Janet C. Loduca - Vice President-Investor Relations Anthony F. Earley Jr. - Chairman, President & Chief Executive Officer Jason P. Wells - Chief Financial Officer & Senior Vice President Geisha J. Williams - President, Electric, PG&E Corp. Steven E. Malnight - Senior Vice President, Regulatory Affairs, PG&E Corp.

Hyun Park - Senior Vice President & General Counsel.

Stephen Calder Byrd - Morgan Stanley & Co. LLC Greg Gordon - Evercore ISI Steve Fleishman - Wolfe Research LLC Michael Lapides - Goldman Sachs & Co. Christopher J. Turnure - JPMorgan Securities LLC Anthony C. Crowdell - Jefferies LLC Paul Patterson - Glenrock Associates LLC Praful Mehta - Citigroup Global Markets, Inc.

(Broker) Julien Dumoulin-Smith - UBS Securities LLC.

Good morning and welcome to the PG&E Corporation First Quarter 2016 Earnings Conference Call. All lines will be muted during the presentation portions of the call, with an opportunity for questions and answers at the end. At this time I would like to introduce your host Ms. Janet Loduca of PG&E. Thank you, and enjoy your conference. You may proceed Ms.

Loduca..

Thank you, Jackie, and thanks to those of you on the phone for joining us this morning.

Before I turn it over to Tony Earley, I want to remind you that our discussion today will include forward-looking statements about our outlook for future financial results, which is 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 on the second page of today's slide deck. We also encourage you to review our quarterly report on Form 10-Q that will be filed with the SEC later today and the discussion of risk factors that appears there and in the 2015 annual report.

With that, I'll hand it over to Tony..

Well, thank you, Janet, and good morning everyone. I've got some opening remarks and then I'll turn it over to Jason to review our financial results for the quarter. We continue to believe that the three key focus areas shown on the slide three are the foundation for long-term operational and financial success.

I'll also cover some of our near-term challenges later in my remarks, but I do want to touch on some of the fundamental drivers of growth, first. So let me start with an update on how we're positioning ourselves for a clean energy economy and the growth that it will make possible.

As you know California has some of the most ambitious greenhouse gas emissions reduction goals in the country and we're helping the state to achieve those goals. First, as we plan for a 50% renewable portfolio standard, we're building additional flexibility into our contracts to effectively respond to changing market conditions.

We've also begun our second round of energy storage solicitations, targeting nearly 600 megawatts of storage by 2024 to help manage the intermittency of renewables.

In March, we reached a settlement with many of the parties engaged in our electric vehicle charging infrastructure proposal, which is critical to enable the levels of EV adoptions the state is targeting over the next decade. We're hopeful the Commission will approve this settlement later this summer.

And finally, as the uses of our energy grid now grow and evolve, we continue to invest in new technologies and equipment to enable distributed energy resources and more actively engage with other stakeholders to shape future policies.

Turning to customer expectations, our recent JD Power survey results show that we've made significant progress with our gas and electric business customers, with the largest year-over-year increase in customer satisfaction in almost a decade.

These results reflect concerted efforts to improve the customer experience through ongoing safety and reliability investments. The El Niño storms this winter were good news and bad news. On the positive side, given all the precipitation we've had we expect hydro production this year to be closer to normal compared with just 50% of normal last year.

However the increased storms also negatively impacted our electric reliability during the quarter. Nevertheless, we continue to show very strong emergency response performance on both the gas and electric sides of the business. And our teams are working to get our reliability back on track for the remainder of the year.

We also continue to focus on reducing the number of third-party dig-ins on our gas lines. As you know, third-party dig-ins pose a significant public safety risk and are completely preventable through the free 811 call before you dig service.

The significant steps we've taken to raise public awareness on this issue were recently recognized by the Common Ground Alliance and our efforts have resulted in industry-leading performance.

In April, we announced that PG&E entered into an agreement with TransCanyon, LLC, a joint venture between subsidiaries of Berkshire Hathaway Energy and Pinnacle West. The agreement with TransCanyon allows us to jointly pursue competitive electric transmission projects throughout the California ISO footprint.

We look forward to leveraging our collective experience and resources to explore future opportunities. Last week, we had a development in the Butte Fire when CAL FIRE issued its investigation report.

The CAL FIRE report concluded that the fire was caused by a tree coming into contact with one of our lines, consistent with what had been reported in the press earlier.

First, let me say that our thoughts and prayers continue to be with the victims and communities who suffered losses as a result of that fire and all of the devastating fires across California last summer. We also want to thank CAL FIRE and other first responders, including our own, for their heroic efforts in responding to all of those fires.

We continue to believe that we have one of the best vegetation management programs in the industry and disagree with the report's conclusion that our practices fell short.

To give you a sense of the magnitude of our program, every year our certified arborists and registered professional foresters monitor nearly 50 million trees across our service territory, and we remove more than a million trees each year. We use some of the most sophisticated technology that I've seen in my career for this program.

Jason will review the financial impact of the Butte Fire in just a minute. And finally, I want to provide a few regulatory and legal updates. I'll start with the 2015 Gas Transmission and Storage rate case, which I know is top of mind for many of us.

Although we had hoped to receive a proposed decision in the first quarter of this year, we're still waiting for that to be issued. As Jason will discuss, our quarterly financial results will continue to be impacted until we receive a final decision.

In the 2017 General Rate Case we were really gratified to receive a report from the Safety and Enforcement Division recognizing our risk management practices as industry-leading.

The SED report found that PG&E's risk assessment approach provides a greater transparency, and successfully maps risk outcomes to requested expenditures, meeting the Commission's goal of moving safety to a fundamental consideration in the case.

The SED report also acknowledged that the value of the third-party certifications – they've acknowledged the value of the third-party certifications we've received in our gas asset management programs. In April, we also received testimony from the other parties in the case, which recommended reductions to our request.

Obviously, we disagree with those proposed reductions, and we'll be filing our response later this month. In the gas distribution, record keeping investigation, we received penalty recommendations from both the Safety and Enforcement Division and the City of Carmel. Fundamentally, we do not believe that any of the penalties are warranted in the case.

However our response noted that if the CPUC decides to issue a penalty, we believe it should not exceed $33.6 million, and should be applied towards future spending rather than taking the form of a fine. At this point, the record is complete, and we're awaiting a decision from the Commission. I also want to provide a brief update on the criminal case.

We continue to believe that the changes do not – the charges do not have any merit. While we have acknowledged that we've made mistakes in the past, we simply haven't seen any evidence to indicate that PG&E employees knowingly and willfully violated the law.

We're anxious to get the case underway, but just two weeks before the trial was scheduled to begin, the government finally provided us with more than 100,000 pages of documents that we've been requesting for more than a year. To ensure we could thoroughly review all of this material, we were compelled to ask the court for a delay.

We're scheduled to go back before the court tomorrow to provide an update on our review of the documents and we hope to get a reasonable new trial date at that time.

So to sum things up, while we continue to work through some of the outstanding regulatory and legal issues, we are well-positioned for growth, as we support California's clean energy future. So with that, I'll hand it over to Jason to review the financials..

Thank you, Tony, and good morning, everyone. I'll begin by covering the first quarter results and then quickly review the 2016 outlook. Slide five shows our results for the first quarter. Earnings from operations came in at $0.82. GAAP earnings, including the items impacting comparability are also shown here.

The pre-tax numbers for the items impacting comparability are at the bottom of the page. Pipeline related expenses came in at $22 million pre-tax in Q1. Our legal and regulatory related expenses were $17 million pre-tax for the quarter. And fines and penalties were $87 million pre-tax.

As a reminder, this amount represents our estimate of the disallowed capital work, coming out of the final San Bruno penalty decision, which we are accruing as we complete the work. Our results for the first quarter, include a new item impacting comparability for costs related to the Butte Fire.

Based on the CAL FIRE report, we've taken a charge for $381 million pre-tax for the first quarter. As background, California has a theory of inverse condemnation, under which utilities may be liable for property damages without a finding of negligence when a power line is involved in a fire.

The charge we've taken includes $350 million to reflect the low-end of a range for property damage and an additional $31 million for other costs related to the fire. At this point, we are not able to estimate the upper end of the range.

We do carry liability insurance for claims like these, so we would expect to be able to recover a significant portion of those costs through insurance in the future. And we would show the insurance recoveries, as an offsetting positive item impacting comparability, in the future periods, as they are recorded.

Finally, it is important to note that the $381 million does not include an accrual for any fire suppression or personal injury damages, both of which would require a showing of negligence. Slide six shows the quarter-over-quarter comparison from earnings from operations of $0.87 in Q1 last year and $0.82 in Q1 this year.

The largest item, relates to the timing of taxes during the quarter, which was $0.08 negative. GAAP accounting requires us to smooth the impact of taxes across the quarters, even as income fluctuates. This is purely a timing item that will reverse by year-end. In the first quarter of 2015, we completed our disposition of the SolarCity shares.

We did not have that item this quarter, resulting in $0.03 negative. And issuing additional shares, also resulted in $0.03 negative. These negative drivers were partially offset by growth in rate-based earnings which was $0.05 positive for the quarter.

This item reflects assets covered by our General Rate Case and our electric transmission TO rate case. It does not include the Gas Transmission rate case since we do not yet have a decision. At this point, we would not expect a final decision in the first phase of the case until at least mid-year.

So while the timing should not affect our annual earnings from operations in 2016, it will continue to have an impact on our cash flows in quarterly results as you saw last year. And finally, we had $0.04 of smaller positive miscellaneous items that impacted the quarter.

Today, we are reaffirming our guidance for earnings from operations of $3.65 per share to $3.85 per share, and that is shown on slide seven. The underlying assumptions for earnings from operations remain the same as what we provided last quarter, so I'll just quickly cover the highlights.

On slide eight, we continue to assume capital expenditures of roughly $5.6 billion, and a weighted average authorized rate base of about $32.6 billion for the year. On the bottom right, I want to reiterate a key assumption to our guidance, which is that we receive a reasonable outcome in the Gas Transmission rate case this year.

Turning to slide nine, the guidance for the items impacting comparability has been updated to include the Butte Fire related costs. The other items impacting comparability are unchanged from last quarter.

Our guidance for the year for the Butte Fire related cost reflects the Q1 charge of $381 million, which is the low end of the range for property damages, plus some other fire related costs. As I mentioned, we are not able to estimate the high end of the range at this time.

As shown at the bottom of the slide, the current range for items impacting comparability in 2016 is right about $1 billion. And as a reminder, this range excludes any potential future fines or penalties beyond our estimates of the disallowed capital and expense costs associated with the San Bruno Penalty.

On slide 10, we continue to assume equity issuance of $600 million to $800 million in 2016. During the first quarter, we issued about $150 million in equity through our internal and dribble programs. As a reminder the range reflects a number of assumptions including the timing and the amount of revenues we receive in the Gas Transmission rate case.

The charge for the Butte fire results in roughly $100 million in new equity needs this year, which puts us towards the high end of our range. And finally, on slides 11 and 12, we are reaffirming the CapEx and rate base ranges through 2019.

So to conclude, we continue to have a strong growth profile supported by California's long term policy objectives. We are confident in our ability to execute on our operational plans as we continue to work through outstanding regulatory and legal issues. With that, let's open up the lines for questions..

Certainly Our first question comes from the line of Stephen Byrd with Morgan Stanley. Please proceed..

Hi. Good morning..

Good morning, Stephen..

Good morning..

I wanted to dig into the status of the efforts underway to create and integrate the Western grid. We obviously follow with interest your joint venture, but more broadly, it seems like there's a lot underway in terms of trying to move towards that overall goal and we've been trying to follow the procedural steps there.

But at a high level, can you give us a sense of where that's headed, is there any contentious issues or what any sticking points in terms of trying to move forward towards the concept of a more integrated Western grid?.

Hi, Stephen. This is Geisha Williams. We are very supportive of the energy imbalance market and also CAISO's efforts to really have a more regional larger footprint.

There is a lot of discussion going on, good progress has been made already with the EIM or the energy imbalance market and a lot of discussions are occurring right now in terms of looking at beyond the energy imbalance market, what it would take actually have a broader market, a broader area.

We support it for lots of reasons, not the least of which is we believe that it will enable CAISO to really dispatch lower cost renewables, really take advantage of the load diversity and supply diversity that really is in existence in the western area. So we're optimistic and very supportive of their efforts..

Great. And can you share any particular elements of push back or any sort of – it seems like there are a number of benefits to having a more integrated grid.

Are there any sort of negatives or issues that have been raised that, that could potentially be sticking points?.

I think that there could be – one of the issues is, who governs this broad regional area. Right now, the CAISO is really focused on California. So the membership of the board is are Californians appointed by the Governor of California.

As we look at a broader market, it will be interesting to see what the makeup of that board would be, what the representation will be from other states and what the implications might therefore be on California.

One of the things that will create a bit of a sticking point will be that the rates of California will not be increased, as a result of a broader market. So these are going to be some of the issues that are going to have to be resolved..

That's helpful. And if I could shift gears quickly to energy storage. You've taken a lot of proactive steps in building that out. The one sort of item of feedback we get is that, obviously as costs drop, volumes in terms of installation could go up.

At a high level, could you speak to – so what you think will be necessary to have an even broader deployment of storage, are there sort of mile post levels in terms of overall costs that you would see or is this more just a gradual adoption kind of a plan in the state?.

Well. California again is leading in this area and I think of course you know about the RFO on storage, the storage mandate that we have in place where PG&E will be putting in place 580 megawatts of storage between now and 2024. We had our first solicitation in December of 2014. We announced who the winners of that solicitation were.

This year and now we're awaiting approval. We're going to have yet another solicitation at the end of this year for an additional 120 megawatts. So we're seeing great participation from the storage market, which is very – it's very good news.

We think that it's an emerging technology, a lot of investment from many, many different companies around the world and we're hopeful that just as we saw declining prices on distributed generation or solar panels that we will similarly see improved costs if you will on the storage side.

But it's early days and I think the market is still evolving and we're watching it and hopeful that again as more and more storage comes online that in fact we will see better pricing in the future..

Understood.

And if you did see significant cost reductions in storage, could there be a step change upward in terms of the amount of storage that you would ideally want to employ?.

Well we believe storage is really a critical part of integrating renewables. So we are very active in the market looking at our own ownership as well as contracting with third-parties. But again, it depends on the economics, it depends on what types of changes we see in the future.

Again we're hopeful, and are always in discussions with folks about what could potentially work. But again it's like looking in the crystal ball. I really can't – I can't really speculate on what prices might be and what our actions might be in relation to those prices..

Understood. Thank you very much..

Thank you, Mr. Byrd. Our next question comes from Greg Gordon with Evercore ISI. Please proceed..

Good morning..

Good morning Greg..

Good morning..

I know you've articulated that it's your aspiration to take some action on the dividend and give investors, a sort of a vision for what you see as the long-term, sort of total return profile for the investment after we get through these last few milestones.

Is it fair for me, or am I putting words in your mouth to say that the GT&S case, and the criminal proceeding are sort of the last two major issues we need to resolve before you feel comfortable articulating that outlook?.

Greg, first of all, we have made good progress internally on our discussions about the dividend. I feel good about it. Recall at the last quarterly earnings report, I said it's my objective to be able to publicly state our policy this year. Obviously we've got to be sensitive to all the other things that are going on.

So I wouldn't call the things you mentioned as things that have to get behind us. But they have to be in the right place in order to make a decision, I mean I would tell you the Butte fire, we're just in the early stages of analyzing what the impacts are and we've got to just figure that out.

I don't see that it will in the long run impact our ability at all for a dividend, but you just have to be sensitive. You've got to make sure, you've got all those things lined up when you make that announcement..

Okay. Thanks. And on the Butte fire, I know you've increased your assumed equity issuance needs within the guidance range of course as a function of that. But if you ultimately are covered by your insurance policies, is it actually necessary to equitize those, really necessary to equitize those costs..

Hi, Greg. It's Jason Wells. No, over the long-term, it wouldn't be. But there may be a timing difference between the recognition for the costs associated with the Butte fire and the receipt of the insurance proceeds. So over the long term, no, there would not be the need to equitize those amounts, but there may be short-term financing need..

Okay. Thank you, gentlemen..

Thank you, Mr. Gordon. Our next question comes from Steve Fleishman of Wolfe Research. Please proceed..

Just a follow up on that topic.

So would it be fair to say that it's still, dividends is still something that could be addressed in 2016?.

That's my goal..

Okay. And then a question on the criminal case, you mentioned the document dump and that you'll be kind of responding tomorrow, I think to the court.

Just curious if you could, maybe we can get this tomorrow, but were there a lot of documents in there that kind of would you say better support your case, and obviously better kind of – it sounds like it supports your comment that you already made that there is no evidence of any purposeful negligence..

Just a couple of comments. One, the fact we have 100,000 pages of documents dumped on us two weeks before the trial is quite remarkable. The hearing tomorrow is just to report on going through those documents. You have to go through them – someone's got to read all the documents.

They are not in a – they weren't given to us in a form that you could do any automated reading of them. So somebody has got to put eyeballs on them. It takes a while to do that. And yes, we are finding documents that are very helpful to our case..

Okay. Great. And then I think just on the Butte Fire issue. So could you may be just go through once again the different areas of potential exposures that we need to think about. You mentioned you've taken this reserve for property damage.

But then I guess what are the other areas that are not estimable that you haven't reserved and how we should think about those..

Yeah, this is Jason. We're still in the early stages of discovery and getting more information on the specific claims. With respect to the property damage though, I would say we have a good handle on the damages related to structures. But some of the other components are more complicated including damages to trees.

As you can imagine, there are a lot of variables that go in to quantifying damages related to tree loss, including the number of trees that were burned over the 70,000 acres, the species and size of those trees, the pre-fire health of the trees, the post-fire tree value among other factors.

And so we're working through these issues and we'll obviously provide an updated estimate once we have better information and are able to access those impacted parties. So that's what I would focus on from a property damage standpoint..

Okay. Thank you..

Thank you, Mr. Fleishman. Our next question comes from Michael Lapides with Goldman Sachs. Please proceed..

Hey, guys.

Hate to beat the dead horse but on the wildfire issue, you mentioned the $350 million was the low end, what's the high end?.

We don't have a high end of the range at this point. We're still – it's – we're really in the early stages. So we're trying to gather as much information as we can on the specific claims, and we'll obviously update that range when we have better information..

Got it. So it's not a – not really a range if there's not a high end.

I'm just trying to think about, is there something we're going to be talking about every quarter, where the number keeps creeping up or is this, hey, we've kind of done the bulk of the work, we're 90% of the way there and maybe there is a little bit more coming, but it's not a material bit more..

I think we're really in the early stage. As I mentioned before, I think we have a really good handle on the damages related to structures. There is still a lot more work that we need to do particularly related to the damages to trees. And so we're working through that as quickly as possible..

Got it.

And Tony, as you get through the GT&S case, as you get through the final San Bruno related stuff, how are you thinking longer-term, meaning 2017 and beyond, about the ability to earn the authorized and some of the tailwinds or headwinds that could actually enable you to do so, or keep you from doing so?.

Well, obviously, that's our objective is to earn our allowed return going forward. And we think we've done a lot of work, both internally on managing our cost. We've got a big push on affordability here.

Obviously, we're going to invest what we think we need to invest in the system and I think given the approach in rate cases, we're very optimistic that the showings we've made in our rate cases will support getting a level of revenues, that means that we will have money to continue to make those investments.

So there're obviously going to be things that come up, but I think, we're positioning ourselves well for the future..

Got it. And when you think about the main GRC, the generation and distribution one, how are you thinking about the timeline for that? I know what the stated timeline is.

Unfortunately California hasn't stuck to a stated timeline on a rate case for anybody in the state for a number of years and how any significant delays could potentially impact the balance sheet or cash flows?.

Well, just in general, you're right. It's not just us. All of the cases have been delayed recently. We've had discussions about that. That's not helping California's image, I mean from a regulatory standpoint we've got lots of good policies in place. But the policies aren't effective unless you get the decisions based on them.

That said, I really do think this case is different. I mentioned some other things that SED said about our filing. And also when you look at the bid-ask range, it's not as big as it's been in the past. And so we hope this can be moved along faster than in the past. And maybe I'll let Steve Malnight comment..

Yeah, this is Steve. Thank you, Tony. I do think a couple of things. I agree with Tony. The case so far is moving along on schedule. I think we're optimistic about the case. The challenges do tend to come later in terms of timing.

However, having said that, in this case we also did already receive the authorization to ensure that if the case is delayed, the revenues would be retroactive to the beginning of 2017, which is an important milestone that the Commission has regularly done in many of these cases. So the timing impact is somewhat muted because of that benefit..

Got it. Thanks, guys. Much appreciated..

Thank you, Mr. Lapides. Our next question comes from Chris Turnure with JPMorgan. Please proceed..

Good morning guys. I know we've gone over this on past calls, but I wanted to just discuss the rate base and CapEx guidance for both this year and the next couple of years.

Is there a chance that there could be lower CapEx spend than the bottom end of the range, if all of your rate case decisions kind of come out at the lowest, I guess potential scenario that you guys have been anticipating..

I'd say it's really, really early to kind of presuppose any decision on this process. Just as a reminder, our CapEx and rate base ranges, what we provided here is essentially in the outer years, we stayed flat to what we were spending in 2015, which I think is a reasonable assumption for the low-end of the range.

And then the upper-end of the range reflects what we currently filed in our rate cases and where there's a period not covered by the rate case, we hold that upper range flat with the last rate case filing. So I do think it represents a reasonable range for CapEx and rate base over the next several years..

And I guess, the other thing that I would add. Some of the recommendations of the other parties while they recommended reductions in our expenses largely supported the capital proposals..

Okay. And then just to go back to the fire. Maybe you could give us a bit of historical context here and remind us of your last kind of major fire where you had a liability there, and how things kind of played out in terms of timing, the amount of liability and the insurance proceeds.

And then am I to understand this, the special legal clause in the State of California as basically putting any utility on the hook to pay for trees and other property damage even if they are not negligent there. It seems kind of a lot there and obviously you have insurance proceeds.

Do those costs of insurance and the premiums there get passed through to rate payers ultimately?.

So, this is Hyun Park, General Counsel. So you had a number of questions there. So I'll try to answer what I can recall. The first question was about our prior experience with fires.

And yeah, we've had fires in the past, and for example in 2013, we settled two fires; 2004 Power Fire and 2008 Whiskey fire and it cost us $50.5 million to settle those fire cases. In 2012, we spent approximately $30 million settling the 2004 Fred's and Sims Fires and in 2009, we spent approximately $15 million to settle the 1999 Pendola Fire.

So those are the recent experiences with the fire cases. And you asked a question I think about inverse condemnation. And basically, inverse condemnation is a doctrine that is based on the California Constitution. It's based on the Takings Clause of the California Constitution.

And courts basically held that inverse condemnation maybe found when three elements are satisfied. First, there has to be injury to private property. And second, the property damage was substantially caused. So there has to be a substantial causation and it does not matter whether there is fault or not.

And thirdly, the damage had to be caused by a public improvement operating as deliberately designed, constructed or maintained. So that's the language from the case law.

And inverse condemnation has been applied to utility fire cases, where fires were caused by power lines, and court cases that basically describe the underlying purpose of this doctrine is intending to distribute throughout the community, any loss inflicted upon an individual property owner by public improvement.

And inverse condemnation allows recovery for property damage, prejudgment interest and attorney's fees..

Thanks. And I think you had one question about recoverability of our insurance costs. They are a component of our rate cases. So we do file and seek recovery for the costs of our various insurance programs..

Okay. Thank you..

Thank you Mr. Turnure. Our next question comes from Anthony Crowdell with Jefferies. Please proceed..

Good morning. I just want to follow up on the previous questions. What's the path from here to reconcile the Butte fire. Do we – you guys go through the paperwork. You come up with a new target.

Does it go to a court, does it go to District Court or where does it get resolved?.

Yeah. So to-date we have 32 complaints involving approximately 1,300 plaintiffs and their property insurers. So these cases have been coordinated in Sacramento Superior Court and of course it's possible that more cases will be filed.

And right now, what's happening is the plaintiffs are starting to present to the utility claims seeking early resolution of the so-called preference cases and these are the cases that involve plaintiffs who either due to their age or physical condition are not able to wait for the full trial process.

So we're starting to engage in discussions with the plaintiff's counsel about that these preference cases. And we have a Case Management Conference in Sacramento Superior Court on May 24..

When you went to the previous question, it seemed that from fires to settlement, we were looking at anywhere from eight years to 10 years, is that accurate or did I not hear it correctly?.

I don't recall, saying anything about eight years to 10 years, but.....

When you mentioned the fires, there were 2004 fires that were settled in the last couple of eyars..

Is that accurate?.

Yeah. So some of these settlements do to take a while. Yeah..

I think the components of the settlements that normally takes the longest is the actual CAL FIRE or U.S. Forestry Service component where they are asking or claiming fire suppressions costs and it's that element that likely often takes a long time..

Okay.

And just lastly, Jason, just trying to sure I heard correctly, the fine recommended by CAL FIRE was $90 million but that's not included in the company's low end of the range right now, is that correct?.

So, couple of things on that. The first is the $90 million that CAL FIRE mentioned in its report was not a fine. It was essentially, they're seeking recovery for their cost to respond to the fire.

In order for us to be viable for those fire suppression costs that were incurred by CAL FIRE, we'd have to be found liable for negligence and we just don't see, see that as based on what we understand today that we don't see the possibility being found liable for negligence as Geisha mentioned and as Tony mentioned.

We have an industry-leading veg management program. And so at this point, we have not accrued anything for those fire suppression costs..

Great. Thanks for taking my questions..

Thank you, Mr. Crowdell. Our next question comes from Paul Patterson with Glenrock Associates. Please proceed..

Good morning, guys..

Good morning..

Good morning..

I wanted to follow up on Steve's question regarding the criminal case. There has been some discussion about some of the former executives getting granted immunity.

And I don't believe what that actually means or practically, or what does that mean, how should we think about that in terms of – what are the ramifications of that, I just don't understand it that well, do you follow what I'm saying?.

Yeah. So this is Hyun Park, again.

So at the earlier stages of the government's investigation of this case, the government insisted that certain of our current or former employee witnesses be represented by a separate counsel, other than the company counsel and in situations like the one we're in, getting immunity by certain witnesses is actually fairly common and I don't think one should read too much into that.

As part of our cooperation with the government, we agreed to have some of our employee witnesses be represented by separate counsel. And these witnesses' lawyers negotiated an immunity, and it's fairly routine. And just being granted immunity does not mean that they are going to testify for or against anybody.

I mean the bottom-line is that they all have to be sworn in to tell the truth..

This is Tony, I might add that in the civil cases, because remember we have the investigation into San Bruno. But in the civil cases most of these employees were deposed.

So we have a pretty good idea of what they're going to say and that's why we continue to believe that there is no basis for saying that anyone knowingly and willfully violated the law..

Okay. So it's fairly routine. I guess just lawyers probably protecting their clients, would it be safe to say in terms of any potential charges being brought up. Just to make them more comfortable in terms of what they are able to discuss.

Is that how we should think about what it sort of procedurally mean as opposed to them necessarily cooperating with the government to....

Yeah, as I said, I just don't think you can read too much into this, and it's pretty standard practice on the part of a defense counsel to try to negotiate an immunity for their clients..

Okay. Great. And the immunity is only for the issues that are involved in this case, is that correct? You know that or....

I don't. I haven't seen these immunity agreements. So I really can't speak to that directly..

Okay, fair enough. The rest of my questions have been answered. Thanks so much..

Thank you, Mr. Patterson. Our next question comes from Praful Mehta with Citigroup. Please proceed..

Hi guys. So my question firstly is on the growth side, the 5% to 7% growth.

I know there are utilities who worry about retail rates and is that a concern for you guys at all as in consistently growing at that level, do you see ever rate pressure coming that may restrict or limit the growth going forward?.

I'll start off, this is Tony. Obviously, affordability is one of the things that we focus on here. One of the – the good news things here in California is well, some people say your rates are high. Actually the total customer bill is below the national average.

And so while we're always sensitive, we still think that our products are overall affordable for the customer.

Now one of California's challenges is in the rate structure that's been in place for a long time really needs to be reformed, because there are some groups of customers that are paying far more than they should and others probably paying less, and we've made some progress in improving that. We need to continue to make further progress on it..

Got you. Great. Thanks. And then, secondly just quickly on M&A and strategic direction both on the buy and sell side. Is there any view from your perspective on how you look at the landscape today given the consolidation that's happened in the space.

How are you looking at the strategic path going forward, I guess?.

So obviously, we never comment on specifics of M&A. But just stepping back from an industry standpoint, I believe we'll continue to see a fairly slow consolidation of the industry. It kind of goes in fits and starts. One of the interesting things is the consolidations – recently, the big consolidations have been creating combination companies.

So gas and electric combined. Of course we're already there. We're a combination company. Also California is different, in many parts of the country, gas is viewed as the transition fuel from an environmental standpoint replacing coal. We have no coal on our system in California.

So it's – the long-term issues are a little bit different here in California..

Got you. Thank you, guys..

Thank you, Mr. Mehta. Our next question comes from Julien Dumoulin-Smith with UBS. Please proceed..

Hey, good morning..

Good morning..

Good morning..

So a lot's been asked and answered already, but just following up here. First, just on the equity side of the equation. Obviously, Butte fire is not necessarily explicitly reflected.

How do you think about equity needs 2016 and more importantly onwards, right, but you've laid out rate base, you've laid out CapEx, is there any good way to think about that generically?.

Yeah. What I continue to focus on is sort of the two big drivers of our capital needs, which are our CapEx program and our unrecovered costs. For our CapEx guidance, we've provided a range that relates to our pending rate cases.

I think there you have to make an assumption what are we going to receive in those rate cases and what our CapEx will be to inform equity needs related to CapEx. On the other side of unrecovered costs, what I'll say is we expect to fully fund the San Bruno penalty in 2016. So that will go away after 2016 as a driver of equity needs.

We also have our Right of Way program in our gas transmission business, which will continue through 2017. And as a quick reminder, that was a $500 million program to be completed over five years ending in 2017. So that will continue into 2017.

And then you'll have to make your assumptions around any additional unrecovered costs, but absent any new items, unrecovered costs should start to decrease in 2017 and 2018 and be much less of a driver of the ongoing equity needs for the business..

Got it. Okay. And then just continuing there. Since you left it off at the GT&S.

So maybe curious, can you elaborate a little bit more, I know it's been out there for a bit, what the rate impacts are by customer class and perhaps if you can comment to what extent is that any potential limiting factor and getting resolution here versus just the conventional lag that we've seen before the CPUC and getting cases processed..

Hi, this is Steve Malnight. Well, I think that obviously this is a big case and it's been going on for some time. The rate impacts when you look at our original proposal, the rate impacts would be a monthly increase of about $5 a month or 12% for our customers. That is an issue.

I think that is in consideration and was a part of the discussion throughout this case, but more so it's really about what's the right work that needs to be done in the system and the right cost to do that. And I think in this case we've seen a substantial record built on why we believe that the work we proposed is the right work to get done.

So, we'll just have to see how that comes out in the proposed decision..

Got it.

And last quick one, TransCanyon, why the latest partnership, why now perhaps if I would ask after years of success alone?.

Hi, Julien, this is Geisha. So, we've been very successful within California in terms of competitive projects. But as we look at a broader market, we've talked about it earlier, broader CAISO footprint. And we think an alliance agreement with TransCanyon makes sense. We think we have strengths. They have strengths.

And together, we can even be more competitive and successful..

Fair enough. Thank you..

Thank you, Mr. Smith. Ladies and gentlemen, thank you, for attending the PG&E Corporation's first quarter 2016 earnings conference call. This now concludes the conference. Enjoy the rest of your day..