PG&E's CEO Discusses Q4 2011 Results - Earnings Call Transcript


Q4 2011 Earnings Call

February 16, 2012 11:30 am ET


Gabriel B. Togneri - Vice President of Investor Relations

Anthony F. Earley - Chairman, Chief Executive Officer and President

Christopher P. Johns - Former President and Director

Nickolas Stavropoulos - Executive Vice President of Gas Operations

Kent M. Harvey - Chief Financial Officer, Senior Vice President, Treasurer and Senior Vice President of Financial Services - Pacific Gas & Electric Company

Thomas E. Bottorff - Senior Vice President of Regulatory Relations-Pacific Gas & Electric Company


Dan Eggers - Crédit Suisse AG, Research Division

Greg Gordon - ISI Group Inc., Research Division

Paul Patterson - Glenrock Associates LLC

Jonathan P. Arnold - Deutsche Bank AG, Research Division

Steven I. Fleishman - BofA Merrill Lynch, Research Division

Hugh Wynne - Sanford C. Bernstein & Co., LLC., Research Division

Michael J. Lapides - Goldman Sachs Group Inc., Research Division

Travis Miller - Morningstar Inc., Research Division

Andrew Levi - Caris & Company, Inc., Research Division



Good morning, and welcome to the PG&E Corporation Fourth Quarter Earnings Conference Call. [Operator Instructions] At this time, I would like to introduce your host, Mr. Gabe Togneri. Thank you, and have a good conference. You may proceed, Mr. Togneri.

Gabriel B. Togneri

Good morning, everyone. So let me provide the usual upfront remarks. Our comments today will include forward-looking statements based on assumptions and expectations reflecting information currently available to management. Some of the important factors that could affect our results are described at the front of today's slide. We also encourage you to review the more fulsome discussion of risk factors that appear in our 2011 annual report that will be filed as an exhibit to the Form 10-K with the SEC later today.

This morning's speakers are Tony Earley, Chris Johns, Nick Stavropoulos and Kent Harvey. Other members of the team are also here to participate in the Q&A. And with that, I'll hand it over to Tony.

Anthony F. Earley

Thank you, Gabe, and thank you all for listening in today. Since this is only my second quarterly earnings call, I think I'm still enough of a newcomer to share some of my observations of the company before we get to the heart of our discussion this morning.

At our last earnings call, I made several points about what we had done to start to transform PG&E. And we had hired a lot of top-tier talent to supplement the strong core of PG&E veterans that we have. We made organizational changes that established clear lines of accountability for our gas and electric businesses. We put a strong emphasis on operational excellence, and we made a commitment of resources to turn the business around, and, ultimately, to make our operations the safest in the country. So with the benefits of a few more months on the job, let me add a couple more observations.

Our team understands that public safety is our highest priority, and we're now rolling out technologies to get us there. They understand that the focus is on back-to-basics, that we have to be -- have to focus on benchmarking and to put in place a continuous improvement program. Most of all, the team understands that we have to deliver. We know the areas we need to improve on, and we've got a solid foundation from which we can execute. And that's significant because it means that in contrast to where we were just 7 or 8 months ago, we now have a very real opportunity in 2012: first, to truly tackle and resolve our gas issues; second, focus on repositioning PG&E for long-term success; and third, rebuild relationships with key stakeholders. And that is exactly what our executive team is focused on.

So let me start with the first point, the gas issues. The new gas organization we put in place last year has delivered on our key commitments and made impressive progress in 2011. And Chris and Nick will give you the update on the details in just a couple of minutes. What you'll hear is that we still got an extremely demanding amount of work ahead in 2012. Much of this falls under our Pipeline Safety Enhancement Plan. It's work that is critical to meeting the new pipeline safety standards being adopted by the CPUC and in Congress. It's also essential to resolving the San Bruno issues and rebuilding public trust and confidence in the company. At the same time, it's important to distinguish between the work that was necessary to close the gaps in our past performance and work that's newly required going forward.

Our Pipeline Safety Enhancement Plan is largely new work for a new world, where the CPUC is setting future safety standards at a higher level than ever before. With minor exceptions, it's not all work to meet yesterday's standards as some have claimed. To avoid confusion, we've already asked the CPUC to separate the review of the appropriateness of the plan over the issue of who should pay for the plan.

You've seen our press release this morning that although we're maintaining our guidance from earnings from operations, we've updated our outlook for 2012 pipeline costs. The update reflects our current understanding of our cost based on the experience that we gained in the field last year. We've also made some conservative assumptions about the timing of the CPUC's ruling on our safety plan. Let me underscore that we're going to continue to work hard to accelerate a decision on a safety plan and to resolve all of the gas-related proceedings at the commission.

Reaching as much clarity and closure as we can on the regulatory and legal fronts in doing so as soon as we can is a top priority for our team, and we know it's a top priority for our investors as well. Shareholders have stepped up and are bearing substantial cost to address past issues, and it's important that regulators recognize this when it comes time to make a decision on cost for work going forward, and we will urge them to take that into account.

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