EmberPoint is intended to integrate next-generation wildfire solutions and set a new standard of wildfire safety.

With our regulator’s approval, we can bring our wildfire mitigation experience and proven layers of protection while Lockheed Martin brings its cutting-edge prediction and detection along with military-grade equipment and tools to help our firefighters stay safe while putting out fires faster. We can accelerate at scale the deployment of technology at the lowest societal cost, the goal being speed to safety—making our system and others safer faster. In addition, EmberPoint gives us a pathway to flow some savings back to our customers over time. Also in January, five finalists were announced in the autonomous response track of XPRIZE Wildfire where Pacific Gas & Electric Co. is the main sponsor.

This summer, the five finalists will be tasked with demonstrating autonomous systems which can detect and fully suppress a high-risk fire in a 1,000 square kilometer test zone within minutes while leaving decoy fires untouched. We could not be more excited to be helping advance real-world adoption of game-changing solutions. On the regulatory front, in December, the CPUC voted out revised guidelines for utility undergrounding plans. This is a key step that moves us toward initiating our ten-year plan filing with OEIS, likely in the third quarter of this year. Earlier this week, we and the other IOUs made a required filing with the CPUC to establish the benefit-cost ratio methodology.

Aligned with that, the CPUC guidelines provide us a path for us to file for approximately 5,000 miles of additional undergrounding over ten years starting in 2028. These miles will represent the next phase of our undergrounding journey and will add to the 1,900 miles we expect to have completed by 2027. Combined with overhead hardening, this would bring our total system hardening plans through 2037 to almost 11,000 miles and more than three-quarters of the high fire threat miles we plan to harden based on our current modeling. The remainder of our overhead system in the HFTDs will be protected with operational controls like PSPS, EPSS, maintenance including vegetation management, and continuous monitoring, as it is today.

As illustrated on slide seven, we see Pacific Gas & Electric Co.’s affordability story as our story of the year. As I mentioned earlier, on January 1, we lowered our bundled residential rates for the fourth time in two years, and our average bills for those customers are now 11% lower than in January 2024. That is a headline worth repeating. We hear a lot of discussion of affordability in absolute terms, but what gets less attention is that our bills, as measured by share of wallet, are below the U.S. average. Our value proposition relative to income levels is therefore better than average.

Our prices are moving in the right direction, and we believe this will become easier for policymakers to recognize going forward. As our 2027 GRC proposal laid out, our simple, affordable model allows us to make needed investments while holding our bill increases at or below typical inflation. Back in 2024, we started talking about our simple, affordable model, amplified. This showed an opportunity for further improvement in each of the key elements, our goal being to bend our future customer bill trajectory down even further.

Today, as shown here on slide eight, I am excited to share with you that we are officially updating our simple, affordable model to show a new target future bill trajectory of 0% to 3%. You heard me—0% increase in our bills is in sight. We have amplified two key enablers: our non-fuel O&M savings and electric load growth. Our confidence in the Pacific Gas & Electric Co. performance playbook and in our ability to drive savings has continued to grow. We still see plenty of headroom for savings, as indicated by our capital-to-expense ratio, which has improved from 0.8 to 1.0 over the past two years.

While improving, our ratio remains well below our peer group average of 2.0, while top-decile performers are close to 3.0. Turning to our rate-reducing load story here on slide nine. Since our third quarter update, we have seen significant growth in projects moving into the final engineering stage, which now stands at almost 3.6 gigawatts. That is up two gigawatts, more than doubling from last quarter. We are excited by the opportunity to bring on large load and deliver savings to our bundled customer base while enabling growth and economic prosperity for our state.

In January, Carla Peterman represented us at a ribbon-cutting ceremony at the Equinix Great Oaks South Data Center, the first data center to come online under our joint implementation agreement with the City of San Jose. This was an opportunity to demonstrate that Pacific Gas & Electric Co. is delivering on our promise to provide fast, reliable power to large energy users. For each gigawatt of large loads, we see the potential to drive savings of 1% or more on average monthly electric bills. In order to do this, it is actually quite simple. We just need to get the pricing right.

And while the relationship between data centers and customer affordability is now receiving a lot of attention at the national level, demonstrating savings for our core customers has been nonnegotiable for us from the beginning and continues to be so. With that, I will hand it over to Carolyn.

Carolyn J. Burke: Thank you, Patty, and good morning, everyone. Here on slide 10, we are showing you our 2025 earnings walk for the full year. Core earnings per share are $1.50, at the midpoint of our guidance and up 10% from 2024. We have added $0.07 from our customer capital investment, deploying critical capital on behalf of our customers for safety, resiliency, reliability, capacity, and new customer connections. In fact, with respect to new connections, by late 2025, we had cut application intake time by 40%, from a 2023 average of 76 days to just 45 calendar days. And our engineering design times are down by one-third, thanks to our performance playbook.

Our operating and maintenance savings came in at $0.20 for the year, and we were able to redeploy $0.09 back into our system for the benefit of our customers. We had over 160 waste-elimination initiatives in 2025, which came from across Pacific Gas & Electric Co., from our front line to the back office. And we are not done yet, as this is a muscle we are continuing to strengthen. Timing items reversed for the full year, with “other” here mainly reflecting benefits from smart tax planning, as we shared on the third quarter call. Turning to slide 11. There is no change to our $73 billion five-year capital plan.

We still see at least $5 billion outside the plan, much of which is FERC-jurisdictional capital, which can enable rate-reducing growth. Here on slide 12, I am pleased to share our five-year financing plan. On the third quarter call, I shared our financing guideposts. Those principles have not changed and are reflected here. Importantly, our plan is built to require no new common equity through 2030. We continue to prioritize investment-grade ratings, including sustaining FFO to debt in the mid-teens. And we still target reaching a dividend payout of 20% by 2028 and holding that level through 2030.

As you likely saw, we doubled our annual share dividend to $0.20 for 2026, and based on our payout guidance, you can expect consistent increases in the next two years. This plan offers flexibility over the five-year period and is based on conservative assumptions. On this slide, we are also showing our expected 2026 utility debt issuance of up to $4.6 billion. Our plan includes a modest additional parent-level debt financing, which may include efficient tools such as junior subordinated notes. Overall, we expect our percentage of parent debt to remain below 10% through 2030, which is on the lower end of sector norms.

While this need is more towards the back end of the plan, we will always be opportunistic in terms of timing our market access. Given uncertainty on timing and indeed whether the contingent contributions to the continuation account will be called, we have not explicitly included these in our waterfall. If these were called, Pacific Gas & Electric Co.’s share would be $373 million annually over five years, which we would plan to debt finance and still maintain our mid-teens credit metric. Turning to slide 13. Achieving investment-grade ratings and efficient financing are key principles of our financing plan. With investment-grade credit, we would be able to access lower-cost debt, unlocking a key incremental affordability driver for our customers.

Regarding capital allocation, consistent with what we have said before, we are in the midst of a state-led process on wildfire policy reform, and we continue to see our current investment plan as the one that best delivers for our customers and investors. Now is not the time to make a change. That said, as you would expect, we will have a disciplined approach, and if we reach a point where we are not seeing clear signs of progress on the legislative front, then you can be certain we will take a hard look at all aspects of our plan. Here on slide 14, now this is where I get really excited.

We reduced non-fuel O&M by 2.5% in 2025, meaning we have now exceeded our target for four years in a row. And we are definitely not done yet. As Patty mentioned, we have updated our simple, affordable model on this call to reflect O&M savings in the 2% to 4% range, up from the previous target of 2%. And as a reminder, this savings target is after we have absorbed inflation and other cost pressures. Slide 15 highlights our upcoming legislative and regulatory calendar. The California legislative session is already underway, and as you know, the wildfire fund administrator’s report is due April 1.

On the regulatory front, our general rate case process continues with intervenor testimony tomorrow and hearings in April. We expect to file our ten-year undergrounding plan with OEIS in the third quarter, and we are tracking towards a November proposed decision in the Kincaid and Dixie cost recovery proceeding. I will end here on slide 16 with our value proposition. It is a reminder that the simple, affordable model works. The concept is simple, but it is our differentiated performance that is unlocking benefits for both customers and investors. And now I will hand it back to Patty.

Patricia Kessler Poppe: Thank you, Carolyn. We understand that the state’s work on wildfire risk in SB 254 phase two remains the critical variable for many investors, and we are fully committed to finding an outcome which delivers on key priorities. These include continuing to accelerate our reduction of wildfire risk while also delivering on affordability for our customers and attracting investment for California energy infrastructure. Before we take your questions, let me recap some highlights from this past year. We achieved a significant reduction in serious injury and motor vehicle incidents, resulting in some of our best-ever safety performance. We reduced ignitions by over 40%, resulting in our third consecutive year with no major fires caused by our equipment.

We improved electric reliability by 19% year over year. We now have 3.6 gigawatts of data center demand in the final engineering stage, positioning us to capture rate-reducing load growth. Our customer transaction score, which we measure every day, is up, and our field crews are being scored 9.5 out of 10 by our customers when they interact with our frontline team. Our brand trust is up. We reduced O&M by 2.5%. We delivered another year of double-digit earnings growth, further extending our execution track record. And with all of that, we have lowered bills again, with our now amplified, simple, affordable model offering a pathway to zero bill inflation. Now that is a year to be proud of.

With that, operator, please open the lines for questions.

Operator: Ladies and gentlemen, we will now begin the question-and-answer session. As we enter Q&A, we ask that you please limit your input to one question and one follow-up. As a reminder, to ask a question, please press the star button followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Your first question comes from the line of Nicholas Joseph Campanella of Barclays. Please go ahead.

Nicholas Joseph Campanella: Good morning, everyone. Thank you. Morning.

Operator: Great to see progress overall, and you know, definitely hear you on the 0% to 3% bill growth on the refresh plan, so thanks for that. Maybe just kind of if you were to kind of reflect on the CEA process, what is most encouraging to you? And then what is your view on just having something done legislatively in June versus September just given the summer recesses? You know, historically, I think things have gone the full distance into September. I am wondering if there is broad enough alignment in your view to maybe get something done sooner than that. And any comments on timing? Thank you.

Patricia Kessler Poppe: Yeah. Thanks, Nick. I will start with timing questions. Look, this is a complex legislative effort, and we definitely want to support taking the time to get it right and getting the right outcomes. And, obviously, the sooner, the better, but we want to make sure the most important thing is getting something right done this year. So we are very much intent of, you know, really helping make sure that we are on the right footing, that we have got the right information, and that the decision makers have the information they need to make decisions well.

And so that leads to the CEA process, and I would say that they are right where they are supposed to be in terms of timing in the process. They are doing what they said they were going to do. We are encouraged by that. And you know, as they closed their latest webinar, the CEA said they are focused on actionable, viable, and durable solution. Boy, we really support that. Because we know our customers and our investors bear an outweighed cost of the current construct, and it is regressive. Our most vulnerable citizens are paying too much for this current construct, and so we definitely support the actions that are being considered.

You know, we do think that the most important criteria for us as we look at it is making sure that we continue to focus on risk reduction on recovery outcomes for costs that are borne, affordability obviously needs to be a key component of whatever solution there is. And today, the current model is not affordable for our customers, and so we need to fix that and make sure then that, most importantly for the audience on this call, is that we continue and are able to be investable and that you can price the downside risk associated with the legal construct here in California.

So we are very much focused on getting the right outcomes and taking the time required to do that here in this legislative session.

Nicholas Joseph Campanella: Thanks for the thoughts there. And then, you know, I know in the prepared there was also kind of discussion about, you know, you would relook at the overall plan, depending on the signs of progress and legislation overall. Can you just, if it does not go the way it is planned, can you just give us a sense of some of the items or just how you would kind of rank what takes priority in capital allocation, whether it is the capital investment, dividend, or otherwise that you would be looking at first.

Patricia Kessler Poppe: Well, let us just back up for a little bit about capital allocation just in general. As Carolyn reiterated, and I will just reiterate for everyone on the call that, look. We see what you see. We too can do the math. The current valuation is absolutely not sustainable. And we are ringing that bell in every corner of California that we can find and in every conversation to make sure that people understand the value of the investor-owned utility model and how important attracting low-cost, high-quality investment is to spread out the cost of infrastructure for customers over the long haul. And that means we need to have an attractive legislative construct.

Therefore, that is what makes SB 254 phase two so important. Now we say that, and as I said earlier, we do think that they are right where they are supposed to be, and people are following through on what they said they were going to, so we feel good about that. But as we think about capital allocation today, because we are encouraged by that progress, because we are having the right conversations, and because we are delivering everything that I talked about on the call—performance is power here—this is no time for us to pull back on serving our customers. Look. As I mentioned, our safety has continued to improve. Our reliability has improved 19% year over year.

Our customer satisfaction is up. Our trust is up. Our rates are down. All of that to say, there is no time to change the model. However, to your ultimate question, Nick, if progress stops or derails or we feel that the state has lost interest in getting to the right outcome on SB 254, then obviously all aspects of our plan must be and will be on the table. We will not continue to sustain this valuation. And so, you know, today, that could take a lot of different forms, and I am not going to rack and stack them here on the call.

But there is a lot of different ways to approach that problem, and the entire plan will be on the table if we do not see progress or if it stops and derails.

Nicholas Joseph Campanella: Appreciate the thought. Thank you.

Jonathan Arnold: Thanks, Nick.

Operator: Your next question comes from the line of Steven Isaac Fleishman of Wolfe Research. Please go ahead.

Jonathan Arnold: Hey. Morning, Steve.

Patricia Kessler Poppe: Hi, Steve. Hi, Patty. Excuse me. Good morning. Good morning, Carolyn.

Operator: So yeah. So just maybe following on the CEA process, we did get this view from the CPUC last week, and I am kind of curious your take on that and how influential they might be with the legislature in this process?

Patricia Kessler Poppe: Yeah. You know, the CPUC sees what we see—that this current model is regressive, and it is putting excessive burden on our electric IOUs and our customers. And so I appreciated them sharing their points of view. They, I think, support what we support, which is a whole-society approach. People will definitely listen to what the CPUC thinks. They are the state agency whose job is to confirm that we have financially healthy utilities and rates and affordability for customers.

And given our performance and our ability to lower rates while we are continuing to improve the service customers, we hope that it makes it easier for the CPUC to fully advocate for the reforms that we think are necessary in SB 254 phase two.

Operator: Okay. Great. And then just going back to the simple, affordable model changes. So on the growth level, is this basically, with this better visibility from the data centers, you now have kind of line of sight to higher growth?

Patricia Kessler Poppe: Yeah. I would say prediction that it is going to be higher. Yes. Yes. We definitely see. And as we shared, 3.6 gigawatts in final engineering. We had previously said about 1.5 of that would be online by 2030. Now we are saying it is closer to 1.8 gigawatts that will be online by 2030. Obviously, that continues to change and evolve. And as we get more applications and we can combine projects and bring things online faster, obviously, we would accelerate that. But the good news is that we do see that real load growth in project stages that makes it very real, and we have lots of confidence about that.

We said 2% to 4% load growth in the simple, affordable model. That 4% is more at the back end of the five-year plan, but we definitely see it in there. And we also see, as Carolyn shared, an opportunity to continue to increase our O&M reductions as we continue to better serve customers. So it is really a combination. I will also say that we are still seeing EV load penetration. We had 18% EV penetration in the final quarter of the year, even after the incentives went away. So we definitely are still seeing increased EV demand as well, and that is an additional load driver.

Jonathan Arnold: Okay.

Operator: Great. Thank you. Your next question comes from the line of Shar Pourreza of Wells Fargo. Please go ahead.

Patricia Kessler Poppe: Good morning. This is Marcella Petiprant on for Shar. Thanks for taking our question.

Operator: Hi, Marcella.

Patricia Kessler Poppe: Hi, Marcella.

Patricia Kessler Poppe: Hey. Good morning. Maybe following up on that data center piece, how should we be thinking about the timeline for ramp beyond 2026? And then is that, just to clarify, final engineering stage fully incorporated into the 0% to 3% bill growth and CapEx opportunities on transmission or would be incremental when it reaches construction stage?

Patricia Kessler Poppe: Yeah. So our load growth is part of the 0% to 3%. So to get to zero, we would need to see more of that load growth online. And so as I was sharing, as we look at the ramp to 2030, we can see about 50% of that 3.6 gigawatts online by the end of that range, so 2030. And so that is in that zone of 2% to 4% within that five-year time period. So consider that a ramp in that period. There are other things, though, that we have got in the hopper to help drive affordability.

In addition to, you know, we talk about O&M and load growth on that, but the other line, you know, we held at 2%, but there are other parts of the bill, like supply costs. We had a good reduction in our supply costs here this year over year, thanks to our incredible supply team and work they have been doing to make the energy that we purchase and procure and produce more affordable. So there is a lot that goes into a customer’s bill that can help get us to that 0% to 3% range and trying real hard to bias as close to zero as we can get.

And so we are going to keep working that every day.

Jonathan Arnold: Great.

Carolyn J. Burke: And then pivoting a little bit to credit metrics, investment grade one agency, how much incentive is there for continued balance sheet improvement? And then any line of sight to multi-agency investment grade? Yeah. So I will take that. This is Carolyn. So a couple of things just to remember. Fitch just upgraded us this past fall to investment grade.

Patricia Kessler Poppe: Both Moody’s and S&P have said that our financial metrics are meeting the investment-grade criteria. What they are really looking at is, again, progress on SB 254, less of continued improvement in our balance sheet. With that said, we remain very committed to mid-teens FFO-to-debt metrics, and we continue to look at building a very sustainable financing plan to continue to meet those metrics.

Carolyn J. Burke: Perfect. Got it. Thanks so much.

Operator: Your next question comes from the line of Anthony Crowdell of Mizuho. Please go ahead.

Anthony Crowdell: Hey. Good morning. Thanks for taking my—excuse me. How is it going? Just I wanted to follow up on Steve’s question. I only had one. On the legislature, there are some new faces or maybe old faces in new places in the state senate. Senator Limón is a pro tem of the senate, also new head of the energy committee. Just curious if you had any discussion with them. Just wondering if you think that may be a required big portion of support of getting something across the finish line.

Patricia Kessler Poppe: Well, of course, we have been in conversation with the leadership, and we continue to be. And, you know, I think one of the hard things is our business model is hard to understand. And it is hard for people to believe and see that you can raise profits and lower rates all at the same time. That is why our performance is so important and why our mantra that performance is power really holds true at this time as we work to educate all of the legislators, including the leaders as well as others, that we can, in fact, invest in long-term infrastructure, make the system safe, make the system resilient, and lower costs.

I think affordability is top of mind for all the legislature, and I think they are going to want to understand that as they make decisions on SB 254 and can see that SB 254 is actually contributing to the affordability issues for their constituents puts us on very much common ground. We want the same thing. We want a safe state. We want the ability for resources to respond when there is an incident and spread is taking place, but that our customers should not be subject to this regressive policy that has them bearing both the cost of the hardening of the infrastructure and claims then that follow when we were, in fact, prudent and capable operators.

And so I think that problem takes a long form to explain to people. And so the more we work with the legislators to help them understand the full picture, the better. So we look forward to engaging with those leaders to help make sure that they are making the best decisions for the people they represent, which happen to be the people that we serve.

Anthony Crowdell: Great. That is all I had. Thanks again.

Carolyn J. Burke: Thanks, Anthony.

Operator: Your next question comes from the line of Julien Patrick Dumoulin-Smith of Jefferies. Please go ahead.

Carolyn J. Burke: Morning, Julien.

Julien Patrick Dumoulin-Smith: Hey. Good morning, team. Hey. Thank you guys very much. Appreciate it, Patty, team. Look. Hey. Hey. Just wanted to come back on the upside capital you guys have here, and look, away from SB 254, how do you think about that $5 billion and when you would be in a position to around that? Right? And as much as, obviously, you guys are talking about sales, and that trending in the right direction, I would love to hear how you think about upside of the $73 billion CapEx plan. Then in tandem, how do you think about financing that to the extent to which you were ever to go down that rabbit hole?

I imagine that there is debt capacity that is latent to be able to accommodate that upside capital that you guys are identifying? And or how do you think about JSON?

Carolyn J. Burke: Yeah. Hey, Julien. This is Carolyn. I will answer that. As we think about the additional $5 billion, as we have said in the past, we see three options. The first option is you can make the plan bigger. Right? You could increase your $73 billion. But that is probably the least likely given our current valuation discount. Then there is the potential to make the plan better. And when we say better, we mean in terms of affordability in particular. And an example of that is prioritizing certain capital that is associated with new load that could improve upon our bill trajectory.

And then the third option is we could simply make it longer in terms of extending our above-average growth runway. So where we sit today and seeing the pipeline for load growth, the way we think about that $5 billion is if there is any additional capital coming in, it is probably option two, where we are looking to make the plan better, keeping to the $73 billion envelope of our capital plan, but ensuring that we can drive affordability for our customers with that additional capital. In terms of financing, I will just say that we continue to prioritize avoiding the need for equity at today’s low values and maintaining the FFO-to-debt to mid-teens.

So as we look at financing that, those are two of our key principles.

Julien Patrick Dumoulin-Smith: Awesome. Excellent. And then just if I could follow up a little bit on the process front. Any specific milestones after April 1 that you would be looking towards? I mean, I know at times it gets pretty dark and opaque through the summer months. But anything in particular you would flag here at least at the outset beyond the April 1 recommendation?

Patricia Kessler Poppe: Yeah. I think that there are no specific milestones I would point to. I think there will be ongoing conversations, and it remains to be seen how much of those political conversations will be public, or will they be handled by a subcommittee or however the legislature intends to take on process once they have been given recommendations.

Operator: Okay. I get it. Well, best of luck, Patty.

Carolyn J. Burke: Thanks, Julien.

Operator: Your next question comes from the line of Carly S. Davenport of Goldman Sachs. Please go ahead.

Carolyn J. Burke: Hey. Good morning. Thank you for taking my questions.

Carly S. Davenport: Hey. Just a couple of quick follow-ups to some other questions. Firstly, just on the data center pipeline, great to see that growth in the final engineering and the under construction. Just any color on the movement in the overall pipeline? Is that a high grading? Or are you seeing any shifts in sort of overall tone on demand?

Patricia Kessler Poppe: Yeah. I would say that will continue to move. As we mentioned, we just, or at least we said on the slide, we have just hired a Chief Commercial Officer. We are seeing lots of opportunity. You do not think about California when you think about manufacturing, but let me remind everyone on this call that California manufactures more products than any other state in the nation. California has more manufacturing jobs than any other state in the nation. I expect that those companies intend to grow, and so we are working to make sure that we can supply their growth as well, whether it is robotics or silicon manufacturing equipment and chip manufacturing equipment. That all lives here.

And there is an electric bus company in—these companies intend to grow, and so we want to make sure that we grow for them as well. So I would say that number is a moment in time, and I expect over time when people realize that we have the capacity, that we can, in fact, deliver the timelines that they want and make sure that what we deliver is then affordable for all of our customers, that we are going to continue to be a key enabler to California’s prosperity, and that requires growth. And we are excited to power it.

Carly S. Davenport: Really clear. Thank you for that. And then just back on the wildfire policy reform, just as you talked about given the urgency, but also the complexity here, I guess, is it your expectation that this will be sort of in this legislative session? Or do you see any potential for other processes to sort of be borne out of this one?

Patricia Kessler Poppe: We are very hopeful that this is resolved. The substantive risk and cost allocation—we are very hopeful that this is resolved during this legislative session. That would be—this is the second phase of a two-phase process, a two-year session. And we have gotten—you know, I think we have seen what everyone has seen—that they are right where they said they were going to be. The process is working as planned, and the CEA is a very professional organization. I am impressed by the actions that they have taken and them following through on what they said they were going to do.

Carly S. Davenport: Great. Thank you for all the color.

Jonathan Arnold: Thanks, Carly.

Operator: Your next question comes from the line of Gregg Gillander Orrill of UBS. Please go ahead. Yeah. Good morning. Thank you. Congratulations on the results.

Patricia Kessler Poppe: Thank you. Just—I was wondering if you could talk about what you are expecting from the Kincaid and Dixie cost recovery proceedings, who handles that, and, you know, what you are expecting to see out of that.

Carolyn J. Burke: Yeah. So we filed in November 2025 the first catastrophic wildfire proceeding that involves the presumption of prudency. What we submitted is a review of the costs that were paid by the Wildfire Fund associated with Dixie and Kincaid. That is the over $1 billion in claims. That is about $674 million. We are also looking for recovery of WEMA costs, which is about $1.6 billion, and that is primarily—if you think about this, remember, we did not have the self-insurance at that time.

Patricia Kessler Poppe: And so it is the donut hole between what we recovered from insurance versus up to the $1 billion threshold before we can have access to the Wildfire Fund. So we are looking for—that is the second thing we are looking for recovery from, and then we are looking for recovery from CEMA costs, which are about $314 million.

Carolyn J. Burke: So that is what we are looking for. I will just remind you that with Kincaid and with Dixie, we had a valid safety certificate, which is—

Patricia Kessler Poppe: So we are deemed reasonable in terms of our prudency. We think we have made a strong case, and we believe the facts support our case.

Gregg Gillander Orrill: Sounds good. Thank you.

Operator: Your next question comes from the line of Ryan Michael Levine of Citi. Please go ahead. Had one clarifying question around some of your comments. Are you looking to accelerate the prudency determination through the CEA process for future liabilities or future claims? Is the CEA process—

Patricia Kessler Poppe: Yeah. Ryan, there are a lot of things that we are looking at through the CEA process. So, really, not specifics. It is going to be a bundle of options and improvements and construct. And so I hesitate to have a specific outcome that we want. We want to make sure that the downside risk is knowable and affordable for both customers and investors. And there is probably a lot of ways to make that happen.

Operator: Okay. Thanks for taking my question.

Patricia Kessler Poppe: Yep. Thanks, Ryan. There are no further questions at this time. And with that, I will now turn the call over to Patricia Kessler Poppe, CEO, for closing remarks. Please go ahead.

Patricia Kessler Poppe: Thank you, Kelvin. Thanks, everyone, for joining us today. I will just hit the high points. Look, our safety has improved. Our reliability has improved. Our customer satisfaction has improved. Our earnings have improved, and our rates are down. And at the fundamental aspect of running a great utility, I could not be more proud of this team and the work that they have done. And for a company that leads with love, happy Valentine’s Day. I hope you have big plans for tomorrow. Enjoy your time. Thanks so much. We will see you soon.

Operator: Ladies and gentlemen, this concludes today’s call. We thank you for participating. You may now disconnect your lines.

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