PG&E Corporation (PCG) Q3 2021 Earnings Call Transcript

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PG&E Corporation (PCG 1.87%)
Q3 2021 Earnings Call
Nov 1, 2021, 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings. Thank you for standing by and welcome PG&E Corporation Third Quarter 2021 Earnings Call.

I would now like to turn the conference over to Matt Fallon, Senior Director of Investor Relations. Please go ahead.

Matt Fallon -- Senior Director of Investor Relations

Thanks, Jenny. Good morning, everyone and thank you for participating in PG&Es third quarter earnings call. Joining us today are Patti Poppe, our Chief Executive Officer; and Chris Foster, Executive Vice President and Chief Financial Officer.

I want to remind you that today's discussion will include forward-looking statements about our outlook for future financial results. These statements are based on assumptions, forecasts, expectations and information currently available to management. Some of the important factors that could affect the Company's actual financial results are described in the second page of today's third quarter earnings call presentation. The presentation also includes a reconciliation between non-GAAP and GAAP measures. The presentation can be found online along with other information at investor.pgecorp.com.

We also encourage you to review our quarterly report on Form 10-Q for the quarter ended September 30, 2021. Before I hand it over to Patti, would like to thank all of you who attended Investor Day either in person or virtually and we look forward to seeing you again at the [Technical Issues].

Patricia K. Poppe -- Chief Executive Officer

Thanks, Matt. Hello, everybody. Thank you for joining us today. This quarter, we delivered non-GAAP core earnings of $0.24 per share. We are reaffirming our 2021 non-GAAP core earnings per share guidance of $0.95 to $1.05, and we no longer expect to issue equity in 2021. We continue to see rate base growth of 8.5% and longer-term earnings-per-share growth of 10%. Chris will provide more details on the financials in just a bit.

As you saw at Investor Day, our experienced team is driven and focused on delivering clean energy safely every day. We have a very sophisticated and continually improving PSPS algorithm year-over-year. In fact, when we backcast our current model to the previous utility caused fires between 2012 and 2020, we would have prevented 96% of the structure damage had the current model been in place. This year, we also implemented enhanced power line safety settings to address wildfire risk we faced from extreme drought conditions.

In fact, since the end of July through mid-October, we saw 46% decrease in CPUC reportable ignitions in high fire threat districts and an 80% reduction in ignitions on enabled circuits. These enhanced safety settings make our system and our customers safer. We're delivering on the 2021 wildfire mitigation plan with our lean operating system and deploying it across the entire Company to deliver predictable outcomes for customers and investors. In addition to quarterly operational, financial and regulatory updates, I'd like to spend some time on the work done and the changes made since 2019 that make our system safer and more resilient.

Let's start on slide 4, with how we've improved our PSPS program since 2019. In 2019, we had seven events that impacted over 2 million customers. Since then, we've installed approximately 1,300 weather stations, 500 high definition cameras and over 1,100 sectionalizing devices to better pinpoint exactly where we need to initiate PSPS. Our 2021 PSPS algorithms are informing -- are informed by more granular weather forecasting and we're using Technosylva software to incorporate machine learning into our fire spread modeling, so we can better predict where the risk is on our system in real time. Our continuous improvement approach applies to addressing safety risks while minimizing disruption to our customers.

As you can see on slide 5, our model shows that by backcasting our new 2021 PSPS algorithm on to 2012 through 2020, we would have prevented 96% of the structure damage from fires caused by overhead electrical equipment in our service area. As you know, this year, we experienced extreme drought conditions in our service area. Due to these conditions, we saw fire spread on non-red flag warning days. We assess these risks and identified where we needed to focus. Guided by former CAL FIRE and local fire authority personnel who now work for PG&E, we implemented additional wildfire mitigation in our high fire threat areas. You can see the results of our safety focus on slide 6. We've compared the data since we implemented our enhanced powerline safety settings against the most recent three-year averages. What we've seen is a 46% reduction in CPUC reportable ignitions in our high fire threat districts from the end of July through mid-October.

On the specific circuits where we first implemented the enhanced powerline safety settings, we've seen an 80% decrease in ignitions over the same time period. We're working hard to reduce the customer impact from these new necessary protocols. We've optimized our protective device settings on all circuits that have enhanced powerline safety settings and we've adjusted our circuit restoration procedures. These enhancements are making outages smaller and faster to restore, while still removing the ignition risk. We're communicating transparently, our commitment to preventing fires of consequence to communities where enhanced powerline safety settings are in place. Let me make it real with one story.

On Monday, October 11, we initiated a PSPS event that affected about 20,000 people. The wins came in as forecasted, and in 33 instances, outside of the PSPS zones and the highest wind areas, our lines automatically de-energized due to the unpredictable disturbances and potential risk was mitigated. We know our protocols are working. We will continue to work around the clock to make these solutions less disruptive to customers and know that we are keeping them safe while we do that. Our experience since implementing these settings in late July will serve as an important guide for our 2022 planning. As we continue to keep people safe each day, I want to talk a bit about the risk reduction work we've completed since 2019.

Let's start on slide 7 with our enhanced inspection. As you can see, we're on track to complete our enhanced inspections on 0.5 million assets in 2021 in our high fire threat areas. These inspections are scheduled to be conducted every year on all assets in Tier 3 and every three years for all assets in Tier 2. At the bottom of this slide, you'll see a couple of points on our routine inspection program. We get a lot of attention internally, but really isn't well known outside of PG&E. As you can see in the green box, we conduct vegetation management inspections across our entire system annually and in high fire threat areas, we patrol those conductors twice a year. In 2021, we plan to complete 1800 miles of enhanced vegetation management work, combined with what we completed in 2019 and 2020 adds up to over 6,000 miles by the end of this year.

While we are focused on keeping people safe with inspections and vegetation management, we're also focused on the longer-term hardening of our system. In the last three months, we've made great progress against our multi-year 10,000 mile undergrounding program. Our engineering team is scoping out the work as you'll begin to see in our 2022 wildfire mitigation plan. Our goal is to engage the entire community around the imperative of undergrounding and we are succeeding. We are engaging stakeholders through undergrounding advisory group with representatives from environmental groups, labor, telecom, consumer advocacy groups, county tribes among others. And we're gathering ideas on innovations in engineering, equipment and construction from the world's best through our RFI process.

We're continuing to work on system hardening as you can see here and we'll provide an update on how we're thinking about that work as we further develop our undergrounding program. As a sneak peek, I'll share one project we completed this year. In September, we completed undergrounding powerlines in Santa Rosa, which resulted in 11,000 customers who will no longer be impacted by PSPS. This is one of many projects. This is the right solution for our customers in that area and that's why we did it. Simple solutions based on customer needs. As I mentioned, more to come on our undergrounding plans as we move into early 2022. At PG&E, effective implementation of our wildfire mitigation plan is enabled by our lean operating systems, which we're deploying across the entire Company. Every day, we have over 1200 daily operating reviews beginning with our crews closer to the work first thing in the morning and cascading to our executive operating review. These brief 15-minute huddles provide daily visibility on the metrics that matter most, help us identify gaps and quickly develop plans to support our teams closer to our customers giving us control and predictability of our operations.

As you know, this summer, we were challenged by the Dixie fire and the impact of fire had on all of our customers. I'll repeat what we said since Investor Day, our actions around Dixie were those of a reasonable operator and we're confident in the framework created by AB 1054. AB 1054 resulted in a wildfire fund to provide liquidity for resolved claims, a maximum liability cap for reimbursement by investor-owned utilities and enhanced prudency standards when determining that reimbursement amount. We're reflecting that view in our financial statements which show a gross charge of $1.15 billion. We booked an offsetting $1.15 billion receivable that reflects our confidence to recover costs.

As I highlighted, PG&E is working hard every day to deliver clean energy safely. We're building on the mitigation programs we started in 2019. We're staying nimble to respond to current conditions. And we are improving our performance enterprisewide. For example, our team just last week responded to an atmospheric river weather event that included among the highest rainfall totals observed in a 48 hour timeframe ranging from 16 inches at Mount Tam [Phonetic] to 5 inches in downtown Sacramento. The strongest wind gust recorded was 92 miles per hour from Mines Tower in Alameda County with at least a dozen other locations experiencing gust greater than 69 miles per hour. Even in the face of these difficult conditions, we completed our work without any serious safety incidents while returning service to 632,000 of the 851,000 customers impacted within 12 hours. I am very proud of the safe and rapid response of our team.

Now, I'll hand it over to Chris to cover financial and regulatory items.

Chris Foster -- Executive Vice President and Chief Financial Officer

Thank you, Patti. As Patti referenced earlier, our financial plan remains on track and is supported by a regulatory construct [Phonetic]. I'll cover the highlights first, then go into more detail. Today, we are announcing [Phonetic] that we no longer see a need for equity in 2021. We are reaffirming our non-GAAP core EPS guidance for this year and we anticipate issuing our 2022 guidance on our Q4 earnings call. Additionally, we are seeing progress on recoveries related to prior wildfire risk reduction investments to help the balance sheet.

Let's start with the share count used for Q3 2021 and year-to-date GAAP and non-GAAP core earnings per share. We're in a GAAP loss position for both Q3 2021 as well as year-to-date 2021 due to our grantor trust election this quarter. As a result, we're required to use basic shares outstanding to calculate both GAAP EPS and non-GAAP core EPS for Q3 and year-to-date. Our full year guidance as always assumed a GAAP positive year and our full year non-GAAP core EPS of $0.95 to $1.05 per share, reflects our fully diluted share count. So there is no impact there.

I'll start with our Q3 result. We continue to be on track for the 2021 non-GAAP operating EPS of $0.95 to $1.05. This is calculated using our fully diluted share count I just mentioned, consistent with our assumption when we initiated guidance. Slide 9 shows our results for the third quarter. Non-GAAP core earnings per share for the quarter came in at $0.24. We recorded a GAAP loss of $0.55 including non-core items. This quarter, we recorded a $1.3 billion charge we've previously guided to as a result of our grantor trust election. As you recall, this charge is expected to reverse over time as the Fire Victim Trust sells shares.

Moving to slide 10. As Patti mentioned, we took a $1.15 billion charge this quarter for the Dixie fire. We also recorded a $1.15 billion of offsetting receivables. And the receivables reflect our confidence to recover cost based on the facts of information available to us today. And as a reminder, we recognize a receivable if we believe recovery is probable under the applicable accounting standard and due to the fact currently available, we're not yet probable for recovery of amounts exceeding insurance for the 2019 Kincaid and 2020 Zogg fires. Therefore, we hasn't recorded offsetting receivables for either of those fires.

On slide 11, we show the quarter-over-quarter comparison for non-GAAP core earnings of $0.24 per share for Q3 2021 versus $0.22 per share for Q3 2020. EPS increased due to $0.03 of growth in rate base earnings, $0.02 from using basic share count as a result of the GAAP loss I mentioned earlier and $0.01 from lower wildfire our litigation costs, partially offset by $0.01 decrease due to timing of taxes that will net to zero over the year. We expect a stronger fourth quarter due to timing of the regulatory revenue and efficient work execution.

Moving to slide 12. We are reaffirming our non-GAAP core EPS of $0.95 to $1.05. On the debt side, we expect to complete an initial AB 1054 securitization transaction this month, for $860 million. Our separate rate neutral securitization has also been approved by the CPUC. And once we resolve the final legal steps, we anticipate will start issuing bonds early next year. Now some updates on regulatory matters. I'll specifically highlight important filings reflecting both our focus on timely cost recovery for historical spend and our focus on the planet supporting California's clean energy future.

Turning to slide 13. At the end of the third quarter, we've requested cost recovery for approximately 80% of the unrecovered wildfire related costs on our balance sheet. And we already have final decision, settlement agreements or interim rates for roughly 60%. In September, we filed a settlement agreement for our 2020 wildfire mitigation and catastrophic event application. Our request was $1.28 billion comprised of prior wildfire expense including costs that were incurred in 2018. Given some of these cost predate the wildfire mitigation plan construct, we feel that settlement of $1.04 billion is a reasonable outcome.

Most recently on this front, in September, we felt the recovery of $1.4 [Phonetic] billion of additional wildfire mitigation and catastrophic event costs. Most of the costs were incurred last year, and under our proposal, most of the revenue will be recovered in 2023 and 2024. You should expect to see similar filings in the coming years as we seek timely recovery of any incremental spend in these areas.

Next, I'll cover a brief update on our cost of capital application. In late August, we filed the cost of capital application for rates starting in January 2022. The request was filed off-cycle as a result of the disconnect between lower interest rate and the increase in cost of capital for California utilities as seen from higher interest costs and equity issuance costs. At this stage, we'll follow the recent direction by the administrative law judge and for our materials that would have been included in the cost of capital adjustment mechanism advice letter by next Monday. The filing will include calculations of the ROE, cost of debt and the resulting overall return on rate base from the operation of the adjustment mechanism. DOJ's order asked to submit the relevant information into the cost of capital proceeding rather than requesting us to file an advise letter.

Our focus on triple bottom line of people, planet and prosperity is also not slowing down. Just last week, we filed for key transportation electrification investment and we'll accelerate technology adoptions for underserved communities, and of course support California's greenhouse gas reduction goals. EV Charge 2 is an extension of our fully subscribed and successful EV Charge Network Program. We are requesting a total revenue requirement for roughly $225 [Phonetic] million from 2023 through 2030. This phase of the program will provide the infrastructures to support 16,000 new charging ports which is just scratching the surface to meet the demands of our customers. Till [Phonetic] today are driving nearly 20% of the electric vehicles in the country. We are proud to serve the largest base of customers owning and purchasing EVs in the US.

I'll close by reiterating that we are delivering against the financial plan for 2021. Our focus continues to be on addressing the critical need to reduce wildfire risk in the near term, while running the business effectively to the long term. We're investing in needed [Phonetic] wildfire mitigation and we've eliminated our 2021 equity need. We'll continue to focus on improving our balance sheet while making the right investments to deliver clean energy safely to our customers.

With that, I'll hand it back to Patti.

Patricia K. Poppe -- Chief Executive Officer

Thanks, Chris. Every day, we are more and more excited about the future we're creating here at PG&E. We can see the difference that's been made and the value to be unlocked. We continue to reduce wildfire risk and we're encouraged by the protections we have in place for our investors and the hometowns where we live and operate. Our 2021 PSPS protocols are the right solution on high wind days, and our enhanced powerline safety settings are necessary and effective and reductions ignitions and the resulting damage, given our current drought conditions. We're focusing our work to make our system safer every day. We're adapting based on what we learn so we can best serve our customers and you, our investors. We'll deliver on the financials and we'll continue to implement the necessary processes to run a high performing utility.

Jenny, please open the line for Q&A.

Questions and Answers:

Operator

[Operator Instructions] Your first question is from Jonathan Arnold with Vertical Research.

Jonathan Arnold -- Vertical Research -- Analyst

Good morning, guys. Thank you for the update.

Patricia K. Poppe -- Chief Executive Officer

H, Jonathan.

Jonathan Arnold -- Vertical Research -- Analyst

Yeah. Just a couple of questions. Just, Chris picking up on your comment on cost of capital, the fact that the AOJ didn't require the actual advised classes suggest that rates might stay where they are pending resolution of the application. So, is it little early to tell, and we need to wait for the scoping memo or some other directive on that?

Chris Foster -- Executive Vice President and Chief Financial Officer

Sure. Good morning, Jonathan. And again this is a reminder for everyone, the trigger mechanism itself would have implied of 60 basis point ROE reduction, which for us is roughly $0.06 of EPS. In terms of the current state of affairs, we'll be filing this next set of information next Monday. But it is true Jonathan that our position is that the rates are not adjusted, January 1, 2022 by the ALJ's ruling. And so, that's definitely our position at this point. Tough to know, until to your point, we see a little bit more in terms of the scoping memo, but we do think that was a good development in terms of how the judges treat in that next step.

Jonathan Arnold -- Vertical Research -- Analyst

Okay, great. Thank you. And then just I guess sort of stepping back a little bit and considering the taking out the equity out of this year and then the securitization you're about to do. At what point in the -- in your forward outlook, it is the utility arrive at a point where it can stop paying a dividend to the parent and that consider stop to think some delevering?

Chris Foster -- Executive Vice President and Chief Financial Officer

Absolutely. We're looking forward to that Jonathan. Again, our commitment is really twofold, right. First is -- ensuring that we take out roughly $2 billion of holding company debt by the end of 2023, still on track there. Second, our focus is certainly on that period in which we would have get core earning exceeding accumulative $6.2 billion. Than would produce it roughly mid-year in 2023. Let me be in a position to reinstate the dividend and certainly we'll be partnering Patti myself partnering with our Board to really evaluate what makes sense in terms of reinstatement level and growth rate at that stage.

Jonathan Arnold -- Vertical Research -- Analyst

But, Matt, just kind of -- about restriction is on the common, the parent company dividend, right. But, that the -- can the utility stop dividending [Phonetic] to the parent before that or is it also?

Chris Foster -- Executive Vice President and Chief Financial Officer

At this stage, you may have seen that we have disclosed this quarter actually an intercompany loan. So I think at this point, we've got the path to make sure that repeating the holding company for an ease [Phonetic] as Jonathan. We'll still be -- be the double [Indecipherable] reinstate to mid-year 2023.

Jonathan Arnold -- Vertical Research -- Analyst

Okay. Thank you.

Chris Foster -- Executive Vice President and Chief Financial Officer

Sure, then.

Operator

Your next question is from Steve Fleishman with Wolfe Research.

Steve Fleishman -- Wolfe Research -- Analyst

Yeah. Hi, good morning. Can you hear me?

Patricia K. Poppe -- Chief Executive Officer

Good morning, Steve. Yeah, we can hear you, Steve. Good morning.

Steve Fleishman -- Wolfe Research -- Analyst

Thanks. Curious on the -- last week, we got the proposals from the Democrats in this -- in their infrastructure bill or whatever you want to call it. And one of the proposals is this minimum effective tax rate, and I know it's early on, I know it's not passed, but is there any risk that that could kind of impact the ability to get all your NOL and also the securitization tied to the NOL?

Chris Foster -- Executive Vice President and Chief Financial Officer

Sure, Steve. Good morning. Thanks for the question. I think at its highest level, it's definitely little bit early in terms of our initial -- just given the draft was provided. I believe, last Thursday, there is really a couple of things going on. First is that the tax NOL to drive and are not impacted by book minimum tax and the proposal really is focused on book NOLs. And then second, as you can imagine, just kind of going forward, very traditionally, these costs are considered cost. They're part of cost of service and are passed through to customers. So it's a bit early to know exactly how this will play out. And certainly the draft again in DC could change again, but at this stage don't see an immediate impact coming through from the alternative minimum tax.

Steve Fleishman -- Wolfe Research -- Analyst

Okay. Great. And then question just on the zero equity this year. It does also look like the contribution a $1 billion contribution to -- for the securitization was moved to next year. Does that mean the equity could have been moved to next year then? Or not clear..

Chris Foster -- Executive Vice President and Chief Financial Officer

Not necessarily, Steve. We've consistently articulated that our focus has been on resolving really prior legacy legal issues and that has driven some of the equity need. And as we disclosed today, we made some progress in particular on the Zogg fire. What I would say is, it is true, and we've been signaled pretty clearly hear that the -- any additional impact there as it relates specifically to the customer credit trust would be something that would move into 2022 meaning that, that first $1 billion payment right would be only occurring after we have completed the securitization itself. So I don't see a risk there.

Steve Fleishman -- Wolfe Research -- Analyst

Okay. That's great. And then just lastly on the Dixie fire cost, I know that was obviously a large fire in terms of the acreage. But the impact in terms of structure seem to be relatively small. And so I'm a little surprised that the size of cost relative to structures, could you just maybe give us a better sense of what might explain that?

Chris Foster -- Executive Vice President and Chief Financial Officer

Sure. And traditionally, what we'll do, Steve, every quarter is we'll consistently update this. At this stage, when you look at the totality of structures impacted, what's going on there is you have a mix of a few things. First, it's the roughly 1400 structures that were damaged or destroyed. Two, there's also an element of commercial area or downtown area that was impacted, so there is some focus on business interruption in that specific affinity. And then third there are some areas where we have to contemplate the potential for private timber operations, which would have pontential impact there as well. So, when you stack those all on top of each other, you get to the point where we get in terms of those private claims recoveries and the charge we disclosed today of $1.15 billion.

Steve Fleishman -- Wolfe Research -- Analyst

Okay. In your ability, the AB 1054 is what allows you to be able to offset the write-offs, which shows, I guess being conviction on being prudent.

Patricia K. Poppe -- Chief Executive Officer

Yeah. And Steve, just to add, acting as a reasonable operator, one of the interesting things about this fire as we look at the fact pattern, we've disclosed much of the information, through those of questions, many of -- a lot of the information we have is now public through his questions. And fact pattern is very much supportive of a reasonable operator. And with the AB 1054, new prudent standard that is presumed that does gives us confidence and gives us confidence in the accounting treatment.

Steve Fleishman -- Wolfe Research -- Analyst

Great. Thank you so much for all those answers. Thank you.

Patricia K. Poppe -- Chief Executive Officer

Yeah. Thanks, Steve.

Chris Foster -- Executive Vice President and Chief Financial Officer

Thanks, Steve. Thanks for those questions. And again, what we did in terms of the material this morning for everyone, is if you go to slide 10, we give a pretty good volume [Indecipherable] of the different components of potential recovery mechanisms there. Certainly, AB 1054 and its key protections are there, but there are a few other recovery components that we broke out everyone this morning. Thanks for that question, Steve.

Operator

Your next question is from Julien Dumoulin-Smith with Bank of America.

Julien Dumoulin-Smith -- Bank of America -- Analyst

Thanks for the time.

Patricia K. Poppe -- Chief Executive Officer

Good morning, Julien.

Julien Dumoulin-Smith -- Bank of America -- Analyst

Good morning. So maybe to follow up on Steve's question there briefly, can you talk to a little bit more of the process just in terms of seeing that affirmed through the AB 1054 process at least for the intial $150 million, but also speak to the process on effectively truing it up with the $600 million plus of suppression costs would have even, when do we get that affirmation that the process under the AB 1054 Wildfire Fund critical works, if you will? And I know it is the times protected [Phonetic] here, but how do you practically see it from here given now that you've established receivable?

Chris Foster -- Executive Vice President and Chief Financial Officer

Sure, thanks. Good morning, Julien. And I think we touch a little bit about this -- a little bit about of this in our investor day, actually earlier this year. And ultimately what will be happening here is we have to first things first, work our way through the claims themselves, it's very early in terms of any kind of claims interface, we're having at this stage and traditionally had a time period that passes in terms of the first couple of years before the initial statute limitation that. If at that stage once we've resolved the claims and as we resolve the claims, we only then would be -- we'd be bringing things forward to the wildfire fund administrator, really the wildfire fund, seek potential recoveries. So, it's history -- any guide Julien, this could be a few years before we're having that explicit interaction.

In terms of any implications related to fire suppression costs, there's additional acreage impacted in national and state forest land, those are things we provided in the disclosures certainly today and we'll continue to take a look at. And that's just something that every single quarter we consistently review all these different elements and update as we see necessary. But at this stage, where we are today is the $1.15 billion and the recovery toward this will be pretty limited in terms of the wildfire fund impact here as you can imagine, right. It's just that amount over $1 billion to roughly $150 million.

Julien Dumoulin-Smith -- Bank of America -- Analyst

Right. Indeed. Excellent. And then if I could pivot to slightly different subject here if you don't mind, on the resource add [Phonetic] front, certainly, we've made it through the summer relatively unscathed [Phonetic] would argue, curious to see where you stand with the state stands against whether process oriented toward improving its reserve margins and or just execution, right. I imagine that supply chain just ability to procure the resources has somewhat impeded the state's progress, curious on your state of affairs after the summer.

Patricia K. Poppe -- Chief Executive Officer

Yeah, great question. It's definitely top of mind. We did see some delays in supply chain, procurement, particularly of battery storage. However, we expect to have over 900 megawatts added to the system by the end of this year. And so that's all valuable for next year. In total, our plan is to have a total of 1,740 megawatts by the end of 2023 and we're working hard to get those procurement plans in place, so that we can make up for the delays that continue to play the supply chain. I'll also, just say that, as we're thinking about our path forward, the -- I think that State of California is actually doing a good job of looking statewide at who is responsible for procuring what -- we've developed a strong working relationship with Cal ISO. Cal ISO has some new leadership there and we're working together to make sure that we have the kind of transparency and visibility into what is required by when.

And so, lots of, I would say positive momentum and working together at the state to make sure we have adequate resources. We do think it's very important and we see the potential of distributed resources and clean energy resources and this unique, kind of unique moment and time, generational opportunity to clean the energy resources as we transition and provide more resource adequacy for the state. So I would say, very positive signals moving forward.

Julien Dumoulin-Smith -- Bank of America -- Analyst

Excellent just quick further elaboration, what types of documents are requested by the October 7 subpoena from the federal investigators, if you can just quickly turn it in there?

Chris Foster -- Executive Vice President and Chief Financial Officer

Hi Julien, it's Chris. There is not much more detail we can provide there. They do relate broadly speaking to the Dixie fire. What I would -- what I would offer as well that, you can imagine, we have an enormous amount of information in the public domain at this stage through, primarily due to the request that would through from Judge Alsup and the federal monitor. So, quite a bit of information to deal [Phonetic], we've shared certainly what we've seen at this stage and at this point would certainly be complaint with any request from the US attorney.

Patricia K. Poppe -- Chief Executive Officer

And at the end of the day, we continue to say that the fact patterns reinforces that we are reasonable operator and will continue to cooperate.

Julien Dumoulin-Smith -- Bank of America -- Analyst

Thank you for the response, guys. Best of luck.

Patricia K. Poppe -- Chief Executive Officer

Thanks, Julien.

Operator

The next question is from Michael Lapides with Goldman Sachs.

Michael Lapides -- Goldman Sachs -- Analyst

Hi guys. Thank you for taking my question. Just a high level one. Commodity prices have moved a lot. That's just everybody can look every day of the week and yet come down in the last couple of days, a little bit. How are you thinking about the bill? Because you've got a pretty sizable general rate case request out there. You've got all the various cost recovery related to wildfire stand that are starting to flow through the dell [Phonetic] maybe not on the income statement, but on the cash flow statement and on the customer sale. And then you've got to move in gas and purchase power costs, which have been pretty material lately. How do you think about things that can help offset that and mitigate significant build grip [Phonetic] for your customer?

Patricia K. Poppe -- Chief Executive Officer

Michael, great question. This is obviously top of mind, affordability is always very important to us. And there's lots of things that we can do at PG&E to protect customers from bill increases. So just a couple of facts for you. Our average monthly gas bill is at around $50, so a 10% increase in gas prices would increase the bill about 2%. The commodity portion of the bill is about 25% of the bill, so the impact is muted. But more importantly, I would say that because we have pipeline assets to many gas production basins and we're able to -- that allows us to get the lowest cost gas as it's available. And then we use our gas storage to then be able to protect customers from these unusual upticks in price and protect our customers in that way.

So that's an important thing. And I would also say that as gas fuels electric prices, a 50% increase in electric power prices would have less than a 10% increase on our customer's overall bill. So, again, because we have limited exposure to natural gas for our customers' electric usage. So, I would say, of many jurisdictions, our customers are well positioned, given the commodity prices, but more importantly I would suggest that we, PG&E will develop a much stronger muscle with our lean operating system in place to protect customer's bills, making great investments in infrastructure that they need, trading operating expense, band aid [Phonetic] replacements for permanent long-term higher value capital replacements that serve customers very well and better than deliver for investors. So, that's definitely our game plan on our path forward.

Michael Lapides -- Goldman Sachs -- Analyst

Do you believe that was material medium [Phonetic] cost decrease potential in the Company in the next couple of years or do you think it's more beyond that?

Patricia K. Poppe -- Chief Executive Officer

Well, I think we're seeing cost improvements today by already some of our well -- the visibility that we have with our daily operating review cadence, the management that we have in place today who are experienced executives, who are accustomed to finding cost savings on a routine annual basis. I suggest those cost savings will materialize and they are materializing now and they will materialize for years and years and years to come. I will share with you every moment that I found observing our operations, which is a lot of moments. I see great opportunities for waste elimination and cost savings for our customers.

Michael Lapides -- Goldman Sachs -- Analyst

Got it. Thank you, Patti, much appreciated.

Patricia K. Poppe -- Chief Executive Officer

You're welcome, Michael.

Operator

Your next question is from Stephen Byrd with Morgan Stanley.

Stephen Byrd -- Morgan Stanley -- Analyst

Hey, good morning. Thanks for taking my questions.

Patricia K. Poppe -- Chief Executive Officer

Good morning, Stephen.

Stephen Byrd -- Morgan Stanley -- Analyst

Good morning. I wanted to step back on federal draft legislation, again building on Steve's question, just thinking about other provisions that you all are thinking about Dixie relevant as certainly think about sort of the equipped [Phonetic] capital for the side through sort of mitigating climate change impacts. Look, that might be able to do from both PG&E specific factor as well as just more broadly reducing fire risk. And then maybe just second part of the question is very broad, which is just other impacts from federal legislation that you're -- that you're thinking about beyond for latter thinking about almost sort of decline to size.

Patricia K. Poppe -- Chief Executive Officer

Great question, Stephen. We have been actively engaged very early on -- in the great resilience, the climate add that pace in components of much of the infrastructure package. And we want to make sure that there were a couple of things that were recognized in that federal package. One is making sure that we can have support for our customers on vegetation management, which is a high expense item for us as well as other grid hardening solutions, microgrids or even undergrounding. So we -- and we see those elements in the package today.

Now, your guess is as good as mine of, what they actually going to get past, but they continue to be in the revisions that we see coming forward. So we think that's a good sign. We also are very supportive of additional funding for the federal forest service. The US Forest Service has a very important role to play here in California, and we're working in partnership with them on fire prevention and fire mitigation and making sure they have appropriate staffing, so that, in the event of fire they are able to adequately respond and so -- we're very supportive of additional funding for the US Forest Service.

And then ultimately, obviously, this clean energy transition, we've been leaders in that, PG&E. Today, we have an 85% greenhouse gas free generation mix and we're proud of that and we're proud of the leadership position we've shown nationally on that front. We want to make sure that the infrastructure package continues to reflect early movers if you will, people who have advanced in clean energy, early, we want to make sure that the package definitely recognizes that. So we've been working closely with our DC office and EEI and others to make sure that the clean energy components of any of the legislation is favorable.

Stephen Byrd -- Morgan Stanley -- Analyst

That's really helpful. Pattie maybe just building on the point about the fire risk, cost mitigation. I guess I'm thinking a lot about that magical 8:1 ratio of capex to O&M and to the extent that O&M costs can be defrayed by federal support. Could that potentially allow you to sort of accelerate the undergrounding effort in a way that does not harm customer bills because of that -- that will support or is it kind of unclear at this point?

Patricia K. Poppe -- Chief Executive Officer

Well, I would say there's lots of reasons why our customers will not be harmed economically by our undergrounding program, first and foremost, even without federal assistance your point about the trade-off between opex to capital is a key enabler to funding that undergrounding program. We know that the ongoing, enhanced vegetation management and even our routine vegetation management program has a large expense to customers. We spend $1.4 billion a year on vegetation management being able to trade off some of that for capital investments in hardening the system or even so for undergrounding for sure, but also for microgrids and other hardening solutions, depending on the circumstances. That trade-off is very good for customers and we think that is a very and we'll start to demonstrate in our longer term financial and our wildfire mitigation plan, that you'll see at the early part of 2022. We don't think that there is a -- an economic trade-off for customers to safety. We think they can both -- we can both have affordable energy and safe resilient energy, and that's our path forward.

Stephen Byrd -- Morgan Stanley -- Analyst

Understood. That I was thinking as well, but that could get accelerated even further if you could get federal support that could lower your cost structure, but I guess we'll stay tuned to see out specific shape up for that.

Patricia K. Poppe -- Chief Executive Officer

Yeah. Know your intuition is right on that, Stephen, of course for this. There is certainly any support from this package will be good for customers and we've got ample capital to deploy that if we can defray some of the cost to federal support, we're all for it, there is definitely lots to be done out here in California.

Stephen Byrd -- Morgan Stanley -- Analyst

Very good. Thank you so much.

Patricia K. Poppe -- Chief Executive Officer

Thanks, Stephen.

Operator

The next question is from Shar Pourreza with Guggenheim Partners.

Shar Pourreza -- Guggenheim Partners -- Analyst

Good morning, guys.

Patricia K. Poppe -- Chief Executive Officer

Good morning, Shar.

Chris Foster -- Executive Vice President and Chief Financial Officer

Good morning, Shar.

Shar Pourreza -- Guggenheim Partners -- Analyst

Just a real quick on the equity, obviously you guys removed it for this year. But I'd love to get a little bit of a sense on sort of the moving pieces as you're thinking about financing would seems to be a relatively ambitious capex plan, right, so as you're thinking about undergrounding distributed generation, microgrids, would sort of any of those programs push you to issue equity? I guess the broader question is this, what would push you from zero? Or do you think sort of Patti, with the amount of leverage that you have at your disposal like on the O&M side that you can leverage that opportunity versus having to mitigate -- versus having to actually raise future equity.

Chris Foster -- Executive Vice President and Chief Financial Officer

Hey, Shar, it's Chris. I think -- good morning. So I think there is a couple of factors. First, we'll be growing into our undergrounding plan a bit. That's the way I would think about it as we start to reduce operating expense and work into that integrating plan, it will occur over time, will really start to disclose more details there as part of our 2022 wildfire mitigation plan in February.

We haven't guided toward 2022 equity needs at this stage specifically, but we would intend to do so again at Q4 and provide more color at that stage. I wouldn't necessarily just off and consider though I'm getting out here undergrounding or for that matter, going to be our related investments, driving an immediate equity need or there is going to be something we're really growing into this plan over time.

Shar Pourreza -- Guggenheim Partners -- Analyst

And then just on undergrounding, I'm curious, right. You know, and I know you kind of mentioned it, but I'd love to get a little bit more of an early indication on sort of the cost and scaling up that 10,000 mile program, right. I mean obviously the slides reiterate the plan through 26 with undergrounding remain, "potential opportunities bucket". Are there, I guess, Patti, are there any changes to the scope or timing that you're contemplating for such an undertaking from your prior messaging as the CPUC is starting to more actively inquire about your plan? So in net-net, I guess, can you do more cheaper and faster?

Patricia K. Poppe -- Chief Executive Officer

I would say we're very bullish on that, Shar. We have started to have -- we did a global RFI for our construction and engineering firms and we received about 25 responses that were very elaborate. We're doing face to face discussions with seven of the firms and they're very affirming. It's very exciting, we can't wait to share more details and we will, but I'll just tell you that we feel more convicted than ever that this is an important part of the solution, and I will reiterate that our capital program is very expensive and undergrounding as a portion of it. We do think that is an important portion of it, but I can tell you, I heard about just one example of a job last week, we are undergrounding as we speak and as we observe the work, we see tremendous opportunity to reduce the cost of doing that work and when we are at scale and so, and in fact that project wasn't about the $2.5 million to $2.7 million a mile range, and that's the current active project that is not what I would describe at scale.

We will be at scale, and when we are, the costs are inherently lower. And so we are very, very bullish. And all of the feedbacks we're getting from people is, they do want more information, and I -- we have to respect the CPUC's role to affirm that that's the right plan, but knowing what we know and what we can see moving forward, we're very confident that as people see the numbers and the plan, they'll feel very excited just like we do.

Shar Pourreza -- Guggenheim Partners -- Analyst

No. That's helpful. I think investors would like to see that 10,000 mile target triple. But thank you for that. And then just last and I apologize, I had to hop on and off the call. But can you just maybe comment on the recent wildfire safety division resolution, ratifying actions from the '21 WMP update, especially as the resolution would require the '22 WMP update to be included in the GRC proceeding including sort of an explanation of the undergrounding plans. Does it kind of complicate the preceding or is it in line with sort of your GRC strategy? Thank you.

Patricia K. Poppe -- Chief Executive Officer

Yeah. Well, it's just a couple of things, just to touch on. So the good news is, as you all remember the wildfire mitigation plan was approved by OEIS, the CPUC ratify their safety certificate or ratified our plan on April 21, 2021. And then we will shortly file for our safety certificate. We have required safety meeting on Wednesday November 10 with the CPUC and OEIS. We look forward to that opportunity to continue to talk about our plans. And so then shortly thereafter, we'll file our 2022 wildfire safety certificate for OEIS. Now currently that wildfire safety certificate that we currently have is in place until the following proceeding happens. So we feel very, the process is happening as discussed.

We think it's a great opportunity to talk more about our undergrounding plans in our 2022 wildfire mitigation plan, but we'll file there in February of next year. So no red flags as far as we're concerned, we feel good about how it's progressing.

Shar Pourreza -- Guggenheim Partners -- Analyst

Fantastic. Thank you, guys. See you in a few days. Appreciate it.

Patricia K. Poppe -- Chief Executive Officer

Thanks, Shar.

Operator

[Operator Instructions] Your next question is from Jeremy Tonet with J.P. Morgan.

Jeremy Tonet -- J.P. Morgan -- Analyst

Hi, good morning.

Patricia K. Poppe -- Chief Executive Officer

Good morning, Jeremy.

Jeremy Tonet -- J.P. Morgan -- Analyst

Good morning. I think outside of Dixie, I think it's pretty clear that wildfire season has been much less active versus recent years and just wondering if you have any thoughts you could share with us as how much of this might be a factor of weather conditions? And how much might be evidence of any mitigation, that investments you've been doing so far really starting to turn the corner?

Patricia K. Poppe -- Chief Executive Officer

Well, Jeremy, I appreciate you asking the question, because it's a good opportunity for us to reiterate that we believe that our safety measures that we've put in place, the investments that we've made, the vegetation management, fee inspections and the enhanced powerline safety settings combined with PSPS has made our system safer and our customers are safer and therefore our investors are as well as a result, certainly we were not disappointed to have little early rains and the rain is for forecast today and later this week and that will make us feel good. But as we look at our ignition rates, that is the most compelling statistics in my opinion, and I encourage everyone to look closely at it.

In the areas where we implemented our EPS as we've had an 80% reduction and ignition, I attribute that -- to that measure. I'll also say that given the drought conditions that we experienced this year historic extreme, we have fared extraordinarily well. And again I attribute that to the safety measures that we put in place and the amount of investment that we have made in hardening our system and managing the vegetation and doing those inspections.

Jeremy Tonet -- J.P. Morgan -- Analyst

Got it. That makes sense. And maybe just kind of picking up on your point there, given the success of these enhanced safety settings, what percentage of the high risk circuits can you expand these two and how long might that take?

Patricia K. Poppe -- Chief Executive Officer

Well, again, we can be very targeted about this. We know where we have drought conditions and it's a very dynamic tool that we can use. This year, we did around 50%, next year, we could do a 100%. And we -- but it doesn't have to, it's not like an on, off -- we turn it on and we leave it on for the season. We can turn it on, when we can see the conditions want. We can be very, very targeted and we've done some work to really optimize the device settings to shrink the impact, the time to restore now is much closer to what the time to restore was before we put in the settings, because we've shrunk the impact of each of the disturbances and our patrols have become more effective and more targeted. So I would just suggest that our -- the degree of improvement for our team's response this year has been extraordinary, particularly given the conditions. And we know it's an important tool to have in our tool kit.

Long term, we know the ultimate solution is a hardened system that is designed and built to be resilient to wildfire. And that's why, undergrounding and all of our other mitigations are very important path forward, but in the meantime today, every day, customers on our system are safer because of the measures that we have taken.

Jeremy Tonet -- J.P. Morgan -- Analyst

Got it. That's helpful. And just one last one if I could hear and understanding that undergrounding announcements is most topicals and some of the stuff we just discussed here. But do you have anything other that's top priorities into the wildfire mitigation plan filing?

Patricia K. Poppe -- Chief Executive Officer

Yeah. I think it's really continuing to streamline our vegetation management and our hardening plan. I do think that you'll see more of these remote grid applications, there's a lot of circumstances where we have a long radial running through a forest, do we just eliminate, don't even underground it, just equip those people at the end of that line with the distributed energy resource that is both clean and resilient to wildfire and lower cost. And so we do think there is a variety of solutions that you'll see more of in our wildfire mitigation plan for 2022 and beyond.

Jeremy Tonet -- J.P. Morgan -- Analyst

Great. That's very helpful. I'll leave it there. Thanks.

Patricia K. Poppe -- Chief Executive Officer

Thanks, Jeremy.

Chris Foster -- Executive Vice President and Chief Financial Officer

Thanks, Jeremy.

Operator

The next question is from Ryan Levine with Citi. Thanks for taking my questions. What portion of the gas or the gas utility is hedged Into the winter?

Chris Foster -- Executive Vice President and Chief Financial Officer

Hey, Ryan, it's Chris. You can imagine, we don't disclose at that level of specificity [Phonetic], because, it's the commercial decision making for us, but I would just offer again, to reiterate what Patti mentioned is, when you combine the gas storage, we got, when you combine the availability from the basins that we have, you can find the hedging to limit volatility and the fact that we have cost trued up annually. It really is combined a really good solution for customers and clarity for investors.

Operator

Okay. But just to be clear, the 10% increase in gas and 2% impact on customer bill is on a hedge basis. And so that, and just to confirm that and then does that assume about $3 as base price for gas?

Chris Foster -- Executive Vice President and Chief Financial Officer

I wouldn't think about that Ryan as netting, hedging impact. I would think about that just as a basic rule of thumb.

Operator

Okay. And then there is several dimensions around the undergrounding to date or year-to-date, how much undergrounding has been completed? And how much more is possible this year under the current regulatory construct?

Patricia K. Poppe -- Chief Executive Officer

Well, that's what we're excited to share at the beginning of next year. We'll start to show what the path is. This year, we're going to only do about 100 miles. And we're still excited about. That's why, when I talk about our cost per mile. We're at a very -- a project-by-project basis now, and so we can't wait to be able to share with everyone, what the ramp up plan looks like, and how we can then -- did the economies of scale would that ramp.

Operator

Appreciate that. And then there was mentioned of seven parties in the more face to face conversation, is the intention for one party to emerge or more than one, to the extent you're able to comment.

Patricia K. Poppe -- Chief Executive Officer

We're looking at -- it could be multiple, it could be one, we're not sure, that's the benefit of having these conversations with these folks. We'll see -- that's why, is a request for information, not a request for proposal. We're really working together to learn what is the best path forward.

Operator

Thank you, Patti.

Chris Foster -- Executive Vice President and Chief Financial Officer

And just to add there, I think Ryan for us, it's exciting, right, because the beauty of this is the program at this scale, it's natural to have a couple of large providers that you can create good competitive attention in there to get the best outcome possible for customers. We're definitely excited about what we're seeing so far. Couple do -- couple of dozen initial entrants and that we're winning it, let's down [Phonetic], some really good potential partners.

Operator

Appreciate the color. Thank you.

Patricia K. Poppe -- Chief Executive Officer

Thanks, Ryan.

Operator

At this time there are no questions. Do you have any closing remarks?

Patricia K. Poppe -- Chief Executive Officer

Yeah, thanks, Jenny. You know everyone, thank you for joining us today. Our systems is safer every day. And we want to know that, it's both safer for our customers and for you, our investors. We look forward to sharing more details with you and having more conversation with you at EEI, next week. It's right around the corner. Be safe everybody.

Operator

[Operator Closing Remarks]

Duration: 56 minutes

Call participants:

Matt Fallon -- Senior Director of Investor Relations

Patricia K. Poppe -- Chief Executive Officer

Chris Foster -- Executive Vice President and Chief Financial Officer

Jonathan Arnold -- Vertical Research -- Analyst

Steve Fleishman -- Wolfe Research -- Analyst

Julien Dumoulin-Smith -- Bank of America -- Analyst

Michael Lapides -- Goldman Sachs -- Analyst

Stephen Byrd -- Morgan Stanley -- Analyst

Shar Pourreza -- Guggenheim Partners -- Analyst

Jeremy Tonet -- J.P. Morgan -- Analyst

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