PG&E Corporation (PCG)
Q2 2010 Earnings Call Transcript
August 4, 2010 1:00 pm ET
Gabe Togneri – VP, IR
Peter Darbee – Chairman, CEO and President
Chris Johns – President, Pacific Gas and Electric Company
Kent Harvey – SVP and CFO
Greg Gordon – Morgan Stanley
Hugh Wynne – Sanford Bernstein
Jonathan Arnold – Deutsche Bank
Daniel Eggers – Credit Suisse
Michael Lapides – Goldman Sachs
Lasan Johong – RBC Capital Markets
Paul Fremont – Jefferies
Ashar Khan [ph] – Visium Asset Management [ph]
Winfried Fruehauf – W. Fruehauf Consulting Limited
Good afternoon and welcome to the PG&E Corporation Second Quarter Earnings 2010 Conference Call.
At this time, I would like to introduce your host, Gabe Togneri, with PG&E Corporation. Thank you and have a good conference. You may proceed, Mr. Togneri.
Thanks, Monique, and welcome everyone to our earnings call. Leading the discussion today will be Peter Darbee, Chairman, CEO, and President of PG&E Corporation; Chris Johns, President of Pacific Gas and Electric Company and Kent Harvey, Senior Vice President and CFO of the Corporation. Also joining us are other members of the team who will be available for Q&A.
I will remind you that our discussion today will include forward-looking statements based on assumption and expectations reflecting information currently available for management. Actual results may differ materially from our forward-looking statements.
Important factors that can affect actual results are described in the reports we file with the SEC, including the risk factors and other factors that are described in our Annual Report on Form 10-K for the year ended December 31, 2009 and our Form 10-Q reports, and obviously we recommend that you look at and refer those reports.
We will be filing our 10-Q report for the quarter later today and the earnings release that we issued this morning is available on our Web site along with the supplemental earnings table including the Reg G reconciliations. You will probably want to refer to that supplemental information as we go through the results for the quarter.
Now, I’ll turn the call over to Peter Darbee.
Thanks, Gabe, and thank you all for joining us this morning. We appreciate your continued interest in PG&E and this morning we are pleased to reporting another solid quarter.
Earnings from operations came in at $0.91 per share compared with $0.83 per share in last year’s second quarter. These results keep us on track with our 2010 plan and as a consequence, we are also pleased to be reaffirming our guidance for 2010 and 2011.
Kent will provide the details behind the quarter’s financial results in a few moments, but before doing so I would like to add that in addition to the solid financial performance, we also continued to see encouraging progress on a number of high priority areas.
Specifically, these areas include mitigating rate impacts, strengthening reliability and investing in renewables, all of which directly support our goal of providing customers with clean, safe, reliable service at a reasonable cost.
Before we go into the examples, let me make a key point. Obviously, we can’t achieve these goals alone. Constructive relationships with our key stakeholders is essential. In the post Prop 16 period, we’re reaching out to policymakers and regulators and others to rebuild any strange relationships.
We are also redoubling our efforts to focus on customers and making sure we are serving their needs. These include ongoing operational improvements to increase reliability. It additionally includes enhancing our customer outreach in communications and then finally, it includes working to ease rate impacts, which is especially important given the tough economy people are faced with today.
Let’s turn to some key examples of the progress I have mentioned and let’s start with rates. We’re sponsoring important changes to rates where they are needed most. The first of these changes occurred on June 1 with a $400 million reduction in electric rates. This benefits customers across the board. For the average customer, it translates into a 3% rate decrease. For customers in the higher residential tiers, the savings are even greater.
Another example of our work on rates is the general rate case. Even with our full request in the GRC, we don’t expect overall electric rates to increase. This will allow us to continue to invest in infrastructure and reliability.
It will also help with California jobs in the economy because we’ll be investing billions of dollars of capital each year to improve the electric and gas infrastructure within the state. We can achieve this win-win because of several significant rate components that will be dropping off in 2011.
Lastly, on Phase II of the GRC next year, we propose to reduce rates in the highest tiers even further. This would bring down our top rates to be more in line with the other California utilities. In addition to the positive developments regarding rates, we are encouraged by the good progress that’s been made in some other important regulatory proceedings this year.
Now, I am going to turn it over to Chris, who will cover these additional examples in some detail.
Thank you, Peter. Today, I plan to provide an update on our key regulatory developments in the quarter and briefly cover a couple of operational items. I’ll begin with our 2011 general rate case where we recently completed four weeks of hearings that largely went as expected. A number of different interveners groups are involved in the case including the DRA and TURN.