PG&E Corp

RESULTS OF OPERATIONS

The following discussion presents PG&E Corporation’s and the Utility’s operating results for 2023 and 2022. See “Key Factors Affecting Financial Results” above for further discussion about factors that could affect future results of operations.

See “Results of Operations” in Item 7 of the 2022 Form 10-K for discussion of results of operations for 2022 compared to 2021.

The consolidated results of operations consist primarily of results related to the Utility, which are discussed in the “Utility” section below. The following table provides a summary of net income (loss) available for common shareholders:

PG&E Corporation’s net loss primarily consists of income taxes and interest expense on long-term debt. The decrease in PG&E Corporation’s net loss is primarily due to losses recorded in connection with the Wildfire-Related Securities Claims in 2022, with no comparable charges in 2023.

Utility

The table below shows the Utility’s Consolidated Statements of Income for 2023 and 2022. In general, expenses the Utility is authorized to pass through directly to customers (such as costs to purchase electricity and natural gas, as well as costs to fund public purpose programs) and the corresponding amount of revenues collected to recover those pass-through costs do not impact net income.

Operating Revenues

The Utility’s electric and natural gas operating revenues increased by $2.7 billion, or 13%, in 2023 compared to 2022. These increases were primarily due to:

•approximately $1.5 billion in increased base revenues authorized in the 2023 GRC in 2023;

•approximately $740 million in revenues authorized in the 2021 WMCE proceeding (see “2021 WMCE Application” below) in 2023;

•approximately $585 million in revenues authorized in the 2020 WMCE proceeding in 2023;

•approximately $550 million in interim rate relief authorized in the 2022 WMCE proceeding (see “2022 WMCE Application” below) in 2023;

•an increase of approximately $360 million in revenues to recover the costs associated with RUBA in 2023. These revenues and associated costs are passed through to customers and do not impact net income. (See Note 3 of the Notes to the Consolidated Financial Statements in Item 8); and

•additional revenues as authorized through the FERC formula rate in 2023.

•a decrease in revenues to recover the cost of electricity procurement (which decreased by approximately $310 million), the cost of natural gas (which decreased by approximately $350 million) and the cost of public purpose programs (which decreased by approximately $70 million). These costs are passed through to customers and do not impact net income. (See “Cost of Electricity” and “Operating and Maintenance” below);

•the recognition of approximately $310 million in revenues related to the settlement agreement for the 2018 CEMA application (see “2018 CEMA Application” in Regulatory Matters in the 2022 Form 10-K) in 2022;

•a decrease of approximately $270 million in revenues to recover the costs associated with RTBA in 2023. (See Note 3 of the Notes to the Consolidated Financial Statements in Item 8); and

•the recognition of approximately $180 million in revenues related to the final decision approving $356 million in revenue requirements for capital expenditures incurred in the period from 2011 through 2014 for its gas transmission and storage system (see “2015 Gas Transmission and Storage Rate Case” in Regulatory Matters in the 2022 Form 10-K) in 2022.

Cost of Electricity

The Utility’s cost of electricity includes the cost of power purchased from third parties (including renewable energy resources), fuel and associated transmission costs used in its own generation facilities, fuel and associated transmission costs supplied to other facilities under power purchase agreements, costs to comply with California’s cap-and-trade program, and realized gains and losses on price risk management activities. See Note 10 of the Notes to the Consolidated Financial Statements in Item 8. Cost of electricity also includes net energy sales (Utility owned and third parties’ generation) in the CAISO electricity markets and directly with third parties. The Utility’s total purchased power is driven by customer demand, net CAISO electricity market activities (purchases or sales), the availability of the Utility’s own generation facilities (including Diablo Canyon and its hydroelectric plants), and the cost-effectiveness of each source of electricity.

The cost of electricity decreased by $313 million in 2023 as compared to 2022. This was primarily the result of decreased customer demand volumes for the Utility’s bundled electric services, lower purchased power quantities due to contract expirations and higher net energy sales. These decreases were partially offset by increased fuel costs due to higher natural gas prices occurring in early 2023.

Cost of Natural Gas

The Utility’s cost of natural gas includes the costs of procurement, storage and transportation of natural gas, costs to comply with California’s cap-and-trade program, and realized gains and losses on price risk management activities. See Note 10 of the Notes to the Consolidated Financial Statements in Item 8.

The cost of natural gas decreased by $346 million in 2023 as compared to 2022. This was primarily due to favorable price risk management results during the high natural gas price period in early 2023. This decrease was partially offset by an increase in cap-and-trade program compliance costs in 2023.

Operating and Maintenance

The Utility’s operating and maintenance expenses increased by $2.2 billion, or 22%, in 2023 compared to 2022. These increases were primarily due to:

•the recognition of approximately $485 million in previously deferred expenses as a result of the 2023 GRC in 2023;

•the recognition of approximately $720 million in previously deferred expenses authorized in the 2021 WMCE proceeding (see “2021 WMCE Application” below) in 2023;

•the recognition of approximately $420 million in previously deferred expenses authorized in the 2020 WMCE proceeding in 2023;

•the recognition of approximately $550 million in interim rate relief authorized in the 2022 WMCE proceeding (see “2022 WMCE Application” below) in 2023;

•an increase of approximately $360 million in costs associated with RUBA in 2023. These costs are passed through to customers and do not impact net income. (See Note 3 of the Notes to the Consolidated Financial Statements in Item 8); and

•the recognition of $50 million in expenses in 2023, related to the civil stipulated judgement filed on May 31, 2023, by the Utility and the Shasta County District Attorney’s Office (“Shasta D.A.”) for the Shasta D.A. to dismiss with prejudice all criminal charges against the Utility in connection with the 2020 Zogg fire.

•a decrease of approximately $350 million in insurance costs related to the Utility’s adoption of self-insurance;

•the recognition of approximately $310 million of previously deferred expenses, which were authorized by the settlement agreement for the 2018 CEMA application (see “2018 CEMA Application” in Regulatory Matters in the 2022 Form 10-K) in 2022;

•the recognition of $85 million in expenses related to the Kincade SED Settlement (as defined in Note 15 of the Notes to the Consolidated Financial Statements in Item 8 of the 2022 Form 10-K) in 2022;

•the recognition of $77 million in charges as a result of its voluntary separation program in 2022;

•the recognition of $55 million in expenses related to the Kincade Stipulation and the Dixie Stipulation (each as defined in Note 15 of the Notes to the Consolidated Financial Statements in Item 8 of the 2022 Form 10-K) in 2022;

•a decrease of approximately $70 million in pass-through costs related to public purpose programs in 2023. These costs are passed through to customers and do not impact net income (see “Operating Revenues” above); and

•increased operating cost efficiencies in 2023.

SB 901 Securitization Charges, Net

The Utility’s SB 901 securitization charges, net increased by $659 million, or 108%, in 2023 compared to 2022. These increases were due to the recognition of $1.3 billion in net SB 901 securitization charges, primarily representing the amounts that are refundable to ratepayers as a result of tax benefits realized within income tax expense related to the Fire Victim Trust’s sale of PG&E Corporation common stock in 2023, compared to charges of $608 million in 2022. For more information, see Note 5 of the Notes to the Consolidated Financial Statements in Item 8 below.

Wildfire-Related Claims, Net of Recoveries

Costs related to wildfires decreased by $173 million, or 73%, in 2023 compared to 2022. The Utility recognized pre-tax charges of $225 million related to the 2019 Kincade fire, $100 million related to the 2022 Mosquito fire, $25 million related to the 2021 Dixie fire, and $25 million related to the 2020 Zogg fire in 2022. These charges were partially offset by $95 million of probable recoveries through insurance and the WEMA related to the 2022 Mosquito fire and $25 million in probable recoveries through the Wildfire Fund related to the 2021 Dixie fire. The Utility recognized pre-tax charges of $425 million related to the 2021 Dixie fire and $100 million related to the 2019 Kincade fire in 2023. These charges were partially offset by $425 million of probable recoveries through the Wildfire Fund, insurance, and the WEMA related to the 2021 Dixie fire.

In addition to the probable wildfire-related recoveries noted above, the Utility has recorded $99 million of probable recoveries through FERC TO formula rates, which are recorded as a reduction to regulatory liabilities and are not captured in wildfire-related claims. See Item 1A. Risk Factors and Note 14 of the Notes to the Consolidated Financial Statements in Item 8.

Wildfire Fund Expense

The Utility’s Wildfire Fund expense increased by $90 million, or 19%, in 2023 compared to 2022. These increases were primarily due to accelerated amortization of the Wildfire Fund asset recorded in 2023 as a result of the $425 million Wildfire Fund receivable accrued in relation to the 2021 Dixie fire, with no similar amounts recorded in 2022. See Note 2 and Note 14 of the Notes to the Consolidated Financial Statements in Item 8.

Depreciation, Amortization, and Decommissioning

The Utility’s depreciation, amortization, and decommissioning expenses decreased by $118 million, or 3%, in 2023 compared to 2022. These decreases were primarily due to a reduction in nuclear and gas storage decommissioning expenses as a result of the 2021 NDCTP and 2023 GRC final decisions. Depreciation expense due to plant growth was mostly offset by lower depreciation rates authorized in the 2023 GRC final decision.

Interest Income

The Utility’s interest income increased by $431 million, or 266%, in 2023 compared to 2022. These increases were primarily due to higher interest rates earned on regulatory balancing accounts.

Interest Expense

The Utility’s interest expense increased by $827 million, or 50%, in 2023 compared to 2022. These increases were primarily due to the issuance of additional long-term debt, an increase in interest rates on variable-rate debt and an increase in interest rates associated with regulatory balancing accounts.

Other Income, Net

The Utility’s other income, net decreased by $302 million, or 51%, in 2023 compared to 2022. These decreases were primarily due to pension and other post-retirement benefit costs that fluctuate primarily from market and interest rate changes.

Income Tax Benefit

The Utility’s income tax benefit increased by $255 million, or 21%, in 2023 compared to 2022. These increases were primarily due to a benefit recognized related to the Fire Victim Trust’s sale of PG&E Corporation common stock in 2023.

The following table reconciles the income tax expense at the federal statutory rate to the income tax provision:

(1)Includes the effect of state flow-through ratemaking treatment and the effect of the grantor trust election.

(2)Includes the effect of federal flow-through ratemaking treatment for certain property-related costs. For these temporary tax differences, the Utility recognizes the deferred tax impact in the current period and record offsetting regulatory assets and liabilities. Therefore, the Utility’s effective tax rate is impacted as these differences arise and reverse. The Utility recognizes such differences as regulatory assets or liabilities as it is probable that these amounts will be recovered from or returned to customers in future rates. The amounts also reflect the impact of the amortization of excess deferred tax benefits to be refunded to customers as a result of the TCJA.

(3) Includes the tax effect of the Fire Victim Trust’s sale of PG&E Corporation common stock. See “Tax Matters” above and Note 6 of the Notes to the Consolidated Financial Statements in Item 8.

Nuclear Operations

Capacity factors, which are significantly affected by the number and duration of refueling and non-refueling outages, reflect the availability of Diablo Canyon’s generation to the California electricity market and impact the Utility’s performance-based disbursements. For more information, see “Extension of Diablo Canyon Operations” below. Management analyzes capacity factors by comparing Diablo Canyon’s actual generation to forecasted annual capacity factors, which reflect planned refueling outages, curtailments for condenser cleaning, allowances for minor curtailments resulting from equipment issues, and curtailments for major ocean storms.

The Utility manages its scheduled refueling outages with the objective of minimizing their duration and maintaining high nuclear generating capacity factors, resulting in a stable generation base for the Utility’s wholesale and retail power marketing activities. During scheduled refueling outages, the Utility performs maintenance and equipment upgrades to minimize the occurrence of unplanned outages and to maintain safe, reliable operations. For the years ended December 31, 2023 and 2022, Diablo Canyon achieved an average capacity factor of 90%.

In addition to the maintenance and equipment upgrades performed by the Utility during scheduled refueling outages, the Utility has extensive operating and security procedures in place to assure the safe operation of Diablo Canyon. The Utility also has extensive safety systems in place designed to protect the plant, personnel, and surrounding area in the unlikely event of an accident or other incident.