PG&E Corp

PG&E Corporation’s and the Utility’s purpose is to deliver for their hometowns, serve the planet, and lead with love. In support of this purpose, the companies employ a Lean operating model designed to drive more effective and responsive decision-making, reduce the difficulties many coworkers face in their day-to-day work, and deliver better outcomes for customers and communities.

PG&E Corporation and the Utility measure their progress toward the purpose by considering their impact on the “triple bottom line” of people, planet, and prosperity, which is underpinned by performance; this consideration takes into account not only the economic value they create for customers and investors, but also their responsibility to social and environmental goals. The triple bottom line is designed to balance the interests of the companies’ many stakeholders, and it reflects the broader societal impacts of the companies’ activities.

PG&E Corporation and the Utility will continue to consider the impact on the triple bottom line of people, planet, and prosperity in their daily operations as well as in their long-term strategic decisions. The Utility will continue to seek fair and timely regulatory treatment to support its customer-driven investment plan while pursuing cost-control measures that would allow it to maintain the affordability of its service. The Lean operating system is an important means of realizing PG&E Corporation’s and the Utility’s objective of achieving world-class performance while delivering hometown service.

People

The people element of the triple bottom line represents PG&E Corporation’s and the Utility’s commitment to their workforce, their customers, the residents of local communities in which the companies do business, and other stakeholders.

PG&E Corporation’s and the Utility’s goal is to continually reduce risk to keep customers, the communities they serve, and their workforce (both employees and contractors) safe. Their focus is on continuously building an organization where every work activity is designed to facilitate safe performance, every worker knows and practices safe behaviors, and every individual is encouraged to speak up and stop work if they see unsafe or risky behavior, and has confidence that their concerns and ideas will be heard and pursued. PG&E Corporation and the Utility are committed to significantly improving their safety performance by understanding their risks, prioritizing their work, using controls to reduce risks, and continuously measuring and improving risk reduction.

PG&E Corporation’s and the Utility’s human capital resource objectives are to build and retain an engaged, well trained, diverse, and equitably-paid workforce. PG&E Corporation and the Utility place a high priority on delivering customer value and providing a hometown customer experience. The Utility’s customer-driven investment program is aimed at improving safety, increasing electric and gas reliability, and improving customer satisfaction.

For more information, see “Human Capital” below.

Planet

The planet element of the triple bottom line represents PG&E Corporation’s and the Utility’s commitment to protect and serve the environment. This commitment extends beyond compliance with various state and federal environmental, health, and safety laws and regulations. PG&E Corporation and the Utility believe that integrating and managing climate change and other environmental considerations in the companies’ business strategies creates long-term value for PG&E Corporation and the Utility, and for their customers, communities, coworkers, and other stakeholders. Mitigating and adapting to the impacts of climate change presents opportunities for growth for the Utility’s business and economic opportunity for the communities it serves.

The Utility is committed to delivering safe, clean, affordable, and reliable energy in the face of increasingly severe and extreme climate-driven natural hazards. To build resilience to these hazards, the Utility is working to systematically integrate forward-looking climate data and tools into its decision-making. PG&E Corporation and the Utility also work with policymakers and regulators to advance effective climate change policy in California, and work directly with local governments and communities on adaptation solutions.

PG&E Corporation and the Utility are also committed to helping heal the planet. PG&E Corporation’s and the Utility’s Climate Strategy Report, which is available to the public, describes the companies’ climate goals and plans to meet those goals. To meet their longer-term climate goals, PG&E Corporation and the Utility intend to scale their efforts to decarbonize the energy system to accommodate a shift to vehicle electrification, integrate a proliferation of distributed energy resources, and achieve increased penetration of renewable energy combined with investments in the grid and energy storage.

PG&E Corporation and the Utility are also making progress on transitioning the gas system to cleaner fuels and supporting efforts to accelerate building electrification. The objective is to do so in an orderly manner to achieve a positive customer and community experience, while reducing natural gas system investments in targeted electrified communities.

The impacts of climate change on the Utility’s infrastructure are already a reality. Record-breaking extreme heat and heat waves are increasingly a regular occurrence throughout California. Peak electric loads are expected to increase with increasing temperatures due to direct impacts of ambient temperatures on equipment and direct impacts on electricity demand driven by rising air conditioning installation and usage, and increasingly driven in the future from widespread progress in adoption of strategic electrification technologies. The Utility’s assets on the coast and in or near watersheds face potential increased exposures to coastal, riverine, and precipitation-related flooding because of climate-driven changes in precipitation and sea-level rise.

Climate change will also continue to intensify the potential for wildfires throughout California. The worsening conditions across California increase the likelihood and severity of wildfires, including those where the Utility’s equipment may be alleged to be associated with the fire’s ignition. Reducing risk will be even more important as climate change continues to exacerbate the risks facing the Utility. A key element of preparing the Utility for the physical risks of climate change is an updated and more detailed system-wide CVA of the Utility’s assets, operations, and services, which the Utility expects to file with the CPUC in mid-2024. The CVA is expected to improve the Utility’s understanding of its exposure to climate hazards and the sensitivity of assets and operations to these hazards.

PG&E Corporation and the Utility continue to pursue policies and programs that enable safe, reliable, and affordable clean and resilient energy for their customers. As a result of actions already taken by PG&E Corporation and the Utility, the companies have:

•Delivered electricity to customers in 2023 that was 100% GHG free (see “Electricity Resources” below for more information).

•Helped customers avoid emissions and manage energy costs through robust energy efficiency programs.

•Managed contracts for more than 3.5 GW of battery energy storage to be deployed over the next several years and operated 183 MW of Utility-owned battery storage, strengthening California’s grid efficiency and reliability.

•Helped enable the total number of electric vehicles operating in the Utility’s service area to exceed 550,000; installed more than 475 charging ports for electric vehicles at schools, public charging locations, and in support of fleets; and launched a first of its kind vehicle-to-grid program enabling customers to leverage their electric vehicles to power their home.

•Brought the total number of interconnected private solar customers to more than 800,000 and supported more than 70,000 customers who have installed battery storage at their homes or businesses.

•Continued to advance decarbonization initiatives for the Utility’s natural gas delivery system, including meeting the CPUC-mandated methane emission reduction target ahead of schedule and accelerated initiatives to meet its voluntary 2030 reduction goal. The Utility also launched an initiative to purchase California-produced renewable natural gas for its natural gas customers, toward a target to procure renewable natural gas to serve 15% of its bundled residential and small commercial demand by 2030.

The CPUC coordinates the planning of supply resources through the Integrated Resource Planning (“IRP”) proceeding and has determined that replacing the power generated by Diablo Canyon is the responsibility of all LSEs within the CAISO. Looking ahead, the Utility expects its GHG-free energy supply mix of renewable, large hydroelectric, and nuclear generation resources to decrease as, beginning in 2023, the Utility was required to offer, for allocation or sale, renewable sources eligible under California's RPS program that the Utility procured on behalf of customers that subsequently switched to non-Utility providers. These requirements were established to comply with regulatory mandates and to manage customer affordability. Towards the end of the decade and beyond, the Utility’s GHG-free energy supply mix is expected to grow relative to 2025 levels as the Utility procures new GHG-free generation and storage to meet California’s IRP GHG emissions reduction targets and California’s clean energy goals. PG&E Corporation’s and the Utility’s voluntary goal continues to be to deliver 70% RPS clean electricity by 2030, compared to a state mandate of 60% (see “Air Quality and Climate Change” below for more information).

Prosperity

The prosperity element of the triple bottom line represents PG&E Corporation’s and the Utility’s commitment to meeting their financial objectives and providing economic development opportunities and benefits in the communities they serve. Management believes clean energy should be affordable for and inclusive of all economic backgrounds.

Under cost-of-service ratemaking, a utility’s earnings depend on the outcomes of its ratemaking proceedings and its ability to manage costs.

See “Ratemaking Mechanisms” below and “Regulatory Matters” in Item 7. MD&A for more information on specific CPUC and FERC proceedings.

Generally, differences between forecast costs and actual costs can occur for numerous reasons, including the volume of work required and the impact of market forces on the cost of labor and materials. Differences in costs can also arise from changes in laws and regulations at both the state and federal level.

PG&E Corporation and the Utility are committed to taking steps to improve their credit ratings and metrics over time, including by reducing PG&E Corporation’s debt by at least $2 billion by the end of 2026. PG&E Corporation and the Utility expect that reducing the consolidated debt will help them achieve investment grade credit ratings for their unsecured securities, for the benefit of both customers and investors. For more information, see “Liquidity and Financial Resources” in Item 7. MD&A. In 2022, an affiliate of the Utility issued an aggregate of $7.5 billion of SB 901 securitization bonds. The net proceeds were used to reimburse the Utility for previously incurred recovery costs, including the retirement of $6.0 billion of Utility debt, as of December 31, 2023.

In November 2023, the Board of Directors of PG&E Corporation reinstated the dividend on PG&E Corporation common stock, declaring a dividend of $21 million, or approximately 1 cent per share, which was paid by January 16, 2024. The Boards of Directors of PG&E Corporation and the Utility had suspended quarterly cash dividends in 2017 on both PG&E Corporation’s and the Utility’s common stock, as well as the Utility’s preferred stock. For more information, see “Liquidity and Financial Resources - Dividends” in Item 7. MD&A.

Total capital expenditures recorded in 2023 were $9.8 billion. The Utility’s total capital expenditures (including accruals) are forecasted to be $10.4 billion for 2024, $12.7 billion for 2025, $11.5 billion for 2026, $13.6 billion for 2027, and $14.0 billion for 2028. The Utility has identified additional opportunities for investment in the coming years in addition to its forecast, including investments in transportation electrification capacity, FERC-jurisdictional assets, electric distribution capacity, hydroelectric facilities, energy storage, information technology, and automation. The Utility also plans to submit a cost recovery application for its 10-year distribution undergrounding program pursuant to SB 884. Some of these investments depend on the Utility’s ability to generate or obtain the cash to support such investments over this period of time. The completion of projects, the timing of expenditures, and the associated cost recovery may be affected by permitting requirements and delays, construction schedules, availability of labor, equipment and materials, financing, legal and regulatory approvals and developments, community requests or protests, weather, and other unforeseen conditions.

The Utility expects to make additional capital expenditures, the recovery of which will be subject to future regulatory approval. These expenditures include capital expenditures exceeding amounts authorized in the 2023 GRC final decision issued on November 17, 2023, and expenditures to be included in a later filing or separate applications. These expenditures are expected to be primarily for wildfire mitigation and electrification. Additionally, $3.21 billion of fire risk mitigation capital expenditures has been excluded from the Utility’s equity base rate pursuant to AB 1054.

PG&E Corporation and the Utility are committed to finding ways to lower the cost of providing gas and electric services for customers. The Utility’s capital investment plan, increasing procurement of renewable power and energy storage, increasing environmental regulations, and the cumulative impact of other public policy requirements collectively place continuing upward pressure on customer rates. Certain CPUC proceedings could impact different types of customers differently. The Utility has set a goal to increase customer capital investments while also limiting customer bill impacts, including by achieving operating cost savings and by seeking efficient financing. The Utility plans to meet its cost reduction goal through increased efficiencies, including waste elimination through the Lean operating system. The Utility has a number of programs in place to assist low-income customers, such as the CARE program. Under the CARE program, income-qualified customers can receive a monthly discount of 20% or more on their gas and electric bill.

PG&E Corporation’s and the Utility’s Corporate Sustainability Report, which is available to the public, describes the companies’ progress toward world-class performance measured with the triple bottom line framework.

In 2022, the Utility spent $4.79 billion with certified diverse suppliers, representing 39.3% of its total spend.

Performance: Underpinning the Triple Bottom Line

PG&E Corporation and the Utility use the Lean operating system, which includes five basic “plays”: visual management; operating reviews; problem solving; standard work; and waste elimination. Visual management allows teams to see how they are performing against their most important metrics using real-time data. Teams throughout PG&E Corporation and the Utility hold daily, weekly, and monthly operating reviews designed to align the performance of workers closest to the work with the goals and objectives of senior leadership. These brief meetings help the Utility identify gaps and quickly develop plans to support the teams performing the work and give the Utility more visibility, control and predictability in its operations. Problem solving involves a structured approach to identifying, containing, analyzing, and solving problems in order to capitalize on opportunities. Standard work reduces costs and increases productivity by establishing a consistent company-wide method for completing a task. For instance, the Lean operating system helped the Utility identify patterns in the conditions of ignitions and led to the implementation of EPSS, which drove a significant reduction in facility ignitions. PG&E Corporation’s and the Utility’s performance is also driven by an increased focus on alignment of shared outcomes among its leadership and within the organization. Waste elimination, the fifth Lean play, was deployed in 2023 and enables the companies to identify and eliminate inefficiencies in both process and workflow in a sustainable manner and drive the continued adoption of consistent processes and improvements to financial visibility and controls.

In 2023, the Utility implemented PG&E’s Safety Excellence Management System, which is a more systematic approach to assess risk and evaluate or implement controls for safe operation based on industry standards.

PG&E Corporation and the Utility have implemented a regional service model to bring the Utility closer to the hometowns it serves. Through the regional service model, the Utility has restructured its service area into five regions, with leaders assigned for each region to deliver improved public and employee safety, customer service, and operational reliability outcomes.

PG&E Corporation and the Utility are committed to designing an electric system that is resilient to climate change, decarbonized, and optimized to local and system needs.

California has experienced unprecedented weather conditions in recent years and the Utility’s service area remains susceptible to additional wildfire activity. In response, the Utility has implemented operational changes and investments that reduce wildfire risk, including:

•Enhanced Powerline Safety Settings: EPSS adjusts the sensitivity of circuit protection devices on selected power lines to de-energize them in less than one-tenth of a second in the event of a disturbance to help prevent potential ignitions. After EPSS was initiated, both the size and number of CPUC-reportable ignitions were reduced substantially on EPSS-enabled circuits, compared to the prior three-year average.

•Public Safety Power Shutoffs: The PSPS program proactively de-energizes power lines in response to forecasted weather conditions. Since its inception in late 2017, the PSPS program has become more targeted through the use of more granular risk models, including incorporating more detailed data inputs. The Utility has also installed sectionalizers for more targeted de-energizations of circuits and transmission lines. These more targeted scoping criteria are engineered to reduce the number of customers impacted by any particular PSPS event. In 2023, the Utility had two PSPS events impacting a total of 5,099 customers.

•Vegetation management: The Utility inspects its overhead electric distribution and transmission facilities on an annual basis to identify and clear vegetation that might grow or fall into utility equipment. The Utility is also increasing oversight and engagement with the contractors supporting vegetation management work.

•Asset inspections: Since 2018, the Utility has reoriented its asset inspections programs toward asset condition and consequence risk, particularly wildfire risk, and these programs have become more thorough, standardized, digitized, and verifiable. The Utility uses risk-informed inspection cycles. In 2023, the Utility continued to refine its risk modeling, including further incorporating data from asset inspections. As a result of the improved inspection program, the Utility’s inspections in recent years have begun to more thoroughly identify equipment conditions.

•System hardening: System hardening entails repairing, replacing, or eliminating existing power lines in HFTDs and installing stronger and more resilient equipment. As the Utility’s asset inspections have identified more equipment conditions, the Utility has hardened its system by correcting significantly more equipment conditions than in prior years. Hardening methods also include replacing bare overhead conductor with covered conductor and installing stronger poles, removing lines, and serving customers through remote grids, or converting lines from overhead to underground. The Utility has set a goal to underground 10,000 miles of electric distribution lines in high wildfire risk areas. Undergrounding can substantially reduce ignition risk and improve reliability during storms or periods of high wildfire risk. In 2023, the Utility undergrounded 364 miles of lines, nearly double the number of miles undergrounded in 2022. Remote grids can also reduce costs and fire risks, while maintaining service to participating customers. The Utility brought online two additional “remote grids” in 2022, which allow distribution lines in HFTDs to be removed and replaced with locally sited resources.

The Utility’s equipment was not involved in the ignition of any catastrophic wildfires in 2023. The Utility also significantly reduced both the size and number of CPUC-reportable ignitions and number of acres burned in 2023, compared to prior years.

In 2023, the Utility introduced or expanded its use of several measures including downed conductor detection, partial voltage force outs, and transmission operational controls which further decreased wildfire ignition risk. These measures built on the Utility’s progress in 2022, when it expanded the EPSS program to all high fire risk areas. In addition, the Utility uses multiple weather models on a daily basis that indicate which circuits to enable with safety settings and which to put in normal protection settings, optimizing for wildfire risk reduction when needed and enhancing reliability when wildfire risk is low. In 2022, the Utility reviewed and adjusted settings to improve coordination among devices on a circuit to reduce the number of customers impacted by an outage. In 2022 and 2023, the Utility took additional steps to improve customer reliability through several targeted programs, including vegetation management activities to reduce vegetation caused outages, upgrading the system to improve sectionalization, and installing fault indicators to reduce restoration times.

PG&E Corporation and the Utility are continuing to invest in a safe and reliable gas system and are working toward targeted electrification, greening the gas supply, and shaping California energy policy. The Utility has focused on continuously improving its gas operations safety record. Since the San Bruno natural gas pipeline explosion in 2010, the Utility’s asset safety efforts have included replacing distribution mains and transmission pipelines, as well as strength testing transmission pipelines. The Utility uses in-line inspections to assess the integrity of transmission pipelines. The Utility also uses safety and control systems to monitor, gather, and process real-time data on its gas system. The Utility’s gas system has not had a safety-related incident that affected the public and resulted in a fatality or injury since 2015 or 2018, respectively. In 2023, the NTSB confirmed that the Utility had successfully addressed all 12 safety recommendations relating to the San Bruno explosion.

The Utility has engaged in educating employees, contractors, and the public regarding safe digging programs and practices for their awareness during construction and when digging near the Utility’s underground gas and electric assets. The Utility also installed safety devices that automatically detect increasing pressure on systems and stop the flow of gas to avoid outages and overpressure events. Additionally, the Utility continues to streamline its efforts to respond to outages on a timely basis. The Utility’s outage response is designed to keep the public safe while limiting customer outages and returning service safely and as quickly as possible.

The Utility’s generation operations have focused on safety and reliability. Winter precipitation and snowpack provided fuel for increased hydro generation in 2023, exceeding the 15-year average. The Utility is focused on continuous improvement of asset management and work management systems to support comprehensive non-nuclear generation asset management. The goal of these efforts is to further improve project execution capabilities and capacity to deliver on asset improvements necessary for long-term safe and reliable generation.