Pacific Gas & Electric Co. · NYSE:PCG
Pacific Gas & Electric — PG&E Corp (Pcg, Pcg-Pa, Pcg-Pb, Pcg-Pc, Pcg-Pd, Pcg-Pe, Pcg-Pg, Pcg-Ph, Pcg-Pi) — Investor Day (March 2010)
98 slides from Pacific Gas & Electric's investor day presentation, Mar 1, 2010
Slide 1: PG&E Corporation Investor Conference
PG&E Corporation ® Investor Conference March 1, This presentation is not complete without the accompanying statements made by management on March 1, 2010. A replay is available on PG&E Corporation’s homepage at www.pge-corp.com Exhibit
Slide 2: Agenda
March 1, 2010 2:00pm - 5:00pm: Presentation • PG&E’s Investment Case Peter A. Darbee Chairman, CEO and President PG&E Corporation • PG&E’s Operational Outlook Chris Johns President Pacific Gas and Electric Company • PG&E’s Financial Outlook Kent Harvey Senior Vice President and Chief Financial Offic
Slide 3: Cautionary Language Regarding Forward-Looking Statements
Cautionary Language Regarding Forward-Looking Statements This presentation contains management’s guidance for PG&E Corporation’s 2010 and 2011 earnings per share from operations, projections of Pacific Gas and Electric Company’s (Utility) capital expenditures, rate base and rate base growth, and pro
Slide 4: PG&E's Investment Case
® PG&E’s Investment Case Peter Darbee Chairman, Chief Executive Officer and President PG&E Corporation
Slide 5: PCG: Key Takeaways
PCG: Key Takeaways We have a solid strategy - customer focus - excellence in operations - strong regulatory relations - environmentally responsible - community oriented We execute on our strategy - a proven management team - delivering consistent solid results for our customers and shareholders
Slide 6: PCG Investment Case
PCG Investment Case Excellent service at reasonable cost Constructive regulatory environment Investment in infrastructure- providing solid, regulated growth Clean generation and world-class energy efficiency programs Stable capital structure and return Reliable, growing dividend
Slide 7: Operational Excellence
mployee nolders Operational Excellence integrity and communicate honest felivering for our.
Slide 8: 2009 Report Card
2009 Report Card ** Measured by OSHA Recordable Injuries $3.21 $3.9 B 2.38 cases Earnings from Operations* Capital Expenditures 15% Reduction in Injuries** On Time, On Budget Execution $3.15 - - $3.25 $3.6 to $3.7 B 2.76 cases / 200,000 hours SmartMeter TM Gateway Generating Station Nuclear Projects
Slide 9: Analysts' Top Questions
Analysts’ Top Questions Do you foresee any change in your regulatory environment? What is the impact of the California economy on PG&E? What is the outlook for your General Rate Case? What is your long-term earnings growth trajectory?
Slide 10: CPUC and Regulation
CPUC and Regulation “No matter how one looks at it, California will have to make significant investments in transmission and power plants, be they conventional or renewable, to meet the demands of a growing population and economy.” (President Peevey, June 23, 2009) “We want to actually work with the
Slide 11: Impact of Election
Impact of Election Under a new governor, what changes?
Slide 12: State Energy Policy
State Energy Policy AB 32: Developing Implementation Plan 33% RPS: Executive Order and Legislation
Slide 13: Customer Environment
Customer Environment PG&E is sensitive to customer needs - Proposing plan to restructure residential tiers - Making customers aware of options to tiered rates - Managing revenue changes to keep average rates flat in 2011
Slide 14: Recap
Recap Our team delivers results We understand the regulatory environment and can work constructively in it We actively participate in the development of policies that will shape California’s energy future We are sensitive to our customers and the economy
Slide 15: PG&E's Operational Outlook
® Chris Johns President Pacific Gas and Electric Company
Slide 16: Focus on Safety
Focus on Safety 2008 2009 Target Actual 2.79 4.48 3.42 3.241 2.382 2.143 2.51
Slide 17: Excellence in Operations
Excellence in Operations Improved estimating tool reduced paperwork by 65% Information given to crews improved in actionable content by 60%
Slide 18: Reliability Performance
Reliability Performance Annual CAIDI* Annual SAIFI* PG&E’s performance has improved in both the frequency (SAIFI) and duration (CAIDI) of outages Target Actual **
Slide 19: Accelerated Gas Surveys
Accelerated Gas Surveys Target: Survey 1.05 million service lines on our pipeline Actual: 1.11 million service lines surveyed Result: Greater confidence in the safety and quality of our gas system
Slide 20: California Economy
California Economy PG&E’s bad debt levels stable Key Drivers: Customer Assistance Better collections Uncollectibles Expense ($MM)
Slide 21: Electric Demand
Electric Demand Electric Deliveries (in millions kWh) Forecast
Slide 22: Investment in Infrastructure
Investment in Infrastructure Gas & Electric Distribution Total Estimated Capital Spend (2010): $1.3B
Slide 23: Investment in Infrastructure
Investment in Infrastructure Electric Transmission Total Estimated Capital Spend (2010): $800 MM
Slide 24: Investment in Infrastructure
Investment in Infrastructure Natural Gas Transmission Total Estimated Capital Spend (2010): $250 MM
Slide 25: Investment in Infrastructure
Investment in Infrastructure Generation Total Estimated Capital Spend (2010): $750 MM * Does not include PV Project or Manzana Wind
Slide 26: Business Quartile
Business Quartile Overall Customer Satisfaction Index Residential Overall Customer Satisfaction Index Pua 2nd Quartile J D Power Surveys Electric Gas 7m a im 3rd Quartile Top Quartile 2nd Quartile Zi ei 2007 = 2008 »=— 2009S. 201 + 2006 2007 2008 2009 i——- #1 Fl _ 3rd Quartile mm — 2006 «62007 = 200
Slide 27: Outlook for Rates
Outlook for Rates Proposed narrowing of tier differentials to mitigate high bills Overall average rates expected to remain flat in 2011 Longer term outlook depends on price of carbon, natural gas, and renewables
Slide 28: System Average Electric Rates
System Average Electric Rates 20.0¢ 18.0¢ 16.0¢ had cpl 12.0¢ 10.0¢ f 8.0¢ (g/kWh) 6.06 4.06 @ 2.0¢ 0.0¢ 20% 4097 408% a 490% 190% a9T 4908 490% 2009 200% 9007 200 200% 400 2008 y06T mie 200% g0'° gor"
Slide 29: Residential Bills
Residential Bills Source: Edison Electric Institute, Statistical Yearbook, Year 2008
Slide 30: Customer Programs
Customer Programs Family Electric Rate Assistance (FERA): Low-to middle income households of three or more pay a lower rate for part of their electricity usage; If denied for CARE due to income level, customers are considered for FERA Breathe Easy Solutions: The California Alternative Rates for Ener
Slide 31: Energy Efficiency Programs
Energy Efficiency Programs $1.3B program budget (2010-2012) Programs for Customers Partnership with Governments $75 MM in incentive awards in 2008-09 National Recognition: EnergySTAR Sustained Excellence Award Platts Energy Efficiency Initiative of the Year EEI National Key Accounts Customer Service
Slide 32: SmartMeter Rollout
SmartMeter TM Rollout SmartMeters TM installed through 2009: 4.5 million Goal for year-end 2010: 8.0 million installed cumulative Total Installations: 10 million by mid-2012
Slide 33: Regulatory
Regulatory • General Rate Case • Gas Transmission & Storage • Transmission Owner Case Key Regulatory Cases
Slide 34: PG&E's 2007 GRC Request
PG&E's 2007 GRC Request DRA's First Filing Adoped Settlement Edison's 2009 GRC Request Edison's Final Decision @ $5.246B $4.695B $5.057B $5.199B $4.829B ($532 MM increase) ($19 MM decrease) ($251MM increase) ($871 MM increase) ($495 MM increase)
Slide 35: RPS Progress
RPS Progress Progress towards 2010 goal Pursuing all opportunities 14.5% delivered from renewable resources in 2009 Over 6,000 MW in renewables under contract at end of 2009 Getting to the Goal
Slide 36: Other 2010 Items
Other 2010 Items Diablo Canyon Relicensing Remediation of former Manufactured Gas Sites Taxpayer Right to Vote Act
Slide 37: Positioned for the Future
Positioned for the Future Excellence in Operations Improved Safety Performance Increased Productivity Higher Reliability Capital Spending “On Plan” Customer Service Options Good Customer Service at a Reasonable Cost
Slide 38: PG&E's Financial Outlook
® PG&E’s Financial Outlook Kent Harvey Senior Vice President and Chief Financial Officer PG&E Corporation
Slide 39: 2009 Financial Accomplishments
2009 Financial Accomplishments Earnings per share (from Operations): $3.21* Earned incentive revenues for successful energy efficiency programs Managed large CapEx program Strong cash flow Highlights * Reg G reconciliation to GAAP for 2009 EPS from Operations available in Appendix and at www.pge-cor
Slide 40: Cost of Capital
Cost of Capital Current mechanism extended through 2012 52% equity layer remains in place 11.35% ROE, subject to adjustment based on Moody’s bond index Providing Stability for the Future
Slide 41: Capital Expenditure Outlook
Capital Expenditure Outlook Investor Conference Forecast Range Low Case $4.0B High Case $4.6B Low Case $3.2B High Case $5.3B Low High $3.6-3.7B $3.9B $3.4 - - 3.8B $3.3 - - 4.8B Cap Ex Forecast ($B) Prior vs. Current Actual Low High
Slide 42: CapEx Forecast 2010
CapEx Forecast 2010 Capital Expenditure Forecast ($MM)* Capital Expenditure Forecast ($MM)* * Excludes tax equity investment outside of the Utility
Slide 43: CapEx Forecast 2011
CapEx Forecast 2011 Capital Expenditure Forecast ($MM) Capital Expenditure Forecast ($MM)
Slide 44: Rate Base Growth
Rate Base Growth * 2009 actual rate base reflects bonus depreciation of approximately $400 million for 2009 as well as a true-up of 2008 bonus depreciation of approximately $100 million. The current forecast ranges for 2010 and 2011 rate base reflect these same items as well as 2010 bonus depreciati
Slide 45: Future Capital Opportunities
Future Capital Opportunities Conventional Generation Renewable Generation SmartGrid Investments Energy Storage Electric Vehicle Infrastructure Transmission for Renewables
Slide 46: Energy Efficiency Incentives
Energy Efficiency Incentives Incentive Awards (pre-tax dollars $MM) $33.4 MM $41.5 MM Actual Actual High Low Case $0 MM High Case $20 MM Low Case $0 MM High Case $30 MM High
Slide 47: Impact to Cash Flow from Tax
Impact to Cash Flow from Tax Low Case $0 MM High Case $400 MM* Low Case $(10) MM High Case $340 MM * Estimate of 2010 bonus depreciation impact, but amount could vary based on actual capital additions
Slide 48: EPS Guidance
EPS Guidance $3.85 $2.95 $3.65 $3.50 $3.35 $3.21 Actual Low High Low High Earnings per Share from Operations* Earnings per Share from Operations* Actual * Reg G reconciliation to GAAP for 2008 and 2009 EPS from Operations, and 2010-2011 EPS Guidance available in Appendix and at www.pge-corp.com
Slide 49: Dividend Policy
Dividend Policy Sustainable, comparable dividend Payout ratio range of 50% - 70% Dividend growth in line with EPS growth $ 1.44 $1.68 $1.56 $1.82 $ 1.32 Annualized Dividends per Share
Slide 50: Cash Flow and Equity Needs
Cash Flow and Equity Needs Internal Equity forecasted to provide $100 to $200 MM per year (in $MM)
Slide 51: Financial Assumptions: 2010-2011
Financial Assumptions: 2010-2011 GUIDANCE REFLECTS: Capital expenditures consistent with low and high case ranges Utility earns ROE of at least 11.35% Ratemaking capital structure maintained at 52% equity CEE incentives and tax cash flow consistent with high and low case ranges Resolution of FERC ge
Slide 52: Long-Term Forecast
Long-Term Forecast • General Rate Case • Regulated Capital Opportunities • Energy Efficiency Incentive Structure • Holding Company Opportunities Key Drivers
Slide 53: PCG Investment Case
PCG Investment Case Excellent service at reasonable cost Constructive regulatory environment Investment in infrastructure- providing solid, regulated growth Clean generation and world-class energy efficiency programs Stable capital structure and return Reliable, growing dividend
Slide 54: Conclusion
® Conclusion
Slide 55: Sustaining Excellence
Sustaining Excellence years from now, the industry will be different SmartGrid will be implemented Electric Vehicles will be in the marketplace Distributed Generation will continue to increase
Slide 56: Planning Ahead: SmartGrid
Planning Ahead: SmartGrid Automation and Managing Usage Implementation of Home Area Network Opportunity for load-shifting Redundancy helps reliability
Slide 57: Planning Ahead: Electric Vehicles
Planning Ahead: Electric Vehicles Developing infrastructure Creates significant load Currently testing “smart” charging port A significant investment opportunity
Slide 58: Planning Ahead: Distributed Generation
Planning Ahead: Distributed Generation Growing rapidly in Northern California Relatively small percentage of load ( ~2%) Opportunity for further investment
Slide 59: Strategic Outlook
Strategic Outlook Investing in a “smarter” future Building on our green reputation Aligning investments with opportunities for the future
Slide 60: Notes
Notes
Slide 61: Appendix
® Appendix
Slide 62: Navigation of Key Questions
Navigation of Key Questions Do you foresee any change in your regulatory environment? What is the impact of the California economy on PG&E? What is the outlook for your General Rate Case? What is your long-term earnings growth trajectory? Slides 10-12 Slides 13, 20-21, 30 Slides 27-28, 33 -34, 43-44
Slide 63: Pacific Gas and Electric Company (PG&E)
Pacific Gas and Electric Company (PG&E) • Provides energy to approximately 15 million people • 70,000 square-mile service territory • Four main operational units: Electric and gas distribution Electric transmission Natural gas transmission Electric generation PG&E SERVICE AREA IN CALIFORNIA
Slide 64: Revenues, Net Income and Assets 2008-2009
2008 2009 Revenues | $14.628 billion $13.399 billion Consolidated Net Income $1.34 billion $1.22 billion Assets | _$40.860 billion $42.945 billion
Slide 65: Electric and Gas Distribution Business Scope
Electric and Gas Distribution Business Scope • Retail electricity and natural gas distribution service (construction, operations and maintenance) • Customer services (call centers, meter reading, billing) • 5.1 million electric and 4.3 million gas customer accounts Primary Assets • $12.4 billion of
Slide 66: Electric Transmission Business Scope
Electric Transmission Business Scope • Wholesale electric transmission services (construction, maintenance) • Operation by CA Independent System Operator Primary Assets • $3.1 billion of rate base (2009 wtd. avg.) Regulation • Federal regulation (FERC) • Cost of service ratemaking: Transmission Owne
Slide 67: Natural Gas Transmission Business Scope
Natural Gas Transmission Business Scope • Natural gas transportation, storage, parking and lending services • Customers: PG&E natural gas distribution and electric generation businesses, industrial customers, California electric generators Primary Assets • $1.5 billion of rate base (2009 wtd. avg.)
Slide 68: Electric Procurement & Owned Generation Business Scope
Electric Procurement & Owned Generation Business Scope • Electricity and ancillary services from owned and controlled resources • Energy procurement program Primary Assets • $2.8 billion of rate base (2009 wtd. avg.) • Diablo Canyon Nuclear Power Plant (2,240 MW) • Gateway Generating Station (530 MW
Slide 69: PG&E Generation in California
PG&E Generation in California Humboldt Generating Station (in construction) Colusa Generating Station (in construction) Conventional Hydroelectric facilities Gateway Generating Station Helms Pumped Storage
Slide 70: 2009 Customer Profiles - % of Sales
2009 Customer Profiles - % of Sales Electric Customers Gas Customers (822 Bcf delivered)
Slide 71: Existing Resource Mix
Existing Resource Mix Total Sources of Electric Energy
Slide 72: RPS Contracts Signed Since 2002
RPS Contracts Signed Since 2002 Over 6,000 MW in RPS Contracts
Slide 73: Greenhouse Gas Emissions
Greenhouse Gas Emissions U.S. Average (1) 1,329 California’s Average 724 2008 641 2007 636 2006 456 2005 489 2004 566 2003 620 Total 2008 Greenhouse Gas Emissions by Source Category (Total 27.1 million metric tons CO 2 -e (2) ) Benchmarking Greenhouse Gas Emissions for Delivered Electricity (Pounds
Slide 74: Regulatory Case Docket
@ "Regulatory Case Docket # |Nuclear Relicensing A.10-01-022 {TBD [2017 General Rate Case (GRC) ‘A.09-12-020 _|Final decision is requested in Q4 2010 ISmartGrid Compressed Energy Storage ‘A.09.09-019 [Final decision approving PG&E's request received on [Demonstration Project D.10-01-025 January 21,
Slide 75: Cost of Capital
Cost of Capital 52% Equity Level · 11.35% ROE · Adjustment Mechanism • Decided separately from General Rate Case • Current terms in place until • Triggers change to ROE if average Moody’s Utility (A or Baa) bond yield index over a 12 month period moves up or down by 100 basis points over benchmarks.
Slide 76: 2011 General Rate Case
2011 General Rate Case Docket # A. 09-12-020 Sets revenue requirements for Gas and Electric Distribution and Electric Generation businesses for 2011 - 2013 Revenue Requirement Request: $6.7B $1.048 billion increase $2.7B average capital expenditures per year Allows for necessary investments in energ
Slide 77: 2011 General Rate Case
2011 General Rate Case Filing includes a flexible attrition mechanism adjusting for: • labor cost adjustments • materials and services adjustments • capital related adjustments • other adjustments, such as changes in franchise, payroll or other taxes Attrition revenues are currently forecasted to be
Slide 78: FERC TO12 Filing
FERC TO12 Filing Docket # ER09-1521-000 Sets revenue requirements for PG&E’s Electric Transmission business in 2010-2011 Revenue Requirement Request: $946 million $800M Capital Expenditures Adds additional transmission capacity and performance of maintenance and replacement work on our substations i
Slide 79: 2011 Gas Transmission and Storage Rate Case
2011 Gas Transmission and Storage Rate Case Docket # A. 09-09-013 Sets revenue requirements, rates, terms and conditions for PG&E’s Gas Transmission and Storage services for 2011 - 2014 Revenue Requirement Request: $529M $67M Increase $235M Capital Expenditures Allows for upgrades to backbone transm
Slide 80: Cornerstone Improvement Program
Cornerstone Improvement Program Docket # A. 08-05-023 Sets revenue requirements aimed at improving the reliability of PG&E’s electric distribution system Request: $2.0 billion capital spend Enables installation of new substation transformers, feeders, conductors and other equipment to add capacity a
Slide 81: Solar PV Program
Solar PV Program Docket # A. 09-02-019 Sets revenue requirements to develop and own 250MW of PV and sign PPAs for an additional 250MW of PV over a five year period Request: $1.45 billion (all capital) for the Utility-owned 250MW PD issued on 01/26/2010 proposes: • development and installation of up
Slide 82: Manzana Wind Project
Manzana Wind Project Docket # A. 09-12-002 Sets revenue requirements to acquire, own, and operate the 189 - 246MW Manzana wind project in the Tehachapi region of Southern California Request: $900 million (all capital) at 246MW capacity Manzana Wind Project would be developed, designed and constructe
Slide 83: Dynamic Pricing
Dynamic Pricing Docket # A. 09-02-022 Sets revenue requirements to implement peak-day pricing and time-of-use pricing Request: $160 million spend in 2008-2010, approximately $110 in capital In February, CPUC issued revised PD approving $123 million of our request and approving default Peak Day Prici
Slide 84: Carrying Cost Credit Impacts
Carrying Cost Credit Impacts ($MM) 2010 2011 2012 Energy Recovery Bond Average Deferred Tax Balance $396 $243 $82 Estimated After-tax Carrying Cost Credit* $(23) $(14) $(5) Estimated Average Deferred Tax Balances and Carrying Cost Credit Impacts ($MM) * Estimated carrying cost credits include only t
Slide 85: ERB Amortization Schedule
ERB Amortization Schedule ($MM) 2010 2011 2012 Annual ERB Amortization $386 $404 $423 End-of-year ERB balance $827 $423 $0
Slide 86: Credit Profile
Credit Profile Current Ratings • Utility Corporate Credit/Issuer: BBB+ (S&P) and A3 (Moody’s) • Utility Senior unsecured debt: BBB+ (S&P) and A3 (Moody’s) Average Utility Metrics (2010-2012)* • S&P Business Profile Rating: Excellent • Total Debt to capitalization (EOY): 55.1% • Funds from Operations
Slide 87: 2008 EPS - Reg G Reconciliation
2008 EPS - Reg G Reconciliation EPS on an Earnings from Operations Basis* $2.95 Items Impacting Comparability** 0.68 EPS on a GAAP Basis $3.63 * Earnings per share from operations is a non-GAAP measure. This non-GAAP measure is used because it allows investors to compare the core underlying financia
Slide 88: 2009 EPS - Reg G Reconciliation
2009 EPS - Reg G Reconciliation (1) Earnings per share from operations is a non-GAAP measure. This non-GAAP measure is used because it allows investors to compare the core underlying financial performance from one period to another, exclusive of items that do not reflect the normal course of operati
Slide 89: EPS Guidance - Reg G Reconciliation
EPS Guidance - Reg G Reconciliation (1) Earnings per share from operations is a non-GAAP measure. This non-GAAP measure is used because it allows investors to compare the core underlying financial performance from one period to another, exclusive of items that do not reflect the normal course of ope
Slide 90: Officer Biographies
® Officer Biographies
Slide 91: Peter A. Darbee
PETER A. DARBEE Chairman of the Board, Chief Executive Officer and President PG&E Corporation Peter A. Darbee is Chairman of the Board, Chief Executive Officer and President of PG&E Corporation. Since becoming CEO in 2005, Darbee has spearheaded major new initiatives to establish PG&E as an industry
Slide 92: Christopher P. Johns
CHRISTOPHER P. JOHNS President Pacific Gas and Electric Company Christopher P. Johns is President of Pacific Gas and Electric Company and a member of the Utility’s Board of Directors. Johns joined Pacific Gas and Electric Company in 1996 as Vice President and Controller. Johns was named Senior Vice
Slide 93: Kent M. Harvey
KENT M. HARVEY Senior Vice President and Chief Financial Officer, PG&E Corporation Senior Vice President, Financial Services, Pacific Gas and Electric Company Kent M. Harvey is Senior Vice President and Chief Financial Officer for PG&E Corporation. Harvey oversees the financial activities of the $40
Slide 94: Tom Bottorff
TOM BOTTORFF Senior Vice President, Regulatory Relations Pacific Gas and Electric Company Tom Bottorff is Senior Vice President, Regulatory Relations, at Pacific Gas and Electric Company. Bottorff is responsible for developing, coordinating and managing policy with state and federal regulatory agenc
Slide 95: Helen Burt
HELEN BURT Senior Vice President and Chief Customer Officer Pacific Gas and Electric Company Helen Burt is Senior Vice President and Chief Customer Officer for Pacific Gas and Electric Company. An acknowledged expert in the utility industry, Burt is responsible for leading marketing, product develop
Slide 96: Fong Wan
FONG WAN Senior Vice President, Energy Procurement Pacific Gas and Electric Company Fong Wan is Senior Vice President, Energy Procurement, for Pacific Gas and Electric Company, and is responsible for gas and electric supply planning and policies, wholesale market design, quantitative analysis, power
Slide 97: Gabriel B. Togneri
GABRIEL B. TOGNERI Vice President, Investor Relations PG&E Corporation Gabriel B. Togneri is Vice President, Investor Relations for PG&E Corporation. With more than 25 years of experience in energy and finance, Togneri is responsible for providing the investment community with information about the
Slide 98: Notes
Notes