Thank you. We will now begin the Q&A session. We do ask that you kindly limit yourself to 1 question and a single follow-up. For any additional questions, please re queue. And your first question comes from Steve Fleishman with Wolfe Research. Please go ahead.

Morning, Steve. Hi, Steve.

Hi. Good morning. So I guess just curious what signals, if any, you are getting on desire interest of the legislature to address the wildfire liability this year. I know there is assembly hearings and maybe some more. Maybe you could talk about what you have heard in those so far. Just any sense that the senate may want to look to do any hearings?

Well, thanks, Steve. Obviously, top of mind for everyone. And look, we continue to see progress. The hearing this week, I think, was effective at continuing to make the case that the status quo is unacceptable. And you know, as long as nothing happens, no legislation is passed, our customers continue to pay. And it is a status quo that needs to be resolved. The job's not done yet. So we found you know, the hearings that are scheduled next week. Another 1 just got scheduled, so there is 2 next week. That I think are addressing the right questions and the right issues. And we are encouraged by that. In the meantime, obviously, we continue to lean forward and move forward on other alternatives to unlock the value. Obviously, policy reform would be our No. 1 desired next step, but we have a lot of value that is-- I would suggest-- trapped In the company right now. And so we are working hard to create parallel paths and move forward. But we are hopeful that the legislature does continue to act. You know, the senate, we are looking to see if they will schedule any hearings that has not happened yet. But, obviously, these hearings are very public, and the information is clear. And many people and many key leaders in the state continue to speak that action is absolutely required.

And then, I guess, just related, just I think we are still. Are we still supposed to get the PUC report on this topic November 1st? And just any sense of what may come out of that?

I think it will be another good case in why the status quo is unacceptable. I do not know how many different ways that people are going to be able to publish and say, but I expect the CPUC report to be substantive. They have asked really meaningful questions in their discovery, so we were providing very important information to them. It will be good for them to be able to share that November 1st at the request of the governor. We expect that is just another signal that the status quo is just unacceptable.

Okay. Thank you.

Yep. Thanks, Steve.

Your next question comes from the line of Shar Pourreza with Wells Fargo. Please go ahead.

it is Marcella on for Shar.

Oh, fine. Hi, Marcella.

Hi. Thanks for taking my question. Thinking about the strategic review, and without asking you to prejudge any specific outcome, can you just frame kind of the criteria that you are using to evaluate potential pathways, specifically around weighing options, ability to unlock value, with their potential regulatory risk or, or reliance on processes out of your control?

Great question, Marcella. Look, first and foremost, we wanna unlock value. We want to target investment grade business or businesses. To unlock that value for customers and owners. Obviously, feasibility and ability to execute a transaction is a priority. You know, a lot of people ask us about, PacGen and what was different about PacGen when the regulator did not approve. minority interest. You know, there was a totally different time and a different set of facts. During that time, we were, looking to raise cash and were unable to share benefits with customers. We think in this scenario, we have got a much more compelling case to make with our regulator, that for example, our gas business, our 4 million gas customers are paying sub investment grade borrowing costs because it is part of the holdco related to wildfire risk, and that seems like an issue that should be resolved 1 way or another, whether it is resolved through policy reform, which would be great. And if not there, then would we unlock that value and lower borrowing costs for our gas customers through a regulatory approved, spin or sale or separation of some kind?

Got it. Appreciate that. And then you spoke a little bit about, you know, conversations around the current legislator and state leaders, but any sense of conversations with gubernatorial candidates or lawmakers who are running to be part of the next legislative body and how they are thinking about wildfire liability as potentially a day-1 priority?

Yeah. it is you know, the governor's race is not over yet. We do know that Javier Becerra who is the leading in the polls by a pretty wide margin today, has stated publicly his support for action. I think he is hopeful like we are that it does not-- we do not kick the can down the road into next year. That is certainly a possibility. But, you know, he and he. So he is spoken publicly that he is supportive of reform. We are hopeful that reform does not wait for that.

Got it. Thank you.

Thank you, Marcella.

Your next question comes from the line of Nicholas Campanella with Barclays. Please go ahead.

Good morning, Nicholas. Hi, Nick.

Good morning. Guess in the last legislative session, there was, you know, obviously heavy input from the insurance industry. Right at the end, and I am just curious if you could kind of elaborate on how conversations with that stakeholder has trended since then? Is there a possibility to kind of come to some type of agreement with them just to help to increase the odds of any kind of special session. Thanks.

Yeah. You bet. So, look, the reality is nothing was passed. No law was passed at the end of the session as. And I am stating the obvious, but it. In the nuance of what does that mean to insurance, then that means insurance still needs to join in discussions about what is gonna occur to make sure that claims are limited and our customers are not the in infinite backstop for an insured properties. And so I would suggest that, conversations have been productive. They have continued Next week's hearing on the 29th is intended to discuss subrogation, my understanding is. And so given that, I think we will hear continued discussions, with insurance as well as all of the state. there is a wide coalition of interested parties, our builders, our real estate agents, our plaintiff's attorneys, our environmental groups. There are large groups of stakeholders who are interested obviously, in making sure that this is an affordable framework. And that it is sustainable framework and so those. I would suggest those discussions continue and are constructive, and we will hear more publicly next week through the hearing process.

Thanks for those thoughts. And then I guess just you are telling folks that, you know, no later than summer, I guess, you would have an answer on the strategic review. Is this really that you guys are gonna take time to do the work and finalize the plan by then, or could you be actively kind of pursuing things today that could result in things happening to the corporate structure or maybe regulatory filings being made ahead of that summer date. Thanks.

Yeah. We will definitely be updating through our normal quarterly process. And what we have said is we will have, more definitive determination by, next summer. But as things occur, we will obviously be communicating. And if there is something to be discussed between quarterly calls, we will certainly do that. We are moving with a sense of urgency. We see real opportunity here. These assets are extraordinarily valuable, and they are operated by the best in the world. Would argue we have incredible people who operate these assets. They become very valuable, and I think our ability to unlock that value could take a lot of different forms. And as we have said, policy reform is our first preference, and so, hopefully, we could have some update on that. Sooner than next summer. But, otherwise, these other alternatives, as they materialize and as concepts and opportunities and potential filings become possible, we will we will do-- we are not going to stick to the timeline of. We have to wait till next summer. We are gonna work aggressively between now and next summer. We just wanted to be clear that there was a finish line in mind. Thank you very much. Yep. Thanks, Nick.

Thanks.

Your next question comes from the line of Ross Fowler with Bank of America. Please go ahead.

Morning, Patty Poppe. How are you?

Good. Morning. So a couple of questions. Obviously, it seems like investment grade is sort of the foundational objective of the strategic review. So couple things on that. Kind of the realistic time to get there? Can you do it on your own? Does it depend on legislative and regulatory outcomes? And is 14% kind of what we should mark to an FFO to debt level?

So I would say a couple things. We do think it is realistic. it is very realistic that this business be investment grade. The question is, what is the best framework and organization of these, of this business. The. Our lines of business that we have today to maximize the value for our customers as well as our owners And so, some things, you know, we can do on our own, like capital allocation strategy. That would be a strategy to unlock value. We have. As you know, we have held back, on an aggressive dividend because we have been reinvesting in the business for the benefit of customers and for stabilizing, the financials of company and making our investment grade credit rating. We would look at capital allocation as a strategy. that is more. that is probably the most independent We would look at ring fencing. We would look at, as we have said, other corporate structures that would enable would enable unlocking that growth. In those cases, the regulator obviously has an important decision making role to play in that, but we would only bring it to the regulator if it was truly in the best interest of customers and actually created real value for them that we can pass along to customers. And I think given our valuation today and the valuation of these assets, and their actual physical value, there is some real, arbitrage in that distance between the current valuation and what we think the true value of these assets are to provide benefits for customers. And so we would think that we would have a compelling case for our regulator. So all that to say, I will I will just reiterate that the fastest way to unlock the value is policy reform, which, of course, we are not giving up on. Yeah. That would be awesome. Started.

Go ahead, John.

At Yeah.

I would. And I will just add that as we look at all of the alternatives through a lens of investment grade, We want to continue to target that mid teens FFO to debt.

So that is how we model things. that is how we look at things, and so that is the goal.

Yeah. It makes sense, Kyle. And then and then 1 more for me. I am just trying to square these 2 things. I mean, clearly, I know why there is no sort of guidance beyond 2027 at this point as you go through strategic review and look over everything as you get to next summer. You look at all the alternatives, in front of you pending where policy goes and all the other things. You are dealing with right now. But you have made declarative financing statements through 2030. So what gives you the level of certainty that there is no equity needed business through 2030 when there is all the uncertainty related to cap rate base growth, earnings growth, guidance, etcetera, past 2027?

So we funded our equity. Under our plan, our original plan of a $73 billion capital program. And so we know that our equity program supports that. And so any alternative and we love that plan. By the way. We absolutely love that plan and want to for our customers under that $73 billion plan. Any other alternative, would need to-- it would support that 73. Any other alternative that we are looking at. Is equal or is equal would be equal to trying to support the $73 billion plan as well. that is where we feel comfortable that under any other option that we are considering, that we would not need new equity through 2030.

Yeah. And I will just reiterate. We would not issue equity at this current stock price or valuation.

that is not an option for us. Yeah. that is the. that is certainly the wrong cost of capital. I would say. Yeah.

I will just say as we continue to look forward on our financing plans, the principles that we have talked about before still hold under this strategic review. We plan conservatively, plan with customers at heart. We are always mindful of market conditions, in particular, our current value discount. Our primary focus continues to be IG supportive metrics.

Alright. That makes sense, Carolyn. And then you do talk about this amortization or the faster amortization of the wildfire fund. You are calling that out this quarter. That I mean, I do not think that accelerated amortization would that seems like an accounting consequence, I should say. Rather than an economic and credit consequence because I think it is pretty well known that might. That wildfire fund asset might change, given all the things going on in California. But I am just kinda-- I am just trying to check-in and make sure that really has no bearing on your finance plan credit objectives, strategic review analysis.

that is right. It has no bearing. You are right. it is an accounting charge. We are just waiting for the right trigger. Yep.

Okay. Makes sense to me. Thank you.

Thanks, Ross.

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

Good morning, Carla.

Good morning. So much for taking the questions. Appreciate the time. Maybe just 1 on the data center pipeline. Any guidance on how we should just think about the pace and the opportunity to connect data center load in the face of the reductions to the capital plan? Any guidance that you can share sort of on where the data centers may fall in the queue of projects that could be impacted by potential CapEx reductions?

Yeah. So first of all, keeping in mind that our pipeline is a multi pipeline. And our capital reduction is today. Specifically for 2027. We have we see that our 1.8 GW of projects that we have previously signaled would be online by 2030 remain in that plan. You know, when we talk about our capital reset, we reduced $2 billion of capital, but we are still spending $11.4 billion of capital next year. So there is still obviously capital to deploy to our critical safety issues, our critical compliance issues, and projects, that are well on their way to reducing rates for customers, those are obviously very important to us. As we think further on down the line during the strategic review, obviously, as we have said, capital allocation will be an area of focus, and we will look at how we can continue to help power California's prosperity and our growth. But, certainly, under this liability framework, we are limited in that way. that is why when Carolyn says we love our $73 billion plan, it can help fuel that growth and prosperity for customers and lower bills and bring jobs and new tax revenue to the state. I would just advocate strongly that a healthy PG and E, a wildfire reform, wildfire liability policy that enables us to grow, enables California to grow and prosper. And so, we are we are fans of, our what we have referred to as our Goldilocks, data center pipeline. And our, ability to serve the tech industry of California is an honor and a privilege, but we need a liability reform that enables that to happen sustainably and for the long haul.

Great. Very clear. Thank you. And then just a housekeeping item. On the dividend, is the shift in presentation there in the slides just a function of the strategic review? Or is there anything more explicit that you are messaging about the consistent growth versus the prior 20% payout guidance?

No. I do not think it. is any new signaling there. As we have said before with our strategic review, everything's on the table, including the dividend policy. But we have also been very consistent that for 2027 in particular, we get a lot of questions, is that you should expect 2027 to be in line with our prior trajectory. Which is in line with the 20% by 2028. We have noted that it would be ratable Ultimately, our Board will set the dividend in December of this year, but that is what we were signaling. But everything's on the table under the strategic review.

Great. Thank you so much for the time.

Your next question comes from the line of Anthony Cordell with Mizuho. Please go ahead.

Hey. Hey. Good morning, Sam.

Just a quick question, quick follow-up, I guess. 1 on the strategic review, is there a point you are very clear, you hope to have it no later than next summer, Is there a point where that review becomes more urgent, whether it is a you know, a credit rating action or another wildfire season, I guess, flexible is that date on external factors? And then I have a follow-up.

Yeah. it is a great question, Anthony. You know, obviously, as we go through the reform, we will be watching current conditions and whatever, conditions within which we are operating. We will have an influence on our trajectory. But what we are really looking for is a long term sustainable business organization and financing model that delivers value. And we know that it can, and we know that this model works. We know that the investor owned utility model works, for customers. As well as, shareholders and investors and owners and financing entities. And so we will we will just we will obviously respond to current conditions, but more importantly, have an eye on the horizon for what is our long term value proposition and actually unlock that value.

Great. And the follow-up, it may be more focused for the legislature, but I am just wondering, it seems like the cycle of decisions or when I think about the success of NB-10 54 and SB 254 were both after catastrophic events, and the legislature acted. This year, again, of the physical enhancements that companies have made across the state, really did not. You know, fortunately, did not have an event this year, but also were not as successful in legislature. I mean, what decouples that of, in order to get a supportive legislative action, We do not wanna have to have a catastrophic event.

Well, I will remind us we did have a catastrophic event obviously significant 1 back in 2025, which is when this legislative package started. So this has been a 2 year package in response to the issues in 2025, and I would, just suggest that the PG and E remaining sub investment grade is a major issue that must be solved. And, you know, when Fitch put us on negative outlook, I think that really reiterated that inaction will continue to get increasingly expensive for our customers. In fact, for all of the debt that we have issued as our. In sub investment grade, since 2017 will cost our customers an incremental $4 billion in interest expense over the life of that financing that is a cost that can be immediately remediated with good long term policy. So I would like to think Anthony that we have got a real sense of urgency because customers are paying today. And, our customers are waiting on our legislature to take the necessary actions to put us back in a position to be investment grade given we meet all of the criteria for investment grade but for California liability policy.

Great. that is all I had. Thanks for taking the questions.

Thanks, Anthony.

Your next question comes from the line of David Arcaro with Morgan Stanley. Please go ahead.

Good morning, David.

Thank you. Good morning. Sorry if this is a little duplicative, but I was just wondering if there, you know, if there is no special session, if there were not legislation passed this year, would you consider that to be a potential catalyst for accelerating and taking additional actions within the strategic review?

Well, it definitely is a driver for the fact that the strategic review has been initiated. And so we will continue to do the work of that strategic review. I will you know, reiterate that we did not just start thinking about the strategic review. We started our internal process. A year ago thinking about what would be response or what would be our actions that we could take in the event of inaction. And so we have been working on this for some time, so we are not starting from a standing start. We have got a lot of momentum. We have doing. Been doing a lot of work, and so we wanna make sure that we continue to operate with a sense of urgency.

Yeah. Good. Understood. Thanks. And then, you know, as you have had to make tough decisions around capital prioritization and deferring some of your CapEx. And I guess I was wondering with the undergrounding plan, very big amount of capital that you have proposed here, I guess, how do you think about that in the prioritization of within the strategic review, you know, how you how you prioritize capital. Is that something that, would be a kind of an anchor in your overall, you know, longer term CapEx, you know, intentions. And yeah, how important is that, in your overall thinking?

Yeah. We think undergrounding is incredibly important, not for every mile. But for the most risky miles. And so our 5 thousand-mile plan, which we have spread out over 10 years, takes in mind spreading that cost out over a longer period of time. it is just over a billion dollars a year, throughout the life of that 10-year plan. We think it is a very important part of risk reduction and cost reduction. The annual cost for, in. Inspections and vegetation management for those miles, and the reliability impact and the cost of the reliability impact for our customers is real. And so on those 5 thousand miles, we think it is the most and best prudent, deployment of capital. Obviously, that has to be approved by the commission. As Carolyn mentioned in our prepared remarks, we are concerned with the current PD on the benefit cost ratio that would dramatically reduce the number of miles we would do. We have got a lot of talking to do here in the state. About that because we know that customers should not have to choose between being safe and being reliable and affordable. We think that undergrounding is the best answer in certain miles. And so we would say even in a capital allocation, world that undergrounding is an important part of the plan. Now I will also say, when we think about our $73 billion plan that we have previously, declared, it was. it is a small part of the total plan. So the plan does not hinge on an underground. And I guess I just wanna say out loud for the world to hear, we are not doing undergrounding to meet our earnings numbers and to grow CapEx. We are doing undergrounding to keep people safe. So you know, as we think about the role that undergrounding plays, it is a key part of our safety investments on behalf of customers.

Yeah. Great. Thanks for that. Really appreciate it.

Yep. Thanks, David.

Your next question comes from the line of Richard Sunderland with Truist Securities. Please go ahead.

Hey. Good morning, Richard.

Hey. Good morning. Good morning. Thanks for the time. You know, I will follow-up on that last point around undergrounding and the methodology concerns. Could you speak a little bit more to how many miles of your filing would be impacted by that? Think you said significant potentially. But I guess more importantly, how that would impact the quantified benefits you laid out in your filing?

Yeah. We are still working through that. On the exact number of miles that would result if we use this benefit cost ratio. I think the thing that we are concerned about is it does not match the standard that we use for all other investments benefit cost ratios that we make. And so, we are we are definitely concerned about the impact on our customers to that. So we are working through what those miles would be, and, obviously, it is a proposed decision. And, hopefully, we will we will see some movement.

Got it. that is helpful. And then switching gears back to that November 1stst CPUC report, I know you addressed this earlier, but thinking about the strategic review context alongside that, I am curious if you have any sense of if this could have potential signals from the commission that could inform your strategic review or I guess, maybe putting this another way, do you see review opportunities that are logical to pursue put in front of your regulators even if there is legislative action later this year?

that is a good question, Richard. You know, we are thinking about that as we do all of this analysis and we see the value of, our assets and the incredible people who operate them, you know, and the benefits to customers. If there is a customer beneficial outcome that even with legislative action would still be considered. We obviously will keep that on the table. We do know that the fastest way to unlock value is policy reform, and so if that were to occur here in the near term, we would be thinking hard about the scope and scale of the strategic review. But, obviously, we are learning a lot about, where we think the full potential of our businesses are. Like any good management team and board of directors, we are looking at the best way to unlock that value for customers and investors.

Very clear. Thanks for the time today.

Next question comes from the line of Aidan Kelly with JPM. Please go ahead.

Morning, Aidan. Hi, Aidan.

Hey, guys. Good morning. Thanks for the time today. Maybe just going on the, like, the debt front of the strategic review, Carolyn, I know you mentioned kind of mid teens FFO to debt is maybe a north star to think about long term. I think, like, previously, you also mentioned, like, holdco debt below the 10% of total debt. Is that also kind of intact as well, or is there kind of flexibility to revisit that threshold?

Yeah. As I have. As we have said, everything's on the table. And so we are considering both our debt profile, our capital growth, and our capital return. So I would say that we are not necessarily indicating any target for parent debt at this point in time.

Got it. And then just 1 kind of lingering question on the timing of the strategic review. I believe in the past, in September, you kinda mentioned there is, like, a maybe a default 12- to 18-month timeline, and now we are kinda seeing, you know, summer of 2027 as the target. Is there any kind of rationale behind, like, the acceleration in that timeline over the past month and a half that is. I know you kinda mentioned urgency. Is it just simple as taking that as the reason or is there anything kinda deeper to read into that?

Yeah. When we had previously mentioned 12 to 18 months, Aidan, we were talking about that is typically what you would see from companies. We were not intending to signal our time line, so that is why we wanted to clarify today. We wanna be, we wanna really push to have a definitive direction forward that we can communicate by summer of next year.

Understood. Understood. Well, appreciate it. Thank you.

Yeah. Thank you.

Ladies and gentlemen, that does conclude our Q&A session. I would now like to turn the conference back over to Patty Poppe for closing comments.

Thank you, Krista. Thank you, everyone, for dialing in today. Look, our electric, gas and generation businesses are strong. And they are operated well, and they are getting stronger every day. Now while legislative action is still possible this year, we are moving forward and we are advancing our strategic review We are evaluating all our available paths to unlock value for customers and owners. And you can imagine that we are doing that with a sense of urgency. We look forward to seeing you at EEI. Please stay safe out there.

And ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and you may now disconnect.