Good afternoon. My name is Chris, and I'll be your conference operator today. At this time, I would like to welcome everyone to PG&E Corporation's Third Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. [Operator Instructions] At this time, I would like to pass the conference over to your host, Chris Foster with PG&E. Chris, you may begin your conference.

Thank you, Chris, and thanks to those of you on the phone for joining us. Here with me today in the room are Geisha Williams, Jason Wells, John Simon, Steve Malnight, and Pat Hogan. Before I turn it over to Geisha, I would remind you that our discussion today will include forward-looking statements which 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 on the second page of today's third quarter earnings call presentation. The presentation also includes the reconciliation between non-GAAP earnings from operation and GAAP measures. We also encourage you to review our quarterly report on the Form 10-Q that will be filed with the SEC later today, and the discussion of risk factors that appears there and in the 2017 annual report. With that, I'll hand it over to Geisha.

Thank you, Chris, and good morning everyone. Before we dive in, I first want to acknowledge the one-year anniversary of last fall's devastating wildfires. The efforts by members of the impacted communities to rebuild and improve emergency planning and preparedness for potential future fires continue. We are deeply involved in all of this work as we collectively adapt to the new normal. I also want to take a moment to thank our employees who have worked tirelessly throughout the peak wildfire season to keep our customers and community safe, including the recent activities associated with our decision to proactively shut off power for safety in parts of our service territory. Following extensive outreach to key third-party agencies and our customers, in mid-October we shut off power in certain communities in the North Bay and Sierra Foothills in response to a forecast for extreme high fire risk weather conditions. When the weather improved, our crews conducted patrols across the entire 3,400 impacted miles of our power lines by helicopter, vehicle, and on foot, identifying multiple lines that had sustained damage. Service was restored to nearly all customers within about two days, and I would personally like to thank our impacted customers and communities for their patience while we worked to turn their lights safely back on. This morning, I'll touch on Senate Bill 901, and then I'll walk you through our community wildfire safety program proposal, the multiyear effort targeted at wildfire risk mitigation that continues to evolve and expand. I'll reference some of the near-term progress we're making on enhanced programs, and also highlight our plans for the coming years. Finally, we have a number of regulatory proceedings that are underway or will be filed in the near-term, and I'll touch on a few of them today. These proceedings are…

Thank you, Geisha, and good morning everyone. Today, I'll walk through the results for the quarter. We will also provide CapEx and rate based guidance through 2023. Before we dive in, I want to address the customer harm threshold through disallowance GAAP which will establish a cap on the amount that shareholders will contribute to cost associated with the 2017 fires. We're beginning to work constructively with the commission on a process to objectively review this unique charge from the legislature but I want to acknowledge that we're still in early stages. We've recognized there is great interest and better understanding this figure and believe it is critical to establish this threshold timely as new material information becomes available, we will continue to keep you apprised. Also reiterate that given the continued uncertainty, we're facing particularly around the amount and timing of any potential future financings, we're not providing earnings per share guidance on today's call. With that, let's move now to the financial results for the quarter starting on slide six. Earnings from operations came in at a $1.13 per share. GAAP earnings including the items impacting comparability are also shown here. Legal and other costs associated with the Northern California wildfires net of insurance recoveries total $43 million pretax. Pipeline related expenses were $30 million pretax. We recorded $9 million pretax where legal costs related to the Butte Fire. Lastly, we reduced the previously recorded charge for capital costs that we anticipated would be disallowed based on previous gas transmission rate case decisions. This is driving a $38 million pretax gain this quarter. Moving on to slide seven, which shows the quarter-over-quarter comparison of earnings from operations of a $1.12 in the third quarter of last year compared to a $1.13 this quarter. We were sixth sense favorable…

[Operator Instructions] Your first question comes from Jonathan Arnold with Deutsche Bank. Your line is open.

Good morning, guys.

Good morning, Jonathan.

Quick question on, I'm just curious at previous occasions you've give sort of a three-year GRC type outlook and this is the 2023, if I'm not wrong, would be after the to-be-filed 2020 GRC, or is it are you perhaps signaling that you could look for a four-year GRC here?

No, Jonathan. Our intention with providing the five-year forecast was to reflect our confidence in the long-term spending program that we're proposing. We anticipate the 2020 GRC will cover the period of 2020 through 2022, but we have light of sight to the long-term spending plans which gave us confidence to provide the five-year forecast.

Okay, that's helpful. And then you also -- I think the details you gave on the Community Wildfire Safety Program, you're showing us a five-year look. But what's the kind of real longevity on this. And yes, you mentioned spending at similar levels in future GRCs, plural, if I heard you correctly.

Jonathan, this is Geisha. Our view is the Community Wildfire Safety Program has different elements. The veg management work that I described, our intention is to really address that 25,000 miles over an eight-year period. On the system hardening, we're look at a 10-year focus on roughly the 7,000 miles. And this is a long-term approach to frankly de-risking our assets in these high fire prone areas.

Okay. And then just had one other thing, when I look at the rate base for 2019 it's obviously higher than what you had approved in the prior GRC. Is the difference there pretty much all to do with this community planned spending or are there some other -- can you unpack any other differences, Jason, there, as we're trying to translate that into sort of probability of getting approved at that level, et cetera?

I do think if there's low cost recovery risk. In 2019, the higher level of CapEx and rate base associated with the Community Wildfire Safety Program is roughly $300 million. The remaining difference is essentially the timing of spend associated with our general rate case and gas transmission storage rate case decisions with a small amount coming from CapEx. Essentially, we have been spending more in the later years of those rate cases then we did in the earlier years. But the spend, overall, during those rate case periods is generally consistent with what has been authorized in those cases.

So you would isolate the amount by which '19 rate base exceeds currently approved amounts to the piece related to the wildfire program, is that fair?

To roughly that $300 million that we intend to spend for the Community Wildfire Safety Program.

Okay, thank you very much, guys.

Thank you.

Your next question is from Stephen Byrd with Morgan Stanley. Your line is open.

Hi, good morning.

Morning.

Good morning, Stephen.

It was helpful disclosure you provided in terms of the CapEx. And I'm just sort of thinking through that CapEx that you laid out on slide 10. And at the higher end of that range, at the $7 billion, kind of the far right bar, how should we think about how you would fund that? Would you be able to rely solely on your programs? And I'm kind of thinking steady state; I know there are a number of moving parts in the near-term, but longer-term at that higher end. Could you rely on your equity programs? Would you need to go out and seek larger amounts of equity in offering, how should we think about sort of financing that $7 billion number you lay out?

Stephen, I think at the $7 billion level the required equity contribution it would exceed what we anticipate to recover through our internal programs, both kind of the amount that we're seeing this year as well as sort of the amounts that were generated prior to the 2017 fires. And so I really think there's a number of factors that are going to be impacting our financing plans, mostly largely associated with the 2017 wildfires. As we think about dividend reinstatement down the road, we are going to have to balance the growth that we see in our business with the competitive payout ratio of our dividend. And so we will balance all those factors. So I think it's too early to really be specific with how we will raise that incremental equity that will be needed to fund that higher level of CapEx.

Yes, and I respect that, there are a lot of factors. Actually -- and just you had mentioned dividend, which was another area I just wanted to touch on. When you think about both the factors that are really driving your thought about potential dividend reinstatement but also I think, importantly, about the policy to pay out level, et cetera. Would you mind just giving us your latest thoughts around the key drivers there, both of timing the three institute as well as sort of philosophically, does -- obviously we have much higher wildfire risk than we used to. Does that factor into your decision about payout ratio, any color on the dividend would be helpful.

Yes, thanks for that question, Stephen. I can tell you, we couldn't be more cognizant of the importance of dividends and the role that dividends play to our utility investors. So as we think about this, I would also tell you that our Board is very engaged, and is continuously evaluating, both the timing of the dividend reinstatement as well as to what level it should consider. But it has to look at a number of factors that are impacting our environment. So for example, we've got to take a look at what are the ultimate determination of the cause of the pub fire from Cal Fire. What is the Safety and Enforcement Division's report in terms of our operating practices in regard to the fires that we had in '17? And we're also looking at what are the potential decisions of local DAs in terms of brining charges against the company. Now, all of these factors we believe could impact the determination of the customer harm threshold process that is going to be kicking off at the CPUC. What I would tell you is that, well, we're not looking at any of these specific items or milestones as a triggering event. We do need to acknowledge that there are a number of uncertainties that could impact the longer-term value of the company. So with all that said, the focus is on, in our Board anyway, is really to consistently evaluate all of these relevant factors. It's a pretty fluid situation. And our goal is to provide you with clarity in terms of the dividend reinstatement when it's appropriate. But we're just not in a position to do that today.

Understood, thanks. I'll get back in the queue. Appreciate it.

Your next question is from Steve Fleishman with Wolfe Research. Your line is open.

Hi. Just on the affordability, could you maybe give a little more color on this capital plan when you see all the different factors, costs -- cost cuts, and PPAs that roll off, kind of what do your rate levels look like over the five-year plan?

Well, I think I'll talk about it pretty broadly. I mean, we are absolutely focused on costs, and we understand how important the issue of affordability is for our customers, particularly at a time when we're proposing additional wildfire-related spend, and then also write the potential for the securitization of third-party liability in the years ahead. So we understand we've got to take a look back and figure out how do we expand the necessary work to de-risk our system, while at the same time focus on doing that in the most cost effective way possible. So as you know, Steve, we've been really focused on our affordability initiatives for several years. And those initiatives, as we look at our costs and our efficiencies will apply as well for all of the hardening effort that we have planned. So we're also, frankly, looking at our own costs, our own programs, and at the same time looking at broader policies that are designed to release cost pressure. So for example, and I mentioned this in my opening remarks, we advocated really aggressively for changes to the PCIA, and we're gratified to see the substantial progress that we made on correcting that cost shift from CCA customer to a broader bundled customer. Next year, we've got another opportunity to take a look at those cost shifts as we start thinking about net energy metering and how to reduce those cost shifts as well. So our view is to look at the work we can do on our own in terms of our own programs, our own efficiencies, while also looking more holistically at the policy area to see if there's opportunities to reduce costs further for our customers.

Okay. And then you probably noticed that Edison gave the -- their view of their -- I guess fall on the Thomas Fire prior to Cal Fire actually issuing a report. Do you see any chance that you would do that on pubs or you're definitely going to wait till Cal Fire issues a report?

I think that we're at this point in the game, we are really very much waiting on Cal Fire to complete its work. We're looking forward to seeing them complete their work. And we obviously don't have access to all the information, all the evidence, all the various things that they're considering. So it's our belief that at this point, given what we know, that it would be prudent to allow Cal Fire to complete its work.

Okay, that makes sense. And one last question on the customer threshold filing, when you do make a filing is it going to be more of here's what the procedure we think should be or will it actually be here's what we actually think the customer threshold should be?

Well, I think that when you look at SB 901, it left a lot of room for interpretation in terms of how to answer that question, which I think adds a lot of complexity, and frankly likely adds a lot of stakeholders into the process who might be really interested in the outcome. Our point of view is and what we've been advocating is that the process, whatever that process is, needs to move forward soon. And we've been expressing that view throughout this last quarter. So not exactly sure in the bottom line, Steve We're working expeditiously with the CPUC, we're asking them to take up this important question. What I would tell you is we are working urgently. This is a high priority; we want to bring clarity to both the process as well as what the final threshold amount is going to be as soon as possible. We understand how important that number, that process is to the various stakeholders.

Okay, thank you very much.

You bet.

Your next question is from Greg Gordon with Evercore ISI. Your line is open.

Thanks, good morning.

Good morning.

Has there been a formal process that's even been started in terms of engagement between the different utilities who'll be affected by the stress test, or as we're calling it now, the customer threshold and the CPUC, so that we'll have a sense of when that -- there's been an official sort of starting date for that?

Well, first of all, I think in terms of the stress tests, the customer harm threshold for 2017, it's really a PG&E issue primarily, and so we've been, as I mentioned earlier just to Steve, engaged in dialogue with the CPUC on the importance of getting started, getting started quickly. We recognize that there likely will be other stakeholders that will have an interest in the proceeding, whatever that may look like. And so it's in process, but there isn't an official date or timing that I can give you at this time.

Got you, thank you. And how does the wildfire mitigation plan filing sort of dovetail with the GRC, are they sort of operating in parallel but relate to each other as it pertains to the $7 billion spend that you've requested?

Yes, that's a good way of thinking about it. We're using the vehicle that's available to us, which is I think appropriately the GRC, the 2020 GRC, to propose our wildfire mitigation activity -- our wildfire mitigation plan. Having said that, on an annual basis, the CPUC will take a look at what the wildfire management plans are. And so they've kicked off, through that OIR process we're using. The GRC is a funding mechanism, and then we'll have a separate proceeding to approve those plans through the SB 901 annual review process.

Got you. And the Safety Enforcement Division is conducting a review of the fires as well. If my memory serves me correctly, I don't see that on the timeline of key regulatory cases here. But when we last spoke your lead director indicated that was something that you were keenly watching. So can you explain why and when the expected timing is of its release?

So this is Steve Malnight. Greg, thanks for the question. The SED has that they are investigating working alongside with Cal Fire and others. We expect that they will issue a report once all of the Cal Fire reports are out. We don't really yet know the timing. And we don't know what would result from that. Obviously as you know this PUC has wide discretion to consider potential penalties if they found something as a result of that investigation or also could launch an OII. I think at this point, we don't know yet where that proceeding will go but we've mentioned that that is a factor that's out there as well. Q – Greg Gordon: Okay, final one really quick, the safety culture investigation that came out of the San Bruno fire is still open, what are our expectations there in terms of whether that will ever be resolved?

So this is Steve Malnight again, thanks. The recently the PUC actually issued a proposed decision in the safety culture OII. That proposed decision effectively agrees with the recommendations from North Star and the North Star originally reported and requires PG&E to implement them by July 2019 with quarterly reports to the commission. So we're actively engaged in implementing those recommendations and moving forward and we expect that the commission could vote on their proposed decision, I think the earliest is at the second meeting in November. Q – Greg Gordon: Okay. And there is no ROE penalty proposed in that meeting?

That proposal was, that proceeding was just to look at those recommendations and where they go, they did they rejected other recommendations from other parties. So it's just about implementing the existing recommendations from North Star. Q – Greg Gordon: Thank you.

Your next question is from Praful Mehta with Citigroup. Your line is open.

Thanks so much, hi guys.

Good morning.

Good morning, Praful.

Good morning. So there is obviously a lot going on the legislative legal side related to wildfires and waiting for the customer threshold as well, how should we think about the financing and the plan for like the 2019-2020 timeframe given all of these uncertainties, is there any near-term equity I guess related to the current fires that you already know about or how should we think about all of this playing out I guess for the 2019-2020 timeframe?

Praful, I think it's just too early to be to be definitive there with the suspension of the dividend, there is not a near-term equity need, I think the sort of clarity around sort of the longer-term equity needs for 2019 and 2020 are really largely going to be driven by the timing of the customer harm threshold process and so it's just really too early to put a date to that time.

Got it. So in the near-term any financing need would be more funded through holding company debt or revolver borrowings?

Currently, we don't have any discrete equity needs, we're going to continue to issue equity through our internal programs as I mentioned in my prepared remarks and we will continue to raise long-term debt consistent with our rate base growth as we periodically need that as we have in the past.

Understood. And then in terms of the customer threshold again just to get back to that given the importance wanted to understand is there any -- when do you expect I guess somebody to get appointed to do that process, you said you already working with the CPUC on it, so is that directly with the CPUC or do you expect somebody to be appointed by the CPUC and what is the timing for that?

Let me start Praful, it's a very fluid situation without specific sort of milestones that have to be achieved by a particular time, so it's a difficult question to ask in terms of how the CPUC is looking at it at this point, we're continuing to advocate for timely starting the process whatever that process may look like, we understand that other stakeholders will have a point of view on that as well as will we but there is not a specific series of actions that are needed to be taken in order to provide that customer harm threshold analysis to be completed. As I mentioned earlier, SB-901 provided pretty broad discretion to the CPUC on how it handle something like that.

Understood. And do you expect the Overland report to have any kind of framework or guidepost to that process or do you see this as completely different?

It could, again it's I think it possibly could be something that acts as an overarching framework but we certainly don't know what the CPUC's intentions are what they're thinking in terms of how or if to use the Overland report.

Got it. Thanks so much guys.

You bet.

Your next question is from Julien Dumoulin-Smith with Bank of America Merrill Lynch. Your line is open.

Hey good morning everyone.

Good morning.

Good morning, Julien.

So I wanted to go back to the projected rate base figures you provide through 23, I wanted to understand just reconciling the CapEx ranges the 577 relative to the rate base. When you think about the lower and upper ends, does that necessarily reconcile with the 577 or there other moving factors that we should be aware of when it comes to whether it's tax reform or perhaps other items that you may be accruing to rate basis? I want to make be extra clear about this particular given the wide range of the rate base.

Julien, this is Jason. Largely it's a reflection of the CapEx, obviously the rate base figures have assumptions around appreciation, deferred taxes but none of those things are unusual nature, they're just sort of byproducts of the CapEx spending plans.

Got it. So said differently to be clear, if you got the $7 billion number through that 2022, 2023 period that would be consistent with the upper end of that range to be sure?

Yes, that's right.

Is that reason for the wide range is not a reflection of some other factor to simply reflection of the range of the CapEx itself?

In a compounding nature of that of the wide range of CapEx over that period of time, yes.

Great, excellent. I wanted to come back to Steve's earlier question around the customer threshold process, how do you in light of the commentary around the Overland report, what other methodologies are you thinking about again, again I know it's early days in the process but how would you frame it outside of the Overland report given how relevant or lack of relevant data points there might be within that?

Hi, this is Steve Malnight, Julien. I think as Geisha was saying really look there are a lot of different processes and pathways that this proceeding could go, I think we're engaging in conversations with the commission about different potential pathways, different processes that could be engaged in other interveners will have, they will have their point of view as well. I appreciate the desire to know more, I wish we just don't have more to really tell you about that today and I think as you can imagine many different ways they could go and we're going to continue those conversations. As Geisha said, obviously this is an urgent focus for us, it is something we're focused on driving clarity on not only process but obviously getting to clarity on the amount as well and we'll continue to keep you updated as we go.

Right, sorry. Just a quick clarification on the rate faith given that a lot of the wildfire mitigation seems to be running through the GRC process as well as I suppose in parallel a wildfire mitigation plan. Do you expect to get definitive kind of CapEx related updates more in the mid part of next year or are we really waiting for a GRC outcome before getting real comfort on where you are in this range. Just to be clear incremental over time obviously?

I think the incremental CapEx spending associated with the wildfire mitigation efforts roughly $700 million a year in that 2020 to 2022 period. I think we'll get a stronger signal next year as we go through the wildfire safety action plan at the commission obviously we're going have to wait for the GRC decision to finalize that overall spending level. But next year we should get a good indication of the support for the program that we're proposing.

Excellent. All right. Thank you very much.

Your next question is from Michael Lapides of Goldman Sachs. Your line is open.

Hey, guys, thanks for taking my question. Real quick on interpreting Senate Bill 901 and what costs are potentially recoverable via securitization and what are not. I get it that anything that would be inverse condemnation related would be recoverable via at least some portion of that if not all would be via recoverable securitization. What about private liability or if there any negligence related costs that come out of various lawsuits that are under way. Is that covered under 901 or is that covered separately?

Michael this is Steve Malnight. So under Senate Bill 901 what it really did was establish the customer harm threshold to apply against all costs that the utility could bear as a result of the wildfires. So it really is indifferent to the drivers. It's just the point that beyond a certain threshold, customers would be broadly harmed and therefore the better alternative past that point is securitization. So really it doesn't speak specifically about different aspects of the costs.

Okay and is there is at this point meaning or at least until you have the docket next year. There is no real way of kind of knowing or defining what is that kind of harm to all rate payers' number or level. You've got to literally go through that and have you in the commission and others kind of analyze that and come up with whatever the best estimate is for any number of years?

Yes, that's correct. The Senate Bill 901 really doesn't spell it out beyond the general direction for the commission to consider, customer harm and the inability for us to continue investing in the safety and reliability of the system, so that they left it to the commission to decide the best process and pathway and that's what the commission will be doing.

Got it. Thank you guys. Much appreciate it.

You bet.

Your next question is from Christopher Turnure with J.P. Morgan. Your line is open.

Hi, I wanted to follow-up on the fire safety or fire mitigation plans that you're going to be filing shortly with the commission. How specific do you think the plans should be or how specific do you think the CPC would want those plans in terms of milestones to achieve the exact timelines cost buckets et cetera as opposed to just one or two big numbers over the 12 or 18 month timeframe?

Yes, Chris. This is Steve Malnight again. So I think that that is the process that the commission will lay out in their scoping memo which will be coming soon. As they've laid out this process, so they'll issue the scoping memo we'll have the discussion in November we'll be filing those plans in February and they will be deciding on those plans three months after. So they've set out an aggressive timeline here. I think this would be the first time through So a big part of it will be the specifics. I should say that as you and Jason laid out in the comments, we have a very specific plan in mind in terms of what we want to go deploy and we'll be advocating for that through this proceeding as well as through the GRC. Those will align and our initial filing and the GRC filing, so the Commission will set that really soon. We'll see more on what they're going to propose.

Okay. Got it. And then my second question is on your overall capital plan and funding requirements. There's been a couple of questions on this already obviously but I think it's probably fair to assume that you view your cost of equity as being above your authorized cost of equity right now. How reasonable a source of funding is equity overall for your five year plan, given the current numbers authorized to you by the commission and your current estimate of your own cost of capital.

Yes, we've seen, we've clearly seen an increase in the in our cost of capital Chris and I think in recent transmission on a rate case that we filed with first reflects our current thinking about that elevated cost of capital, when we think broadly about sort of funding CapEx over this five year time horizon. I think what an important element of that is going to be the timely resolution of the customer harm threshold as well as the securitization of costs above that threshold. And so, our focus right now is working constructively to bring clarity to those items to lower our cost of capital so that our customers don't have to pay that elevated cost for an extended period of time. I think it's really too early to be specific or any more specific than that.

Okay, fair enough. Thank you.

Your next question is from Shahriar Pourreza with Guggenheim Partners. Your line is open.

Hey, good morning guys.

Good morning, Shahriar.

Good morning.

I know you touched a little bit on the ultimate cost to the consumer but maybe specifically honed on O&M, obviously it's a healthy amount of O&M that you guys requested in the current wildfire plan. So how should we sort of think about your O&M growth path on a go forward basis especially as we think about the rate impact given sort of the sizable capital program you presented today. I mean knowing the plans you know and obviously they'll you know somewhat change through time. Is there a way we should be thinking about your O&M growth profile?

Sure, this is Jason. I think it's too early to give a specific O&M trajectory, what I will say is as Geisha has mentioned in her comments we are laser focused on continuing to drive efficiencies in our core work. We have lowered the cost of our base O&M over the last couple of years however those reductions have been largely offset by cost increases, we're seeing with insurance costs as well as the elevated levels of vegetation management that we're proposing here. So while we've made good progress, there's more to do and we are laser-focused on continuing to execute on those long-term affordability programs for the company.

Got it. And then, just real quick from legality standpoint, the power shutoff program is leading the summary parachuting for the disruption, is this sort of any merits to these cases?

Hey, Shah, this is Geisha. I'll tell you know actually initiating that Public Safety Power Shutoff program a couple weeks ago was a very, very difficult decision. But from our point of view, it was a right one given the forecast that we have of extreme weather conditions. The real -- the real-time whether modeling that our team was doing and frankly field observations from our employees. So as we took a look at all that, there was no doubt in our mind that we have to initiate it and I would tell you if we are faced with similar conditions in the future, similar forecasts. We're going to do it again, it's as we've talked about this in the past, it's not a free play when you do a Public Safety Power Shutoff, there's clearly implications associated with doing right that, but as we look at the potential implications of another ignition associated with these extreme wildfire conditions? We've got to take the broader public safety. Sort of considerations in mind and that's what we've done. As far as litigation and whether it has merits, I'm not sure I mean, that's something that will have to play out over time, but we would do it again, we would absolutely do it again. I don't know John, if you want to comment on that.

Well, we haven't seen any claims from it yet and the CTC in the CTC will evaluate the reasonableness of our actions. We file the fairly detailed report on what that was. So we are pretty hopeful, confident that they're going to see what we saw when they read that and not overly fixated on claims at this point.

Got it. And then, Geisha you've been you've been pretty visible as far as the somewhat of the shortcomings of 901, though, it was obviously a very good start. Are you going to sit out next year as far as looking for a fix around inverse and let the state kind of digest 901 and reasonableness and or are you going to pursue a fix next year?

Well, I think that it's a -- inverse contradictions flawed, and it needs to be addressed as I've been -- as you said, very, very vocal about that. As we look at the next legislative session. I think one of the most important drivers or one of the most important activities in that will be the Blue-Ribbon Commission's work looking at wildfire issues broadly and including whether and how to socialize those costs. So we think the Blue-Ribbon Commission's work will be important and we will be engaged in that to the extent that we can be and that work is supposed to be completed in July, so will it be too late for the next legislative session? I'm not sure; it depends on how much work they've done, how much they've socialized, how much they've been able to engage with stakeholders and the legislators in particular. But we are certainly going to continue to advocate for a change, whether that be through legal court sort of system or through continued legislative process. We're going to continue to look for opportunities to change what we believe is a flawed doctrine, not really properly applied to investor owned utilities.

Terrific. Thanks, guys.

You bet.

Your next question is from Paul Patterson with Glenrock Associates. Your line is open.

Good morning, guys.

Good morning.

Good morning.

Just to follow-up on the cost of capital. Did I hear you correctly to say that it was kind of in the ballpark of what you power for transmission? That's your kind of thinking. I know there's going to be some fine tuning et cetera. But that's kind of a proxy we should be thinking about or could there be a change in equity ratio or ROE from there?

I think it's too early to be definitive, but clearly that filing with the FERC represents our current thinking on our current cost of capital and how we will approach the cost of capital proceeding with the CPC next spring. But it is early and they're going to be a number of factors that that may influence that filing.

Okay. And then, just finally following up on the affordability question that's been asked, is there a metric or a particular class of customer that we should be thinking about as being particularly sensitive? Just how should we think about that I mean if it's -- if there's any sort of direction we have yet in terms of exam? I mean, what we're talking about, I assume it's not just average rates across the system or is it. Can you give us a little bit more of a feeling for what we should be thinking about sort of the thresholds that that might be really key?

Yes, thank you for the question. And we look at customer affordability through a number of different lenses and its sort of highest sort of view, we consider sort of rate increases in line with inflation. But we also do look at share of wallet or share of disposable income for the different communities we serve. And I think really where the pressure point largely lies is more in the Central Valley, those customers who are higher users of electricity feel more of the burden of cost increases. And so that's why we're trying to work very diligently in with a lot of rigor on continuing to drive not just affordability and our efficiency and our spend, but also focusing on working with a commission on the policies that may impact those communities as well.

So could a rate design change, perhaps augment some of the issues or how should we think about the potential for rate design particularly alleviating some of the affordability issues versus actual cost cutting and what have you?

I think that, we look at these issues holistically. It's not just spent, it's the policies associated with that. I think the recent proposed decision on PCIA was a decision rather on PCIA, it was a good step in terms of minimizing the impact on some of those communities that are sort of move sensitive to rate increases. And I think as the commission looks at net energy metering. I think that's another opportunity for us to update our rate design to take more pressure off some of those communities that face the most direct pressure from customer -- rate increases.

Great, excellent.

This concludes the Q&A portion of the call. I'll now turn it back over to Chris Foster.

Thank you, Chris. I'll just wrap this up. Thanks everyone for joining us this morning on the call, and please have a safe day. Thanks very much.