PG&E Corporation (NYSE:PCG) Q2 2022 Earnings Conference Call July 28, 2022 11:00 AM ET
Company Participants
Matt Fallon – Senior Director, Investor Relations
Patti Poppe – Chief Executive Officer
Chris Foster – Executive Vice President and Chief Financial Officer
Conference Call Participants
Jonathan Arnold – Vertical Research
Shar Pourreza – Guggenheim Partners
Julien Dumoulin-Smith – Bank of America
Richard Sunderland – JPMorgan
Michael Lapides – Goldman Sachs
Nick Campanella – Credit Suisse
Gregg Orrill – UBS
David Arcaro – Morgan Stanley
Ryan Levine – Citi
Operator
Hello and thank you for standing by. My name is Regina and I will be your conference operator today. At this time, I would like to welcome everyone to the PG&E Second Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Matt Fallon, Senior Director of Investor Relations. Please go ahead.
Matt Fallon
Good morning, everyone. Thank you for joining us for PG&E’s second quarter earnings call. With us today are Patti Poppe, Chief Executive Officer and Chris Foster, Executive Vice President and Chief Financial Officer.
I want to remind you that today’s discussion will include forward-looking statements about our outlook for future financial results. These statements are based on assumptions, forecasts, expectations and information currently available to management. Some of the important factors that could affect the company’s actual financial results are described in the second page of today’s second quarter earnings call presentation. The presentation also includes a reconciliation between non-GAAP and GAAP measures. The presentation can be found online, along with other information, at investor.pgecorp.com. We also encourage you to review our quarterly report on Form 10-Q for the quarter ended June 30, 2022.
With that, I will hand it over to Patti.
Patti Poppe
Thank you, Matt. Good morning, everyone. Thanks for joining us. I will focus on three key areas today: first, our financial results; second, our continued work to build trust with policymakers and play our role as an enabler for California’s prosperity; and third, I’ll provide an update on our wildfire mitigation progress.
Our results through the first half keep us on track to deliver our full year 2022 non-GAAP core EPS guidance of $1.07 to $1.13. We have got the system in place to manage the inevitable pluses and minuses. The system provides confidence that we will deliver our commitment of at least 10% non-GAAP core EPS growth through 2024 and at least 9% in 2025 and 2026. As a result of further progress on legacy items, our rate neutral securitization and good cash management, we are lowering and narrowing our equity guidance. We are projecting a need of $0 to $250 million for the remainder of the year.
We are on the right path to mitigate financial risk and deliver the consistent results you can expect from PG&E. We are continuing to build trusting relationships with policymakers and work with them on outcomes that are good for our customers and allow us to deliver the energy they want safely and reliably. Earlier this year, Governor Newsom reached out to ask us to evaluate keeping Diablo Canyon open beyond its scheduled retirement in 2024 and 2025 to support the capacity and liability of the state’s electric supply system. We are exploring the possibility of keeping this plant open for California’s benefit. It is not an easy option and it will require much coordination between the state, multiple regulatory bodies and PG&E as well as many others impacted by the outcome of this decision. We of course are motivated to be of service to the people of California and our policymakers and we will continue to work with the state regarding the future of Diablo Canyon and to ensure reliability.
I am very thankful to our team at the plant for continuing to remain focused on safe and excellent operations as the conversation and decisions move forward. We are also continuing to work with legislators on Senate Bill 884. The amended language in the undergrounding bill provides a supportive framework for PG&E to follow long-term undergrounding plan, which is good for customers and investors, because it allows us to build a more robust plan for labor, the lowest cost contracts and provide the fastest path to eliminating the highest risk and moving reliability at the same time on our power lines.
I am pleased with the relationships we are building with these key policymakers in California. We are proud to be recognized as essential to California safety and clean energy goals. Our ability to continue to demonstrate the turnaround of PG&E enables long-term relationships built on mutual benefit and prosperity. Just this week, we filed our final responses in the review of our 2022 Wildfire Mitigation Plan. We welcome the healthy dialogue with the Office of Energy Infrastructure Safety and we believe our responses address their concerns, make our plans stronger and make our communities safer. We look forward to a draft decision on our Wildfire Mitigation Plan by the end of September.
Given the dry conditions we have seen in our service area in 2022, I thought I’d spend some time discussing our wildfire mitigation tools described on Slide 5. As a result of the significant work that we have completed since 2019, combined with the protocols we have implemented for our EPSS and PSPS programs, we estimate that we have mitigated more than 90% of the wildfire risk in our service area. Our approach to catastrophic wildfire mitigation is driven by multiple layers of protection, starting with vegetation management, enhanced inspection and our longer term system hardening work anchored by our undergrounding plans.
While we continue to make progress on our longer term mitigations, we layer in EPSS and PSPS to mitigate risk today. Our situational awareness capability, which we have built over the past 3 years, including installation of our high-definition cameras, the use of enhanced technology in our hazard awareness and warning center, and the expertise of our safety and infrastructure protection team, allow for better coordination and faster response should emission occur, providing our final layer of protection. The 90% risk mitigation today is informed by the results we are seeing in operations.
For example, on the circuits where we have implemented our EPSS program, we have observed significant reductions in reportable ignitions and the acres impacted per ignition this year are significantly lower despite very dry conditions. We are continuing to pursue opportunities to improve beyond the 90% risk mitigation with additional innovative technology solutions such as partial voltage SmartMeter alarms’ inbound conductor capability. We anticipate that additional opportunities, including undergrounding, will provide us with greater long-term protection while reducing the customer impact.
As you can see on Slide 6, the Fire Potential Index guides our wildfire mitigation efforts. Most of the damage in recent years have occurred under R3 and higher conditions. In recent years, we have experienced more acres and structures damaged due to fire spread driven by fuels and terrain. To mitigate the fuels and terrain driven risk, in 2022 we have enabled EPSS for all fire potential conditions across all our high fire risk areas, except under conditions of heavy fog, high humidity and precipitation. Historically, nearly all of the acres and structures burned during extreme wind events. For these conditions, categorized as R5 and higher, we rely on our PSPS program.
I talked a lot about mitigating physical risk today. As I know, this is a key area of concern given the impact of climate change across California and the rest of the world. As you have heard, we have the right system in place to keep our co-workers and our customers safe from physical risk and a mindset that has us continuously improving that system everyday. Please be assured that the team and I are also continually focusing on mitigated financial risk. We know our customers are experiencing major inflationary impacts outside of utility bills. And at PG&E, we are planning to keep costs down even as we invest in our system by utilizing our simple and affordable model.
I am going to focus on the non-fuel O&M cost reduction line you see here on Slide 7. I am never short on stories and this quarter is no different. Here is the simple example of an opportunity we came across in our inspection work. People often think it will cost more to do high-quality work. I beg to differ. Last year, due to multiple verification methodologies between our vegetation management pre-inspectors and our work verification team, we had a 40% rejection rate on tree inspections, resulting in a crew coming back out to correct the miss. We cut that rejection rate by half already this year by adopting a uniform technology-driven inspection process, saving almost $100 million. Better first-time quality is more affordable. One example of many such opportunities, we are just getting started here and there is a long runway of opportunities across the entire enterprise that the team is learning to uncover.
On the financing front, we successfully completed our rate neutral securitization bond issuance in July using the proceeds to pay-down temporary utility debt to strengthen our balance sheet. Importantly, S&P moved our outlook to stable after the rate neutral issuance. We are following through on our commitment to you, our investors, to delever our balance sheet and reduce financing costs for our customers, a real-time demonstration of our simple and affordable model in action.
Finally, let’s turn to our report card, which you can see here on Slide 8. We chose these metrics to show you where our focus is, delivering consistent outcomes through 2022 and beyond by building on our culture and our capabilities. One metric I want to highlight is our CPUC reportable emissions greater than or equal to 100 acres in high fire-threat areas. Fires this size are a small percentage of ignitions, but account for more than 90% of the acres burned and more than 95% of the structures damaged from 2015 to 2021 in our service area. We have zero CPUC reportable admissions over 100 acres so far in 2022. You will recall that in early June, PG&E filed an electric incident report on the old fire, which was 570 acres with no reported serious injuries, fatalities or structural damage.
We filed the EIR as required, because Cal Fire collected our equipment and there was media attention. However, we are not recording this as a CPUC reportable admission at this time as we are not aware of any damage to our equipment at Cal Fire’s suspected ignition point. Cal Fire is continuing their investigation on the cause of the fire and we will review the final report when it’s available and the associated recordability accordingly.
In addition, last week, the Oak Fire started in Mariposa County. After the time of the reported ignition, we de-energized lines for firefighter safety at the request of Cal Fire. Based on our review of our data, we are not aware of any information suggesting our facilities were involved in the ignition. We have not filed an EIR and Cal Fire continues their investigation into the cause of the fire. We do want to take this opportunity to thank our firefighters in the broader first responder community for working so hard to keep our communities safe. Physical and financial risk reductions are the building blocks that enable predictable results for customers and investors. I feel good about progress to-date.
With that, I will hand it over to Chris to provide a deeper dive into our financial and regulatory items.
Chris Foster
Thank you, Patti. We are on track to deliver our financial commitments this year. In addition, we are reaffirming our 2022 to 2026 earnings per share CAGR of 10% and reaffirming EPS growth of at least 10% each year in 2022 to 2024 and at least 9% in 2025 and 2026.
As Patti mentioned, I am pleased to share that we just issued $3.9 billion of our rate neutral securitization bond at a weighted average rate of 5.05%. Our transaction completes a critical element of our reorganization financing plan, with a total of $7.5 billion of securitization bonds now issued. This contributes to our focus on near-term efficient financing. The recent actions by both S&P and Fitch on our credit ratings reflect increasing confidence in our plans to make the investment our customers need and affordably finance our system enhancement.
This morning, I want to cover three key areas, where we are laser-focused on mitigating financial risk and delivering predictable outcomes for you, our investors. First, a recap of our second quarter and first half financial results and a reiteration of our full year guidance; second, a deeper dive into our results ownership center and how we are using that to execute from a simple and affordable model; and finally, a few highlights on important regulatory and legal matters.
Slide 9 shows our second quarter and first half results. Non-GAAP core earnings per share for the quarter came in at $0.25 ended $0.55 for the first half of the year. We recorded non-GAAP core income of $536 million for the second quarter of 2022. This income keeps us on pace to hit the common stock dividend reinstatement eligibility criteria by mid-2023.
Moving to Slide 10, our first half EPS growth is on target at $0.55, up $0.05 or 10% from last year. You can see our rate-based growth of $0.03 per share in the first half and another $0.04 projected for the second half, a clear reflection of our investments in customer priorities. Please also note our favorable cost performance of $0.04 so far and another $0.02 to $0.04 planned for the second half. Combined, this tracks nicely to our roughly $200 million or 2% non-fuel O&M reduction plan. What you do not see here in our yearly forecast are risks due to pension costs that we manage on behalf of our coworkers. Due to our longstanding pension recovery mechanism approved by the CPUC, we do not see an impact to earnings even with the current market volatility. There are other changes, including our regulatory agenda as well as tax and other items. And combined, this shows how we are delivering on our at least 10% EPS growth this year, consistent progress to deliver for our customers and investors.
As shown next on Slide 11, we are reaffirming our non-GAAP core EPS of $1.07 to $1.13. We are also narrowing and lowering our equity range for 2022 and are now forecasting $0 million to $250 million in equity needs for the year. As we resolve legacy claims, which I will talk about a bit later, we maintain our confidence that our equity needs will be limited this year.
Let’s move to our simple and affordable model. We adopted this model to help produce medium and long-term financial risk for both our customers and you, our investors. The model allows us to reduce risk for our customers holding down bill increases over time. And we will deliver on this model by using the lean operating system, which allows us to actively manage variability. It’s about evaluating and executing against opportunities like putting lasting fixes instead of temporary repairs in the system, which helps avoid expense in costs that would otherwise flow through right away to our customers. Our efforts on this front give us greater confidence in our financial targets for the long-term. It starts with lean and how my coworkers are using these proven techniques to manage performance, reducing medium and long-term financial risk.
Turning to Slide 13, for the past 8 months, we have been maturing our process to bring improved visibility and control to executing our work plans affordably in a room we fondly refer to as the ROC, short for the Results Ownership Center. On the left hand side of the slide, you can see the elements of visibility and control. In the ROC, we hold a weekly cross-functional operating review focused on our plan and performance against our financial targets. This is the same method we have used to consistently deliver on our operational goals for our Wildfire Mitigation Plan over the last year. You have heard Patti say, we split the details, so you don’t have to. The ROC is where that statement comes to life.
Additionally, we leveraged the 1-3-10 concept of visual management. Using consistently refreshed data, all attendees can tell within 1 second if our performance is on track; within 3 seconds, which way the metric is trending; and within 10 seconds, the recovery plan for any metric that is not on track. Managing all aspects of variability, as shown on the right hand side of the slide is how we deliver predictable results. When a key financial metric is off-track or trending off-track we identify it almost immediately, using current data, not month old or quarter old data.
The conversation always includes who is doing what by when. And the resulting cash back plan will include a combination of short-term containment and long-term countermeasures. In addition to O&M and capital cost performance, our focus in the ROC this year has been on efficiencies in our contracted spending, evaluating productive time, expense to capital optimization that create lasting system enhancements for customers and internal staffing levels. Taking productive time, for example, in addition to the training rationalization Adam Wright discussed at Investor Day, we have also improved our time reporting this year based on an idea serviced at the ROC.
Our coworkers in the field now explicitly report hours lost due to no work or work delays when they are not able to charge to a specific job. Having this data now readily available allows us to problem solve. Work delays can occur when a crew cannot access the customer’s property, for example, but with good planning, we can enable that crew with a backup job. The simple change to our time reporting has uncovered a huge opportunity to increase productive hours. And just a 1% improvement translates to approximately 30,000 more productive hours per month. You can imagine we are excited about how this can translate into better outcomes for the hometowns we serve. This example, along with our focus on first-time quality that Patti spoke to, and many others, is how through the ROC, our entire enterprise owns our financial results and not just members of the finance team. Again, visibility and control provide predictable results. Our focus is on delivering that for you, our customers and our investors.
Now I will cover the key regulatory legislative and legal updates for the quarter. Turning to Slide 14, at the top, as I mentioned in opening, we have now issued a full $7.5 billion in rate neutral securitization bonds. We have used those proceeds to payoff $5 billion of utility temporary debt and will payoff the remaining $1 billion in the first quarter of 2023 as that debt becomes callable. The remaining proceeds will go towards paying down short-term borrowings at the utility. Completion of the securitization was a key aspect of improving our balance sheet.
And as a result, last week, S&P moved us to Stable outlook. And in June, Fitch Ratings revised their outlook, moving us from Stable to Positive. Keeping with the theme of securitization, as expected, on June 29, the CPUC issued a favorable proposed decision granting our request to securitize up to approximately $1.4 billion of eligible AB 1054 capital expenditures previously found reasonable in the 2020 GRC. We expect a final vote on this proceeding on August 4, which – that timing keeps us on plan to proceed with a bond issuance later this year or early 2023. These securitizations are an important aspect of our financing plan, a stronger balance sheet, improved credit ratings and reduced borrowing spreads.
Moving down the slide. We made substantial progress resolving legacy securities’ legal claims. The net impact we’re reflecting this quarter is $145 million. We believe this is a constructive outcome within our forecasted equity needs. Additionally, in connection with the 2019 Kincade fire and based on the status of discussions with certain subrogation entities and individual claimants, during this quarter, we recorded an incremental charge of $150 million for additional potential losses above available insurance.
The movement you’re seeing in this bucket of legacy claims demonstrates our commitment to putting these litigation matters in the rearview mirror. And we’re making progress on these key legal matters while maintaining our focus on financing. As a reminder, we have now reduced and narrowed our 2022 equity needs range from $100 million to $400 million, down to a range of $0 to $250 million.
Next on the slide, we summarize the status that are yet to be recovered wildfire-related spend. As you can see, we have approximately $5.2 billion outstanding at the end of the quarter. Of this amount, approximately $1 billion is approved for cost recovery in 2022 and 2023. Clearly, we still have more work to do, but just around the quarter in September, we plan to file our next WMCE application. And as a reminder, based on the CPUC schedule, we expect proposed decisions on both our 2020 and 2021 WMCE filings during Q4 this year. Together, these represent the majority of the $2.2 billion shown here as pending a final decision.
And finally, at the bottom of this slide, we are highlighting our two outstanding cost of capital applications. The CPUC held oral arguments in the 2022 case last Friday, where we had a chance to reiterate our position that the cost of capital components should remain at pre-2022 levels for 2022. This month, the CPUC also issued a scoping memo in our 2023 cost of capital application. The commission accepted our request to include an updated cost of debt in September, which we think is constructive given where rates have moved. The schedule provides for a possible final decision of the CPUC last business meeting of the year on December 15.
Before I move from key regulatory cases, just a brief update on the 2023 GRC for which we’ve requested a test year revenue requirement of $15.34 billion. On July 11, we submitted our rebuttal testimony responding to GRC proceeding stakeholders’ comments and recommendations. We continue to defend our request and is the next step for evidentiary hearing starting on August 15. We expect a final decision in the third quarter of 2023.
I’ll close by reiterating that we’re on track to deliver our 2022 financial targets, using proven tools and techniques to lean to deliver predictable results, mitigating financial risk. Our commitment is worth repeating again, non-GAAP core EPS growth of at least 10% each year in 2022 to 2024 and at least 9% in 2025 and 2026.
With that, I’ll hand it back to Patti.
Patti Poppe
Thank you, Chris. As we move through 2022, we’re focused on minimizing physical and financial risk. Our layers of protection start with system inspections, repairs, vegetation management, overhead hardening and our 10,000-mile undergrounding program, which provide long-term sustainable climate-resilient infrastructure. In the near-term, additional layers of protection are provided by engineered enhanced power line safety settings when fuel risk is high and our public safety power shutoff program during high wind events.
Our coordination with local and statewide agencies and situational awareness and fast response continues to strengthen and reduce our physical risk and provide a final and essential layer of protection. To mitigate financial risk for customers and investors, we will continue to fully deploy our simple and affordable model. I’m pleased with the progress as I see our relationships and trust growing with policymakers and stakeholders here in California. PG&E is an essential contributor to California’s prosperity.
We will keep an eye on the horizon and ensure we’re making the right investments to deliver California’s clean energy future. Something really exciting is blossoming here at PG&E. We feel the momentum, and we hope you do too.
Operator, please open the line for Q&A.
Question-and-Answer Session
Operator
[Operator Instructions] Our first question will come from the line of Jonathan Arnold with Vertical Research. Please go ahead.
Jonathan Arnold
Yes. Good morning, guys.
Patti Poppe
Good morning, Jonathan.
Jonathan Arnold
Hi, could I ask as just a – could we get an update on the EPSS effectiveness you’re experiencing in ‘22? I know you spoke to the overall 90% risk mitigation, but are we still seeing that kind of 80% reduction that you talked about at the Analyst Day or is that – has that evolved somewhere?
Patti Poppe
Yes. Jonathan, first of all, as we talk about EPSS, let’s just step back for a second and remember that the objective was to end catastrophic wildfire. That’s the objective of the program. And for that, we have layers of protection, EPSS being one of them. So on EPSS effectiveness, we’re in the 70-plus range right now as we’ve gotten a larger sample size, and obviously, conditions are very challenging here in California, we feel good about that 70% because in concert with the 70% plus ignition reduction, the acres burned per ignition is dramatically lower in the plus 65% range. And so we feel like that is a really important sign of progress. And in fact, we’re working on a new metric, Jonathan. It’s not ready for prime time, but what we’re looking at is sort of an ignition times acres burned. And as we look back on previous years, we’ve seen significant improvement. We look at that, all of that driving towards the elimination of catastrophic wildfire. The other thing I’ll share on EPSS effectiveness that we feel good about is the duration of those outages has dropped dramatically year-over-year.
In fact, we set a target for ourselves of 240 minutes, and we are well under that year-to-date. And so our operations team has done an extraordinary job responding to this new configuration of a system that, frankly, no one else in the industry at this scope and scale has this sort of safety measure in place. And we continue to have successful conversations with communities who are most impacted by EPSS. In fact, Pismo Beach is a good example a community down by San Luis Obispo was experiencing multiple outages. Our engineering team went and studied that circuit was able to make repairs and modifications and engineering improvements to significantly reduce the outages. And so we held webinars with the community and the local leaders gave us very positive feedback about our responsiveness. And so we just continue to be focused on our hometowns and making sure that we’re keeping everybody safe.
Operator
Our next question will come from the line of Shar Pourreza with Guggenheim Partners. Please go ahead.
Shar Pourreza
Good morning, guys.
Chris Foster
Good morning, Shar.
Shar Pourreza
Patti, I just wanted to maybe start off with the progress that’s being made on kind of multiple fronts in terms of physical de-risking, in particular, kind of how the undergrounding plans are evolving and just the general sensitivity of the CPUC around affordability. And just as a quick follow-up, understanding, like, the regulatory process is still ongoing, but – what are the current expectations from potential moves with legislation? And any updates around the RFP process where that stands from Jacobs on implementing the program? Thanks.
Patti Poppe
Yes. Thanks, Shar. Well, it’s great because undergrounding and affordability go hand-in-hand. Undergrounding is a great example of our simple and affordable model at work, where we’re going to be able to transition from a highly expense-intensive vegetation management program to more permanent corrective action, which is undergrounding the lines. As you may remember, when we filed our modification to the GRC, we added $7 billion of capital first couple of years of the undergrounding plan, and offset with $1 billion of expense reduction, resulting in a flat – no modification essentially to the rate increases of that ask. And so – we think it’s an important combination.
I’ll just say we’re really pleased with the progress on the undergrounding bill. I think it shows a couple of things. Number one, our customers have been demanding that we invest in our infrastructure. I’ve seen so many quotes and headlines about PG&E, underinvested in its infrastructure. This is our pathway to investing in the infrastructure to keep our people safe and have a climate resilient energy system. Our legislators see the same thing. And they are working with us.
Senate Bill 884 is making progress. We like the current draft. There is still – it’s still a live ball, I would say. There is still modifications that can be made, and so we’re continuing to work closely. But we like the idea that there is clarity to a long-term plan and clarity that the legislature expects us and will hold us accountable to completing this undergrounding plan. We want that, too. And so that accountability then translates into a 10-year plan and the OEIS and the CPUC are directed to review and approve that in a timely fashion, which allows us to save the most dollars for our customers. It allows us to do that massive infrastructure project at the most affordable price. It gives us the opportunity to better long-term contracts, better access to equipment at a lower cost, Staffing up a labor workforce to deliver that incredible infrastructure project. And so I just feel like undergrounding is such a perfect example of the simple affordable model at work and making the system safe.
Shar Pourreza
Got it. Thank you, Patti. And just one last quick one in terms of the guidance, the reduction in equity needs is certainly really appreciated there. You have securitization getting debt off the balance sheet. Does that open some opportunity to maybe simplify financing means going forward? Thanks.
Chris Foster
Hi, Shar, it does. I think if you look at equity, what we’ve said is that really looking forward to getting some of these important legacy items behind us, which we were able to make progress on including this quarter. That helped us refine and really narrow our equity guide for the year. And that’s really ultimately about a good financing plan that’s looking a couple of years out at any point. We also got, as you mentioned, the rate neutral securitization completely done here by midyear, which was nice because, ultimately – we’re initially unsure if we could get it all done at this point or if it was going to take us to the end of the year. And then on the debt side, ultimately, you’ve got a couple of things there, right? They are going to help us further simplify. First, we’ve got an 80 10 54 securitization. That’s really our next one coming up that we’re hoping to execute later this year or early next. And then along the same time frame, we’re probably going to be looking at ongoing needs for long-term debt which really just finance our rate base growth, and that’s consistent with our base financing plan.
Shar Pourreza
Got it. Thank you, guys.
Patti Poppe
Thanks, Shar.
Chris Foster
Thanks, Shar.
Operator
Your next question comes from the line of Julien Dumoulin-Smith with Bank of America. Please go ahead.
Julien Dumoulin-Smith
Hi, good morning, team. Thank you very much and congrats again on another quarter with a zero 100-acre-plus fire. So good stuff.
Patti Poppe
Thanks, Julien.
Julien Dumoulin-Smith
Absolutely. I want to recognize it. Maybe just more of a financial question, your equity issuance, can we talk about the reduced needs here and how to think about that in the long-term, obviously, moving things in the right direction here? Can you talk about just what drove that in part, but also more specifically, how we can think about longer-term means as well here? Especially if you want to avoid them considering what the stock is. So I appreciate the continued hustle.
Chris Foster
Absolutely, Julien. And I think you said it that ultimately, our focus is going to be uncertainly where we’re trading at this point to have to make the best economic decision we can. And so obviously, looking at the 5-year plan at this stage, and really the focus is consistently on making sure that we’re putting these legacy items front and center because they are a driver for us. Specifically, you saw us resolve or make substantial progress and able to bound the securities claims right at $145 million. We’re making progress on the Kincade related claims. And so we’ve got a much better focus now with the increase we had there quarter-over-quarter on where that will land as well. And as you can imagine, those are two key drivers.
As you look in future years, we are going to have fewer implications on that front. We are going to have – obviously, the odd fire is completely covered by insurance at this stage. So you can imagine, Julien, that really our folks is going to be on making it right with these communities where we need to. That’s going to be the core focus of the company. At the same time, we’ve got to actively manage our financing needs, which is I think what you’re seeing in the results of this year and bringing down the range from $1 million to $400 million down to $0 to $250 million this quarter.
Julien Dumoulin-Smith
Yes, absolutely. Let me pivot here to Diablo super quickly. How is the new AB 205 and 180 impact you guys as well as the federal efforts here? I mean, is that bill potentially able to help defray costs from the state back to the Fed in terms of paying for Diablo? And ultimately, I suppose the bottom line is also what does it mean financially for you all considering that you were going to have a fully appreciated asset in a couple of years there?
Patti Poppe
So Julien, obviously, Diablo Canyon is very much on our minds. And so if we step back and just think about what is being discussed here and what the path forward is, first of all, it’s – we continue to remind all engaged parties that the clock is ticking here. we’ve got a real sense of urgency in order to transition from being in a decommissioning posture to a life extension posture. So the most important thing to us right now is that we get certainty on the decision-making. We have to secure tasks. We have to order fuel. There is some very near-term items that – actions that we would need to take if, in fact, we changed the posture of the plant. And so with that, we’re working very closely with the state first to understand what are the needs and what do we need to do to forward. This is not an easy option. Legislation will have to be passed. The permitting and relicensing of the facility is complex. And so there is a lot of hurdles to be overcome in order to move forward. However, we like the fact that, that plant’s value is being recognized by the state that there seems to be kind of a shift in the attitude about the role that nuclear can play in a GHG-free economy. And so obviously, our team at Diablo continues to do great work and earn the respect of the citizens of California and the policymakers as well. We do think that the DOE funding is a possibility. And certainly, the state has expressed interest in maximizing that and making sure that Diablo Canyon gets included in the DOE’s program to extend the life of nuclear. Again, nationally, I think there is been a real shift in attitude about the value of these baseload nuclear facilities. And so given that, we’re just going to continue to work through the financials, and that will be second to making sure that the plant is ready and safe and able to operate for the state.
Julien Dumoulin-Smith
Got it. And just financially for you guys, again, it’s a depreciated asset by about ‘25 here, right? I mean, we shouldn’t think about that earnings impact beyond any differently?
Chris Foster
That’s accurate, Julien. At this stage, that was part of our prior agreement with the CPUC to fully depreciate the assets by the end of – we are talking in light of the second unit in 2025. We are also watching certainly the different pieces are moving on the state level. Patti did well that we are looking at the federal level. The state also has a resiliency fund that they are looking at. And additionally, you mentioned the specific piece of the legislation, including customer [indiscernible]. And certainly, I think that that’s a good example of the legislature acting on behalf of our customers and helping to lower cost. And so certainly, there is a financing advantage for – in that for us as well.
Julien Dumoulin-Smith
Got it. Alright. Excellent, guys. Thank you.
Patti Poppe
Thanks, Julien.
Operator
Your next question comes from the line of Richard Sunderland with JPMorgan. Please go ahead.
Richard Sunderland
Hi, good morning. Thanks for the time today. Maybe a quick follow-up on Diablo Canyon, you spoke to some of the hurdles there, but could you speak to the timing at all in terms of if there is a red line when you need to address a few of those items in switching from decommissioning to life extension?
Patti Poppe
Yes. So legislation – we believe legislation – and it’s pretty well agreed that the legislation is required in order to change the permitting and relicensing time line. And so the legislature is – needs to pass any new laws by the end of April, April 30, and then they are signed by the governor in September. And so that really drives an important deadline for us. And in addition to the fact that we need to order cast and the fuel – and so given that the combination of that timing really does drive the decision-making.
Richard Sunderland
Got it. Thank you. And then switching gears here, I am curious you could speak to the timeline and achievability of addressing the residual wildfire risk that’s on top of the 90% estimated mitigation today? Are these items that you are focused on in the near-term or sort of longer term aspirations as technology evolves?
Patti Poppe
Yes. We are implementing new technologies as we speak, literally. In fact, when we look at the utilization of our smart meter technology to its full potential, it can identify risks and faults on the system, and we are already implementing that system-wide. So, that’s an additional layer of protection. Another layer of protection is on our secondary lines or down conductors. We have new settings that we can utilize and some new technology in a controller box that we are deploying out to the system as we speak. So, what I can tell you is every single day, we have a technology team who is focused on ending catastrophic wildfire. Our team at our advanced technology center, ATS, they are working night and day to come up with new and better technologies to deploy. So, we are not waiting, you can rest assured. And as the quarters progress, we will continue to share progress on those additional layers of protection that we are putting in.
Richard Sunderland
Great. Thank you for the color.
Patti Poppe
Yes. Thanks.
Operator
Your next question will come from the line of Michael Lapides with Goldman Sachs. Please go ahead.
Michael Lapides
Hey, guys. Thank you for taking my question and congrats on a good first half of the year. Real quickly, how are you thinking about Dixie, the Dixie Wildfire, and the potential for this to be the test case to kind of – I don’t know, see how AB 1054 actually gets put to work when it comes to a wildfire that may have over $1 billion in cost? Just kind of walk us through where that stands potentially? And is this going to be, in your view, the potential trial run to see how this all plays out?
Chris Foster
Michael, happy to take it. I think that there is that potential. At this stage, as you know, we recorded $1.15 billion total impact. And so that would imply that the $150 million here could interact with the wildfire fund itself. I just have to emphasize this could take some time. I think in the interim, what we are very focused on, including with an accelerated claims process in the community is making sure that we have impacted families paid quickly. So, at this point, we have got over 100 claims that have come forward in that way and that have allowed us to compensate impacted local communities quickly. So, that’s the near-term. Over time, there is really the way to think about this is we have got our insurance layer itself, CPUC recoveries above that of roughly $360 million. You have got then FERC related recoveries of roughly $100 million. And then ultimately, the remainder will be tapping the wildfire fund. So, there could be time here before we really get to the stage of tapping the fund because the statute actually requires that you are substantially completed with your claims themselves before you move forward to the fund. I think in terms of the fact pattern and our operational prudency as it related to Dixie Fire, I think we have been quite clear that in terms of vegetation management, in terms of the management of our assets and the appropriate response. I think all of those things position us well for the recovery themselves at the various jurisdictions, including at the wildfire fund.
Michael Lapides
Got it. Thanks Chris. And just one quick one, can you remind me when is the last date or the deadline for when either property or other claims have to be filed for Dixie?
Chris Foster
Sure thing. So, there is two to keep in mind. The first would be personal injury statute of limitations, which runs from 2 years from the incident. And then property damage, which is 3 years. Those are the two primary drivers of claims and claims timing.
Michael Lapides
Got it. Thank you, Chris. Much appreciate it guys.
Operator
Your next question will come from the line of Nick Campanella with Credit Suisse. Please go ahead.
Nick Campanella
Hey. Good morning and thanks for taking my question. I wanted to just ask about the pending wildfire legislation in the Senate here. I understand we are kind of in recess and this will go through August. But I believe there have been some amendments. And I am just curious, current bill as it stands today, if it was passed, how would that affect your plan? Is it acceptable in current form? And what should we kind of expect here as we get to the end of August?
Patti Poppe
Yes. We feel good about the current draft. Some of the things that we did not like about the previous drafts have been removed. I think it was important for our legislatures – legislators and the authors of the bill to understand how important it was that the financial mechanisms be in place, so we can attract the high-value capital to fund the program. We know it’s important to you to have certainty for your clients to make sure that those moms and pops who invest their money in a utility can count on a predictable return. And so I think that was a really good understanding that we formed there. So, the language is good about cost recovery, the permitting assistance as well as especially the legislative direction to OEIS and the CPUC to support a 10-year plan, which would be outside the general rate case. An infrastructure project of this scope and scale is so important, it would be longer term. So, we can get the labor force ready, we can get the equipment ready, we can get the long-term contracts. That will save our customers the most money. We can do the program at the lowest total cost when we have that longer term plan. And so having visibility transparency and frankly, accountability to – for us to do what we said we are going to do and to get the unit cost where we want the unit cost. I think it’s in the best interest of everyone to have this kind of legislative direction to provide the certainty that we need. And just to remind you on timing, August 31 is the deadline for bills to be passed and sent to the governor. And then September 30 is the last day the governor can sign a bill. And so that will be the timing of that legislative activity.
Nick Campanella
Great. Thanks. Appreciate that. And I know it’s just happened yesterday, but just Inflation Protection Act and the AMT specifically, if there is an alternative minimum tax, how does that affect the company? I mean just looking at the BBB example, maybe you have done some work there already?
Patti Poppe
Yes. In fact, Nick, I was in Washington, D.C. 2 days ago, in fact, with a small group of CEOs focused on this climate package, encouraging its inclusion in this new program. And it’s amazing to me how much can happen in two days. And so we are excited about clean energy components of the package. We think that it will allow us to continue to grow the clean energy assets here in California by a variety of owners, not just the utility, but making sure that we have got that clean energy transition at the most economic and lowest societal cost. We are excited about the inclusion of hydrogen and the standalone storage credits. We are studying the implications for the EV credits, but it looks like the cap is being proposed to be lifted, which would be good and important here in California because EVs are such an important part of our future. Of course, like I would suppose most businesses, we don’t love the corporate minimum tax. For us, it is a pass-through, which is why we don’t like it. It puts affordability pressure directly on our customers. And so there is obviously a lot of discussion about that. We will continue to work our simple and affordable model, however, and we will ride that rollercoaster so you don’t have to. We will make the necessary adjustments to continue to build our funding, our infrastructure for our customers as they would wish and lower costs in a variety of areas, if, in fact, that additional cost gets borne by our customers.
Nick Campanella
Got it. Thanks. I appreciate that. Just one more follow-up, if I can, just on the Victims Trust, I think we have seen some turnover in the folks that are running the trust and just kind of curious on what the conversations have been of late, if you could provide any kind of color on the relationship or just in general, your ability to align yourself even more than before there?
Patti Poppe
Yes. Nick, thanks for asking the question. I had a very productive conversation with the new administrator, Cathy Yanni. She is a professional. She has been in this business for many – well, her whole career, and she was very impressive to me. I was happy to have a chance to talk with her. We clarify – I clarified for her that we want what they want. We want to maximize the value of this agreement that was made on behalf of victims. And obviously, our stock price has an impact on that and their actions with the volume of shares that they own have an impact on the stock price. And so we talked about that, and we talked about how working together could be very beneficial to the victims and that’s our sole focus. And again, we want what they want, to make it right. And we obviously think working together with them is more productive than working independently. However, they have been clear that they want to make sure that they get certainty around the dollars that they will have available to distribute to victims. And if you check their website, you can see they have made a significant progress in disbursing funds. She is very focused on doing that efficiently and effectively, and so certainty helps them. Bottom line, we want what they want, and we will look forward to continuing to work with them.
Nick Campanella
Alright. Thanks for everything today.
Patti Poppe
Thanks Nick.
Operator
Your next question will come from the line of Gregg Orrill with UBS. Please go ahead.
Gregg Orrill
Yes. Hi. Good morning.
Patti Poppe
Good morning Gregg.
Gregg Orrill
So, maybe following up on Nick’s question, are you looking at additional ways to provide certainty to the fire victims?
Patti Poppe
I – the ball is really in their court. They own the stock, and it’s up to them how they want to disperse it.
Gregg Orrill
Okay, got it. And then just on the wildfire-related cost recovery, the $5.2 billion, could you tie that back to recoveries timeline and how that sort of quantify the improvement in FFO to debt? Would it tie back to the credit measures?
Chris Foster
Sure thing, Gregg. I think that this is going to be a key for the company over the next, really, 2 years, primarily with the majority of the funds coming in 2023 and 2024, and then help us from a cash flow perspective. The things to keep in mind are really two. First, quarter-over-quarter, the overall increase that you saw, a move of roughly $0.5 billion was directly related to prior vegetation management work that was critical for the system. Second thing to keep in mind is that we do have two important data points here that are expected in Q4, which is the resolution of both the 2020 Wildfire Mitigation and Catastrophic Event or WMCE related account as well as the 2021. When you look at those two together, that’s roughly the $2.2 billion that we have talked about. So, those are going to be key in terms of getting resolution there and then keeping us on track for our FFO guidance.
Operator
Our next question will come from the line of David Arcaro with Morgan Stanley. Please go ahead.
David Arcaro
Hi. Thanks for taking my questions. Good morning.
Patti Poppe
Good morning David.
David Arcaro
Wanted to check in on load growth and what you are seeing this year. I know longer term, you have got targets and it’s an important component to reduce the customer bill impact from your rate base growth over time. And that’s driven by longer term programs around electrification and EVs. But I guess I am curious what you are seeing currently this year and expectations for the rest for the year in terms of loan growth?
Patti Poppe
Yes. So, we are continuing to look at that. We definitely see continued load growth. It’s lower at this early part of our 5-year plan. At the latter part of the 5-year plan and then going into the 10-year plan, we see significantly more forecast. It will be interesting to see if the additional incentives on EVs accelerate adoption here in California. But as we have said, 1% to 3% is in our long-term forecast.
David Arcaro
Okay. Great. Thanks for that. And then, Patti, you mentioned a couple of technology aspects, the partial voltage detection, down conductor programs just to kind of attack that last 10% of the risk. When will we see maybe programs like that get officially rolled out or target set in place and kind of quantified?
Patti Poppe
Well, the partial voltage detection through our smart meters is deployed. That is deployed as we speak. And so, we are learning a lot as we get those partial voltage alarms. We have a 60-minute response time. We are trying to narrow that into even less than that, so we can get out and observe the situation and find out if it is in fact unsafe. And so in the coming months, you will get more – we will share more insights with you on what we are learning there. Again, that’s an infrequent occurrence, but it is an occurrence. And then the down conductor, I think has a ton of potential. It does require new hardware. Some of the hardware that we have on the system can be reprogrammed and so we are doing that as we speak, but there is new hardware that needs to be deployed, and some of that is caught up in the supply chain constraints globally. And so we are continuing to work to accelerate the implementation of these particular controller boxes and we look forward to sharing news on progress on that as well. We definitely have already experienced down conductors that have been identified by this equipment and de-energized automatically. We are seeing the benefits of it. But it’s on a smaller scale than EPSS where we have it 100% deployed. So, in the coming months, we will share more about the deployment and the completion of the installation of that hardware.
David Arcaro
Okay, got it. Thank you.
Patti Poppe
You’re welcome. Thank you.
Operator
Your next question will come from the line of Ryan Levine with Citi. Please go ahead.
Ryan Levine
Good morning. Throughout the call, you highlighted that the AB 1054 and the August 31st deadline for pending legislation within the state, given that we are nearing a deadline, are there any other processes or legislation, legislative bills that could be introduced at the last minute here as we work towards the deadline?
Patti Poppe
We are – I am happy to report that our team is very engaged in Sacramento, has a good pulse on what’s coming. And at this stage, bills have had to have been introduced. There is procedurally, it’s now an abandonment can be added to an existing package, and so we have to be on the lookout for that. But we don’t have any alarm bells on the horizon at this stage.
Ryan Levine
Okay. And then on the undergrounding effort, what progress has the company made on RFPs and other contracting efforts for undergrounding packages over the last few months?
Patti Poppe
Yes. We are not complete on the selection of our final partners that we will be selecting, but we will definitely make that public when we do. I am happy to report we have already underground more miles of line this year than we did in the entire year last year. So, we have accelerated our capabilities and the team is just continuing to make great progress.
Ryan Levine
And then last question for me. In terms of the engagement with Victims Trust, you highlighted your recent meeting, but in terms of the overall cadence or pace of engagement has it started to pick up with the change in leadership of the organization, or have things been relatively consistent over the last six months to nine months?
Patti Poppe
I would say it’s been consistent, but maybe over the last six months. I would suggest that we have had a lot of conversations in the last six months, helping the trust to understand what’s happening with the equity price, why it is, what it is and what we can do together to really serve the victims best.
Ryan Levine
Appreciate it. Thank you.
Operator
At this time, I will turn the conference back over to Patti for any closing remarks.
Patti Poppe
Thank you, Regina. Well, thanks, everyone. We know it’s a busy day for you. And as I said in my prepared remarks, something special is happening here at PG&E, and we can feel the momentum. And I really hope you are feeling it, too. Have a great afternoon. Be safe out there.
Operator
Ladies and gentlemen that will conclude today’s call. Thank you all for joining. You may now disconnect.
Be the first to comment