Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
Pacific Gas and Electric Company (NYSE: PCG) Q1 2026 Earnings Call dated Apr. 23, 2026
Corporate Participants:
Jonathan Arnold — Vice President of Investor Relations
Patti Poppe — Chief Executive Officer
Carolyn Burke — Executive Vice President and Chief Financial Officer
Analysts:
Unidentified Participant
Nicholas Campanella — Analyst
Steve Fleishman — Analyst
David Arcaro — Analyst
Anthony Crowdell — Analyst
Gregg Orrill — Analyst
Ryan Levine — Analyst
Richard Sunderland — Analyst
Unidentified Participant
Presentation:
Operator
Thank you for standing by at this time. I would like to welcome everyone to the PG and E Corporation first quarter 2026 earnings release. All lines have been placed on mute to prevent any background noise. After the Speaker’s remarks, there will be a question and answer session today. We ask you to limit yourself to one question one follow up. If you would like to ask a question during this time, simply press STAR followed by the number one on your telephone keypad. If you would like to withdraw your question, press Star one again.
Thank you. I would now like to turn the call over to Jonathan Arnold, Vice President of Investor Relations. You may begin.
Jonathan Arnold — Vice President of Investor Relations
Good morning everyone and thank you for joining us for PGE’s first quarter 2026 earnings call. With us today are Patty Poppy, Chief Executive Officer, and Carolyn Burke, Executive Vice President and Chief Financial Officer. We also have other members of the leadership team here with us in our Oakland headquarters. First, I should remind you that today’s discussion will include forward looking statements about our outlook for future financial results. These statements are based on information currently available to management.
Some of the important factors which could affect our actual financial results are described on the second page of today’s earnings presentation. The presentation also includes a reconciliation between non GAAP and GAAP financial measures. The slides, along with other relevant information can be found online@investor.PGECorp.com we’d also encourage you to review our quarterly report on Form 10Q for the quarter ended March 31, 2026. And with that, it’s my pleasure to hand the call over to our CEO Patti Poppy.
Patti Poppe — Chief Executive Officer
Thank you Jonathan Good morning everyone. I’m pleased to be with you this morning to report another quarter of strong progress on multiple fronts. Today we announced core earnings per share for the first quarter of $0.43. This strong start puts us solidly on track to deliver again and reaffirm our full year 2026 core EPS guidance of $1.64 to $1.66 at the midpoint. Our guidance implies 10% growth over 2025 and would mark our fifth consecutive year of double digit core earnings growth. Looking forward, we’re reaffirming our EPS growth guidance for 2027 through 2030 which is unchanged at 9% plus annually.
We’re also reaffirming our five year capital and financing plans including zero new equity issuance needs through 2030. We continue to deliver for our customers on affordability. On March 1, we lowered electric rates for the fifth time since January 2024 for our most vulnerable residential customers. Bundled rates are now down 20. For other residential customers, rates are down 13% over that same period. In February, our Diablo Canyon nuclear power plant received the final state permit approvals needed to support extended operations through 2030, and in early April, the Nuclear Regulatory Commission granted Diablo Canyon a 20 year license extension.
These actions underscore Diablo Canyon’s critical role in supporting California’s reliability and clean energy goals, although further action by the state is required in order to operate beyond 2030. Turning to slide 4 we remain focused on helping California build a durable, long term wildfire solution. The CEA’s report and recommendations provide a strong foundation as the Legislature begins the next phase of this important work. We were encouraged to see the CEA emphasize the cost of inaction, noting that, and I quote, inaction perpetuates unaffordability for consumers and hinders the ability to attract the capital required to maintain safe, clean and reliable infrastructure.
End quote. This is a strong call to act for California policymakers. As we said last quarter, the CEA report marks the beginning of the legislative phase. With the session running through August, policymakers now have the opportunity to evaluate a menu of options across multiple pathways. We remain encouraged by the progress toward meeting the commitment made by the Legislature last year to find and implement a long term whole of society solution. That commitment began with last year’s SB254, followed by the governor’s executive order, the CPUC’s submission to the CEA, and now the CEA’s report.
As I said last quarter, the status quo is neither sustainable nor affordable and California needs a model that works for all stakeholders, whether they are those affected by wildfires, utility and insurance customers, communities, the state and the capital providers needed to support a safe, reliable and clean energy system. Turning to Slide 5 Our focus on wildfire mitigations remains clear and unwavering. We know this work is never finished, which is why we continuously look for better and more effective ways to strengthen our mitigations.
Our operational mitigations, including PSPs, EPSs and continuous monitoring are making us safer every day and position us to respond effectively whatever the weather conditions. Looking forward, our long term infrastructure hardening plans will combine safety and improved reliability and lower maintenance costs. Undergrounding is an important driver of customer affordability too, reducing the need for and expense of annual inspections and vegetation management. As you heard on our last call, the CPUC has now provided a clear path for us to request additional undergrounding through a 10 year plan.
We’re still on track to make this filing with the oeis in the third quarter including our next approximately 5000 miles and covering years 2028 through 2037. Combined with the 1900 miles of undergrounding we expect to have completed by the end of 2027, plus an additional 4,000 miles of overhead hardening, this would result in nearly 11,000 miles of planned system hardening through 2037, or more than 3/4 of the high fire threat miles we plan to harden. Based on our current risk modeling. We’ll provide more detail in our 10 year filing, but in the meantime, we calculate that our undergrounding to date over 1200 miles has already allowed us to avoid more than $100 million of maintenance spend which otherwise would have been paid by customers.
That is exactly the kind of durable affordability we’re working hard every day to deliver for our customers. Looking at slide 6, you’ll see our simple, affordable model as amplified last quarter, giving us line of sight to customer bill growth of 0 to 3%. We call that our path to flat, a destination our customers would love. As noted earlier, in March we implemented our fifth reduction in electric rates in two years. That’s real progress on affordability, and this progress is matters most for customers who need it most.
Since January 2024, electric rates for our most vulnerable customers are down 23%. For our other residential customers, rates are now down 13%, about $300 less per year. That is real money. Turning to Slide 7, you can see the progress we’re making in enabling rate reducing load growth. Projects are moving through our development pipeline, with our final engineering stage increasing to 4.6 gigawatts since our year end update. This progression from application to preliminary engineering and on to final engineering is a natural and expected part of the project cycle and reflects healthy forward momentum.
We also recently initiated our third cluster study and the results reinforce that there’s strong interest across our service area. In total, customer interest exceeded an additional 10 gigawatts spanning multiple regions including Silicon Valley and the Central Valley. Importantly, this demand remains diversified. There’s no single project driving these totals. We’re committed to only adding load that is definitively rate reducing. We simply need to get the pricing right. Projects from this latest cluster study, which meet the rate reducing threshold, will move through preliminary engineering over the next six months, refilling the pipeline funnel from the top as earlier projects mature.
Importantly, this growth is occurring alongside significant resource additions across California. Since 2020, CAISO load serving entities have added more than 33 gigawatts of new resources to the grid, including over 7 gigawatts in 2025 alone. In addition, the CPUC is continuing their practice of issuing new build procurement orders, which have resulted in 22 gigawatts under contract through 2029. This kind of growth is good for customers and good for California’s economy. Every gigawatt of new data center load can contribute to affordability by reducing electric bills by 1% or more, while also supporting thousands of construction jobs and generating hundreds of millions of dollars in additional tax revenue.
Before I hand it over to Carolyn, I’d like to tie all this together with my story of the month this quarter. That story is about continuous monitoring and how we are shifting from reactive maintenance to proactive data driven risk management. Continuous monitoring uses sensors, our smart meters, analytics and machine learning models to identify emerging issues on the system before they turn into outages, ignitions or safety events. It’s allowing us to see developing conditions in real time and intervene earlier, often before there’s any customer impact.
We’re seeing tangible operational benefits from this approach. Continuous monitoring helped US avoid approximately 12 million unplanned customer outage minutes in 2025 and another 4 million minutes in the first quarter of 2026. In many cases, these interventions occurred before customers were even aware there was a problem. Since the beginning of last year, we’ve had 1484 good catches where sensor data flagged developing weaknesses or active events on the grid. 23 of these could have become ignitions, but didn’t.
Identifying stressed equipment early also allows us to fix issues at a lower cost and avoid more expensive emergency repairs down the road. In fact, over that same five quarter period, early detection of stressed equipment helped us save an estimated $8 million of capital spend through lower cost repairs and over $1 million in expense. By reducing time spent responding to emergency asset failures, continuous monitoring is also improving how our teams work in the field. More precise diagnostics mean our troubleshooters spend less time searching for problems and more time fixing them, improving both productivity and safety.
Taken together, our continuous monitoring program is an important step forward and an example of how we manage risk control costs and deliver reliable service. With that, I’ll turn it over to Carolyn.
Carolyn Burke — Executive Vice President and Chief Financial Officer
Thank you Patty and good morning everyone. Turning to Slide 9, you can see our first quarter 2026 earnings walk. Core earnings for the quarter were $0.43, up $0.10 from the first quarter last year, putting us in position to once again deliver on our plan. Customer capital investments contributed 6 of that $0.02 reflects ongoing execution of our capital plan and the associated return on rate base, including CPUC Roe. We also have a 4 cent benefit related to February’s final Commission decision. In our 2023 WIMSI application, non fuel O and M savings contributed an additional two cents, partially offset by our decision to redeploy one penny back into the business timing and other was a 3 cent tailwind in the quarter compared to the prior year.
As we look forward to the balance of 2026, you can count on us to remain focused on disciplined execution and delivering our guidance while taking a thoughtful approach to redeploying savings in ways that benefit customers and help to de risk 2027 and beyond. On slide 10 there is no change to our five year $73 billion capital plan through 2030. We continue to see strong demand for customer beneficial investment across our transmission and distribution systems and we still see at least $5 billion of incremental customer investment opportunity outside the current plan.
We have flexibility in how and when we may pursue these additional opportunities to ensure we’re making the right decisions for customers and investors. Our preference today remains making the plan better by prioritizing bringing in investments which enable new beneficial load and help lower rates for our core customers over time. Or we could make the plan longer by extending the duration of our top tier rate based growth. A third option, though not one we’re considering right now, is to make the plan bigger by adding to our current $73 billion plan envelope.
Taken together, these options give us confidence that we have flexibility in the plan and that we can continue to deploy growth capital in a disciplined way while at the same time supporting affordability growth and long term value creation for owners. Turning to slide 11, our five year financing plan is also unchanged from our prior call. The plan continues to be built on conservative assumptions which align with the guideposts I’ve previously shared. First, our plan is built to require no new common equity through 2030.
Second, we remain focused on achieving investment grade ratings including sustaining FFO to debt in the mid teens. And third, we continue to target ramping up to a 20% dividend payout ratio by 2028, then maintaining that level through 2030. In February we took advantage of favorable market conditions to execute two financings. We issued 1 billion of parent level junior subordinated notes opportunistically starting to address 2027 parent funding needs. There is no change to our guidance for a net $2 billion of financing from parent debt and other through 2030.
At the utility, we issued $2.2 billion of first mortgage bonds covering roughly half of our 2026 utility debt needs which remain unchanged from a capital allocation perspective and in light of encouraging indications that the state is serious about pursuing additional wildfire reform. We continue to see our current plan as the right one for both customers and investors. However, I’ll reiterate that if we stop seeing progress towards reforming the wildfire risk model, you can be sure that we will actively reevaluate all aspects of our capital allocation Plan.
On Slide 12, we continue to make steady progress toward investment grade credit ratings and I’m encouraged by the momentum we’re seeing following our fourth quarter call. Moody’s revised their outlook to positive, reflecting continued improvement in our credit trajectory. Our focus on strong financial ratios, disciplined holding company leverage and continued progress on wildfire mitigation directly supports the criteria for potential upgrades. As I’ve noted before, achieving investment grade is a key milestone for us.
It will lower our borrowing costs and translate into hundreds of millions of dollars in customer savings over the life of the debt we issue, creating a durable affordability driver for customers not currently assumed in our plan. On slide 13, we’re reinforcing that. We continue to see a path to deliver 2 to 4% long term reductions in non fuel L and M even after absorbing inflation and other cost pressures. Executing against our simple, affordable model is how we keep our capital program affordable for customers and sustained reductions in non fuel O and M are a key element allowing us to grow our plan and fund the investments our system needs while also protecting customer bills.
In addition to the great example of continuous monitoring Patti mentioned, we continue to innovate and drive efficiencies in our field operations by applying technology. By leveraging satellite and LiDAR, we’re improving the quality and consistency of inspections while reducing the volume of patrols, lowering contractor reliance and enhancing safety in the field. Taken together, these changes are expected to deliver $24 million in annual O and M savings this year alone. This is another tangible example of how targeted technology investments support our long term non fuel O and m trajectory.
Slide 14 highlights major regulatory and legislative milestones we’re monitoring this year. On the regulatory front, following our fourth quarter call, we received our 2025 safety certificate from the CPUC, which is valid for 12 months through early March 2027. Additionally, as Patti mentioned, we’re on track to file our 10 year undergrounding plan with the OEIS in the third quarter. I’ll end here on slide 15 by pointing out our differentiated story. We’re proud of what we’ve accomplished and we know there’s still plenty of opportunity in front of us to continue delivering for our customers and our investors.
We’re focused on doing just that day in and day out. With that, I’ll hand it back to Patty.
Patti Poppe — Chief Executive Officer
Thank you, Carolyn. Before we take your questions, I’d like to recap where we stand as we’re building California’s national energy future. We delivered a strong first quarter, putting us firmly on track for another year of double digit earnings growth. Safety remains our highest priority. We continue to strengthen our wildfire layers of protection. We continue to make real progress on affordability with a 23% reduction for our most vulnerable customers since January 2024. At the same time we, we’re seeing good progression of our rate reducing large load pipeline.
And we’re encouraged by California’s focus on constructive wildfire reform with that operator, please open the lines for questions.
Questions and Answers:
Operator
At this time I would like to remind everyone, in order to ask your one question and one follow up press star, then the number one on your telephone keypad and your first question comes from the line of Char Pereza with Wells Fargo Securities. Please go ahead.
Patti Poppe
Morning, Char. Hey
Unidentified Participant
Guys. Good morning.
Patti Poppe
Morning,
Unidentified Participant
Patty.
Operator
Hi.
Unidentified Participant
Morning. So just. I know Patty, you’ve been vocal about not wanting to see the can kick down the road on legislation. I mean obviously that would be a bad outcome in your view. I guess. How should we think about capital allocation? You know, like the buybacks in case some aspects of the CEA report get passed but we don’t get something that is all encompassing. So step in the right direction. But not the Goldilocks scenario. Is some progress a bad outcome if certain key aspects get pushed into 27?
And that’s obviously a tight window and California is dealing with a lot. Just get a sense there. Thanks.
Patti Poppe
Yeah, thanks Char. You know, first and foremost, I would just reiterate that we’re encouraged by the progress to date. We do think the right conversations are happening with the right folks and we feel good and encouraged about that. I’ll just offer that, you know, there’s obviously minimum outcome to prevent additional costs being borne by shareholders and this tail risk being able to be measured and understood. We know that that’s a very important floor for an outcome here. And as we’ve been very clear, we’ve been reiterating wide and far the value of the investor owned utility model.
We’ve been advocating for the importance of the capital that we are able to attain from the capital markets, from our investors and how important that is to making our infrastructure investments affordable for Californians. That as we spread out the cost of infrastructure over time because the great capital that is deployed by our important owners that is good for customers and so an important outcome of SB254 is that we can attract low cost capital to invest in that infrastructure to help California grow and make our energy costs more affordable for customers here.
So I’ll say all that backdrop to say that we feel like our capital allocation and our model is working. We’re lowering rates while we’re deploying our capital today. We think right now is not the time to change that plan. We know that the simple, affordable model is the best plan for customers and investors. And so we’re very bullish on that. Now to the ultimate heart of your question. If that doesn’t occur, if we don’t get a minimum outcome that’s essential, then obviously we’ll have to look at and we will not avoid looking at our entire capital allocation plan, the whole financial plan.
You know, I’m not going to rack and stack how we would think about that here on this call, but I will just say that all aspects of the plan will have to be on the table and we’ll take a look at doing what’s best in totality. But for now we are encouraged by the progress that’s being made and the level of attention to the issue.
Unidentified Participant
Got it. Perfect. I appreciate that and good luck there. Patty. Just lastly, I know obviously you keep highlighting the data center opportunity in the context of savings and kind of bill reductions. Probably that’s the right messaging in this environment. But is there kind of a point you can convert that into sort of like an earnings impact like some of your peers? I mean, 4.6 gigs in final engineering is somewhat material, I guess. At what point does large load growth drive significant new transmission investments?
Thanks.
Patti Poppe
Well, I would say that it is, we are and we shared at the on our Q4 call that we’ve added more CapEx for transmission into our $73 billion capital plan. Given all of our circumstances, we think our $73 billion plan is the right place. The idea that we would make that bigger would take some other changes I would say over time. And so right now as Carolyn has been very consistent in sharing that we want to make the plan better. And when we say better, what we mean by that is by pulling in that transmission and data center load growth, if it makes it more affordable for customers, that’s better.
And so we’ve been very disciplined about our cluster study work and we when we talk about final engineering, we’re sharing real costs with our potential large load customers and they’re signing on for them that are absolutely not just from a sound bite or a marketing perspective, but an absolute rate reducing new capex investment. And so that makes our capital plan even better. There will come a time, I think, particularly after SB254 Phase 2 resolution at the end of the legislative session that we should look at if the conditions are such that we could make the plan bigger.
But that’s just not now.
Unidentified Participant
Got it. Perfect. Thank you again. Appreciate it. See you soon.
Patti Poppe
Yeah,
Operator
Thanks,
Patti Poppe
Char.
Operator
Your next question comes from the line of Nicholas Campanello with Barclays. Please go ahead.
Nicholas Campanella
Hey, good morning. Good morning. Thanks for all the updates. I just wanted to ask a follow up on just the legislation and just, you know, there was a lot put forward by the cea, like three separate phases. It’s a big menu of things and I guess just where are you kind of drawing the line and what is sufficient? Is it more about having some type of permanent cap? If I’m reading your, you know, your response correctly. And then I just, in the last legislative session, shareholders did have to kind of participate in some instances there.
So how are you kind of thinking about that for phase two? Thanks.
Patti Poppe
Yeah, thanks, Nick. The most important thing we think is the whole of society approach. We think the governor was clear and the CEA report reflects that there are multiple aspects of wildfire liability reform that would be important for all California’s because remember, all fires in California are not caused by utilities. Insurance access in California is a real challenge to home ownership. We have a housing crisis in California. Making sure that we have an insurable housing market is very essential for the state.
So well, beyond utility concerns, the CEA report reflects a whole of society approach. We think that’s smart because we’re Californians too and we care about what happens here and what happens to all Californians, not just those impacted by a utility wildfire. Now, that being said, I am the CEO of the utility, so I do have a point of view that we need to make sure that the tail risk of wildfire liability is one that shareholders and investors can model, can predict and know how great the risk is so that you can feel comfortable and investing your clients, pension funds and retirement funds into our infrastructure here in California.
So our minimum is very important that we have ability to see and model and quantify what that tail risk is. Now on shareholder contributions as were required in the 254 phase one, that is a question that’s part of a total look of the value of the fix. The totality of the legislative action will determine whether there’s any reason to make additional contributions. And so the package would have to be looked at as a package. And if it doesn’t improve the status quo, then contributions would be unacceptable.
But if there’s a dramatic improvement to the status quo, we obviously would be in dialogue with policymakers.
Nicholas Campanella
Thank you. That’s very clear. I appreciate that. And then I just had another question because it’s kind of come up to the foray recently. Just the governor election in the state, you know, for various reasons has been more of a focus for folks. And I know that there’s been some calls from various candidates on returns and affordability and maybe even notably a rate freeze. But you know, I do recognize on slides the simple affordable model, you know, you’re showing that you’re pretty well positioned against that.
So just what’s the strategy here to kind of make that resonate with new policymakers and then I guess just how high graded is the plan if we were to kind of go that way with some of the more draconian things that are being pitched right now?
Patti Poppe
Yeah, look, the good news is this number one, whomever is elected governor of the state of California, we’re going to want what they want and that’s affordable utility rates. The even better news is performance is power and we are performing as I mentioned, we’ve reduced rates five times in the last two years. Our most vulnerable customers bills and rates are down 23%. That is meaningful progress that we can point to. And so politicians have to say what they have to say, I guess to get elected. But when it comes down to brass tax and we actually have to do what’s promised, I think our performance is a key enabler to our ability to work with whomever is elected to do exactly what these politicians want.
We want the same thing. We want a healthy, vibrant California powered by pge. And the IOU model is essential to the growth and prosperity of California.
Nicholas Campanella
Okay, thank you.
Patti Poppe
Thanks Nick.
Operator
Just a reminder, please limit your questions to 1 and 1. Follow up your next question comes from the line of Steve Fleishman with Wilf Research. Please go ahead.
Patti Poppe
Morning, Steve. Hi Steve.
Steve Fleishman
Hey, good morning Patty. Carolyn, just I think your comments are pretty clear on what you kind of want out of a law. Just when you look at the different proposals and or structures that were in the Wildfire report, are there any of the ones that best met what you want and you think other parties, stakeholders as well?
Patti Poppe
Yeah, I think Steve, I think this whole of society look is super important. So the three pillars, the you know looking at hardening our communities from spread so important it, you know it’s One thing to prevent an ignition. But when the 100 mile per hour winds are here, we need to make sure that our communities are ready and that they are built for purpose, just like in hurricane zones. Making sure that we get those building codes and implementation of those codes, that’d be very important to de risking our communities.
So obviously that’s a good thing. The liability limits and liability reform is something that we feel strongly should be looked at, particularly when a utility can demonstrate prudence and can demonstrate that through their wildfire mitigation plan they are prudent. And then finally, any kind of state backstop obviously helps to manage that tail risk. But what I’ll tell you is there’s lots of paths to odds here. There are all sorts of vehicles and methods and mechanisms. And so the report, I thought did a good job of outlining multiple paths.
Not we don’t need everything in that. In fact, some of them were intentionally this or that. And so I think now is the heavy lifting for the legislature to really consider what’s the totality package? What is the state’s ambition to truly create a wildfire liability construct that works for everyone and works best. And we’re, you know, as I’ve said, encouraged by the conversations that have ensued so far.
Steve Fleishman
And then I guess one related question of just somebody brought up the governor election and you know, obviously we had this shake up occur. Is there any way to interpret whether that actually adds more impetus to address this wildfire law this year or the other way around? Is it disruptive to it? Just. Yeah. Any thoughts there?
Patti Poppe
You know, I would say the governor, Governor Newsom has done incredible work over his time as governor to address these major fundamental issues with wildfire risk in the state. I think he’s probably the leading governor in the nation who has taken and led his legislative bodies through major reform in this area on his watch. So as he indicated, and we’re just, you know, from the reports and the executive order that he issued, I think he’s expressed interest in having a real fix, but he can’t act alone.
He’s got to have the legislature with him. And so it’s been good to see legislative leadership describing a desire to really get into this issue. And so I look forward to them being able to do their job. And I think unrelated as much to the governor’s election, but for the fact that it’s Governor Newsom’s last year in office here in California, I think he’s made it clear that he’d really like to see action on this.
Steve Fleishman
Thank You.
Patti Poppe
Yep. Thanks, Steve.
Operator
Your next question comes from the line of David Acaro with Morgan Stanley. Please go ahead.
David Arcaro
Oh, hi. Thanks. Good morning, David, I was wondering on the data center side of things, when might you expect to refill that, that bucket of application and preliminary engineering within the pipeline and maybe more broadly, just what has been the pace of data center demand and conversations that you’ve been seeing?
Patti Poppe
Yeah, I would say first of all, the cluster study that we’ve initiated, we call it cluster 26, our third cluster study has initiated, has shown significant demand. As we look at how we do the engineering, we do that over the next six to eight months, we do parallel engineering of all the projects. This has been a real enabler to minimizing costs for any one project, maximizing shared infrastructure investment and really getting a clear eye of where the capacity needs to be either added or leveraged, where we have existing capacity.
And so one of the, I would say the biggest developments we’re seeing lately is more interest outside of just the Bay Area. And so that’s exciting. You know, I’ll just tell you. I was at a conference, an EEI Key Accounts conference with all our large customers. And I was on a panel with a, I’ll just call it a class A data center developer. And as he and I were talking before we went on stage, he, and this is a major data center developer, was unaware we had additional capacity here in California.
And so I think we still have a job to get the word out that California is open for business. You know, we’ve added 33 gigawatts of capacity to the California grid and we’ve got 22 gigawatts more under contract for the next four years. That is significant capacity being added on a grid that is underutilized because of our low air conditioning demand. So we really have an opportunity to serve these large load customers. And I think word’s getting out. And our third cluster, cluster 26, really has demonstrated that.
So I would say, as you can see, as we indicated, 10 plus gigawatts showing interest. That’s in the early phases of that cluster study. And as we do the engineering, obviously some of that will fall out. We’ve seen that over time. But as you can see, we continue to move closer and closer to actual construction. And being online, we still expect to have about 1.8 gigawatts online by 2030. And again, these are multiple projects. No one silver shovel, as I like to say. So this is, I just say, all good for California, for California’s tech industries, for the customers who leverage technology.
And for all of the people who use the grid in California, this is a big win. Win.
David Arcaro
Oh, great. Yep, that’s helpful. And I guess I think you kind of alluded to this also in that response too. But I was just curious. I mean, you’ve got electric bill reduction coming as you start to bring this online. So could you just help with a sense of when those data centers are coming online and when customers would end up seeing some of that bill reduction to kind of add on top of what you’ve been highlighting and achieving on the affordability side of things?
Patti Poppe
Yes. So the 1.8 gigawatts that will be online by 2030, we forecast that to be about a 1 to 2% rate reduction for that time period. And so when you add that in to our simple, affordable model, remember this is the way that we’ve been reducing rates already. There’s very limited large load that’s contributed to the 23% rate reduction for our most vulnerable customers. And 13% rate reduction to date that’s been delivered through the simple affordable model. Converting our capital O and M ratio to a more capital, less O and M, reducing our maintenance costs through more efficient operations, and as Carolyn mentioned, $26 million of savings by transforming how we do inspections.
Those inspections are all O and M. So, you know, one of the secret sauces here at PGE is our O and M reduction capacity. And that is the most beneficial, quickest way to lower rates for customers. Of course, investment grade credit metrics would also help lower bills for customers. And large load as we transition forward is in the future years. Our pathway, as we like to say, our path to flat that is being driven by all of those factors. O and M reductions, more efficient financing and large load.
And the large load in the latter half of the plan.
David Arcaro
Okay, perfect. Thanks so much.
Operator
Thank you. Your next question comes from the line of Anthony Crodel with Mizuho. Please go ahead.
Anthony Crowdell
Hey, good morning. Just how’s it going? A follow up to David’s question on the. I’m curious on the conversion from final engineering to construction. Just your confidence in. Obviously you had an increase there up to 140. Just as that 4600 now is in final engineering confidence of converting that to the construction mode. And then I have a follow up.
Patti Poppe
Yeah. So first of all, one thing to remember about how this large load gets approved and financed here in California. Our generation capacity is driven through the California Energy Commission, CAISO and the CPUC. And that’s why we’ve added 33 gigawatts. That process is working really well. I know that some of the ISOs across the country are struggling to get new large load built. We’re getting capacity added to the grid. So in order to get one of these large load customers, they can leverage that capacity that’s been added to the grid without having to do one on one contracts per se.
So when we talk about final engineering, we’re predominantly talking about transmission and the transmission engineering that’s required because in a lot of cases we’re able to just do a direct connect dual feed with a backup online on site in order to deliver the reliability that these large data centers require. So to answer your question specifically, Anthony, you know, we think there’s a high conversion, but you know, we’ve not been at this stage with this volume before. And so we’re buttoning up all the final details with our counterparties.
But the fact that they’re moving forward, they’re putting money on the table. These aren’t final agreements, but they’re awfully close and they’re putting real forecasted expectations for bringing load online. And so we’d say that process is working. But these will be important tests here, these final, these 4 gigawatts to see how much that actually goes to construction. But we’re pretty optimistic that a lot of it will. And so that’s why we forecasted 1.8 gigawatts by 2030. Right now you can use that as simple math, but those numbers could change here in the coming months.
Anthony Crowdell
Great. And then a follow up on the $5 billion of incremental investment opportunities. And I know, I think third quarter you’re going to file undergrounding and the miles are kind of subject to approval. How much of the $5 billion of incremental opportunities is dependent on the approval for the undergrounding plan? Or the underground plan would be incremental to this 5 billion?
Patti Poppe
Yeah, unrelated, unrelated. We built in a level of undergrounding and around a billion dollar a year in our $73 billion plan. And that’s what’s built into our assumptions. So when we talk about the 5 billion, we talk more about accelerating reliability improvements, accelerating new business connections, accelerating these large loads, including more and more transmission infrastructure investment in our plan. Because right now we’re making trades between where best to deploy capital. We have plenty of capital to deploy and we’re really working from affordability and our balance sheet are key drivers to how much capital we deploy, which is why we love our plan.
We think it’s the best. It really threads the needle for customers and investors. And so anything we add to the plan at this juncture means something else is coming out. And so that’s why we would say that the $73 billion incorporates all of those things.
Anthony Crowdell
Great. Thanks for taking my questions.
Patti Poppe
Yeah, thanks, Anthony.
Operator
Your next question comes from the line of Greg Orill with ubs. Please go ahead.
Patti Poppe
Morning, Greg. Good morning. Yeah,
Gregg Orrill
Hi. Good morning. Thank you for the question. Was wondering about settlement discussions in the rate case, if you’ve had any, and just your general thoughts on how that’s going and if settlement is at all likely. Thank you.
Patti Poppe
Yeah, I would say first of all, evidentiary, evidentiary hearings will be here throughout May. And I think that’s an important step in the process that may create an opportunity for settlement. And so we would never rule out settlement. Obviously, we’ve settled cases in the past, but we’ve also gotten pretty strong indications from the CPUC that they like to do a fully adjudicated grc. So we’re open to both. We think we filed a great case. We think, you know, given our commitment to affordability and our follow through on what we promised the commission we would be doing with rates and they’re watching it happen.
I think we enter those discussions as a real trusted counterparty and we look forward to the hearings throughout May.
Gregg Orrill
Thank
Ryan Levine
You.
Patti Poppe
Thanks, Greg.
Operator
Your next question comes from the mind of Ryan Levine with Citi. Please go ahead.
Ryan Levine
Good morning,
Operator
Ryan.
Ryan Levine
Two questions. One, just in general, how does the summer look for weather into wildfire season? And then secondly, as you continue to look to optimize capital allocation into potential scenarios around capex, whether it’s growth or something else, how do you look at what credit metrics to maintain on your holding company leverage?
Patti Poppe
Well, I’ll take the weather question and I’ll pass off to Carolyn on the credit metrics on the forecast for weather. Look, one thing I’ve learned, we have incredible scientists here at PGE who are extraordinary weather predictors. But our strategy is not to count on weather prediction. We count on being ready every day. And so regardless of the conditions, we are in a position and a posture to respond and to be prepared and to prevent, you know, as I shared in my prepared remarks, this continuous monitoring application to our grid is extraordinary.
I cannot overstate how exciting it is to us here at the company to look at the potential of being able to move from a reactive grid operations to proactive grid operations with visibility knowledge and forethought before conditions materialize and before a branch grows into a tree, before A line has any kind of degradation, we can see it before a transformer might have early signals of failure. We are moving into a fully predictive grid posture. We’re not there yet, but boy, oh boy, are we making progress.
And this continuous monitoring gives us a lot of confidence heading into this wildfire season that we have the posture required to prevent catastrophic wildfires. And so we’re just, we’re working hard to make sure that we deploy those sensors and leverage that technology as quickly and as affordably as possible because it is so, so beneficial. I’ll go ahead and kick it over to Carolyn for the credit question.
Carolyn Burke
So just as a reminder, stepping back, like our current plan is certainly built around three things. As we’ve said, no equity, particularly at today’s low valuation. We want to maintain the common dividend, which provides us with flexibility. And then we do have some modest debt level, parent level, sorry, debt financing in the plan at the end. But we are maintaining that 10%. And that’s all built around maintaining our IG level credit metrics today post SB 254. I think that’s what you’re getting at and looking at a different capital allocation.
If we said everything’s on the table at that point in time, and so all elements of that plan that I just went through will be on the table to be considered at that point in time. And what I’ll say is that you can just really count on us to look at market conditions. We’re going to be looking at what’s going on with our stock price, what’s going on with interest rates, what is the overall environment, and we’ll come to that conclusion at that time.
Ryan Levine
Okay. And I appreciate the sensitivity, but is there any color you could share around whether special dividends or ratable dividends or buybacks that we should consider in those type of scenarios?
Patti Poppe
Hey, Ryan, it’s Patti. Yeah, as I’ve said, we’re just not going to rack and stack the alternatives here today. We’re going to make sure, you know that we do first things first, and that’s to get a solid SB254 outcome.
Ryan Levine
Appreciate the time.
Patti Poppe
Yep, thank you. Your next question
Operator
Comes from the line of Richard Sunderland with Truist Securities. Please go ahead.
Richard Sunderland
Good morning. Can you hear me?
Operator
Yep, we can hear you.
Richard Sunderland
Thank you. Just one for me. You know, given the transparency in the SB254 Phase 2 process, recent CEA report, do you expect any new look to the legislative process this summer, like an earlier bill introduction or more debate on public text or I guess anything else that offers more external insight into where the process stands.
Patti Poppe
Well, you know, we don’t know exactly what, how the legislature is going to approach this, but we do know that the Assembly Energy Committee chair, Katie Petrie Norris, had indicated that she had hoped to hold hearings sometime in May, which would be. She said that in public statements. And so we’re hoping that that gets followed through on. We do think hearings will be important because it’s a complex subject. And we think the more our legislators and these important committees, both the insurance and the energy committees in the Senate and the assembly, understand the alternatives, they’ll see what the CEA report really was conveying that inaction is not a good path forward.
Inaction would be really just not an option. It’s unaffordable. It’s too expensive and too regressive. And we know our policymakers, when they understand that, will want to take the appropriate actions. And the good news is the CEA report provides multiple alternatives for consideration that would dramatically improve the status quo. So we look forward to those hearings and we look forward to the discussion and how it transpires here over the legislative session between now and the end of August.
Richard Sunderland
Appreciate the thoughts. Thank you.
Operator
Thanks, Rich. Your next question comes from line of Carly Davenport with Goldman Sachs. Please go ahead.
Unidentified Participant
Hi, this is. Good
Operator
Morning.
Unidentified Participant
Hi, Good morning. This is Dean for Carly. Actually, thanks for taking the question. Yeah, I had a question on the Caiso transmission project. Could you give us a sense of where things stand in terms of getting to a final approved status? Are there any projects that you’re more optimistic could clear the final iteration this year? And then how should we think about the financing strategy for these projects? Thank you.
Patti Poppe
Yeah, thanks, Beatrice. Great questions. We’re excited to report the transmission planning process from Caiso has completed and they’ve awarded 25 projects for 25, 26 planning, totaling $4.16 billion of projects for PGE. You know, this is a big improvement for PGE. I think there was a period of time where the Caisa was not sure that PGE could follow through and do these transmission projects at this scale. And their determination certainly has shown that they have confidence that of 26 projects, 25 were awarded to PGE.
And we’re proud of that. And all of those projects are currently built into our $73 billion capital plan. So no change to the capital plan there, just our ability to go ahead and execute.
Unidentified Participant
Thank you. That’s great. And then a quick follow up on Diablo Canyon, now that you got the license renewal how are you thinking about appetite from the state to keep the plant on longer term?
Patti Poppe
Yeah, well, thank you for asking this question. I always love talking about Diablo Canyon. Look, we’re very happy with the NRC’s 20 year license renewal. And that was, that was a big milestone for the team. I think they’ve earned that with their performance, their continued delivery of clean energy for the state of California, one of the best operated nuclear plants in the country, proud of their performance and we think that performance was essential in that license renewal. Now it is up to the legislature on whether the plant would be extended beyond 2030.
I think the CPUC has been very clear that there’s a real cost benefit in the billions of dollars of savings for customers by having Diablo remain online. And there’s a recent study by MIT that confirmed and validated CPUC’s understanding or CPUC’s forecast. So I think with affordability top of mind, you know, I leave it in the hands of the legislature to take the necessary actions to extend the life beyond 2030. But the economics certainly work.
Unidentified Participant
Great. Thank you so much.
Patti Poppe
Yep, thanks.
Operator
This concludes the question and answer session. I will now turn the call back over to Patty Palpy for closing remarks.
Patti Poppe
Thank you, Jeannie. Well, you know, thanks everyone for tuning in today. We know a lot of eyes, including ours, are on Sacramento and Wildfire liability reform. And you can rest assured that our eyes are also running a great utility. The PGE transformation is on track. We have never been stronger or better positioned to serve and it is our honor to do so. Thank you for joining us today. Stay safe out there.
Operator
Ladies and gentlemen, that concludes today’s call. Thank you again for all joining. You may now disconnect.