Morning, everyone, and thanks for joining us. I'm Janet Lajuca, PG and E's new Vice President for Investor Relations. I've had the pleasure of meeting some of you earlier this year, and I look forward to working with all of you in the future. Before you hear from Tony Early, Chris Johns and Kent Harvey, I'll remind you that our discussion today will include forward looking statements about our outlook for future financial results 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 the 2014 annual report on Form 10 ks that will be filed with the SEC later today, including the discussion of risk factors. And with that, I'll hand it over to Tony.
Thanks, Janet, and good morning, everyone. 2014 was a strong year for us, and I feel really good about the significant accomplishments that we've had in our operations. There's no question that our system is safer and our customers are experiencing greater reliability now than they ever had in the past. And proof of this is in our customer satisfaction scores. I've always believed that strong operations are the foundation for longer term financial success, and we're working hard to deliver on both fronts.
Chris will tell you more about our operational results in a moment, and then Kent will go through the financials. In addition to the great progress we've made operationally, I want to acknowledge the setbacks we had last year related to communications between the company and our regulators. As you know, we took quick and decisive action, making it clear to our employees and the public that noncompliance has no place in our organization. And with the help of outside experts, we're establishing a best in class compliance program. I also want to acknowledge that we still don't have a final resolution in the gas transmission OII investigations.
With the proposed decision issued last September, we believe the commission has all the information it needs, and we hope to see a final decision soon. Now as we look ahead, with the resolution of the general rate case last year, we are positioned to continue investing in our gas and electric systems. We plan to build on our progress over the past few years by continuing to upgrade our gas and electric infrastructure and leverage technology to enhance performance and modernize the grid. Over the next few years, we expect our capital spending to be more than $5,000,000,000 a year. And we're optimistic about PG and E's growth opportunities.
We plan to continue to take advantage of our location near Silicon Valley to help design and build the grid of the future, or as we've been calling it, the grid of things, where distributed generation, electric vehicles, energy storage and other technologies are integrated into a two way power grid. Governor Brown recently set out some ambitious goals for California to significantly reduce carbon emissions by 2,030. We believe these policies are in line with our own strategies on clean energy, vehicle electrification and energy efficiency and look forward to working with policymakers to develop and implement these new standards. In fact, yesterday, we filed an application at the CPUC to invest $500,000,000 over 5 years in electric vehicle charging infrastructure, which we believe is critical for EV adoption and greenhouse gas reduction. We're glad that CPUC has recognized that the utilities are important players in the electrification of the transportation sector and we're eager to get our program approved and underway.
So with that, let me turn it over
to Chris. Thanks, Tony, and good morning, everyone. As you can see on Slide 4, I'll begin my remarks with an update on our operations and then touch on some additional regulatory developments from the quarter and the year. As Tony mentioned, we had a really strong operational results in 2014. Starting with safety, we're extremely proud of our performance on key public safety metrics such as gas odor response time, 9 11 response and 3rd party dig ins.
For example, last year, PG and E employees responded to gas emergency calls in an average of less than 20 minutes, which represents one of the fastest response times in the industry. In terms of electric reliability, 2014 was our 6th straight year of record performance for outage duration and our customers experienced the fewest outages in company history. We also opened our first of 3 state of the art electric distribution control centers last year, integrating leading technology to further improve operations. In terms of electric supply, we continue to make good progress on our goal of 33% qualified renewables by 2020. And last year, our electric supply portfolio was more than 50% greenhouse gas free, making us one of the cleanest utilities in the country.
On the gas side, we're especially proud of the international certifications we receive for our asset management practices. Not only did we receive the initial certifications from Lloyd's Register in May, but in November, we were recertified after an extensive follow-up audit, which validated the sustainability of our program. We're one of only a few utilities in the world to achieve these certifications. Also in gas last month, we announced that we've now completed our system wide cast iron pipe replacement program making our gas system even safer. And you can see on the slide the extensive work we completed on strength testing, valve automation and pipe replacement.
Now all of this work is being acknowledged by our customers. Our customer satisfaction results in 2014 were the highest we've seen since 2009, which is before the San Bruno accident. While we're proud of all of these achievements, we know we have more work to do, and we'll continue to look for, find and fix areas that need improvement. Moving on to our Pipeline Safety Enhancement Plan or our PSEP. We've completed the majority of the planned expense work in PSEP, although a small amount of work will continue into this year.
And Kent will cover how this fits into our 2015 plans. On the capital side of the program, the last part of the PSEP has proven to be very challenging. Late last year, we determined that the permitting and routing for a number of the remaining pipeline replacement projects, including some in environmentally sensitive areas, will be more difficult than we previously expected. So we now expect the work to be more costly and will be completed over the next few years, which is longer than we had originally anticipated. Since the PSET program has a cap on the recovery of capital, we took a charge of $116,000,000 in the Q4 for these higher expected costs.
Shifting to regulatory matters, the hearings in the gas transmission and storage rate case started last week and are expected to conclude this month. The current schedule calls for a final decision in August with revenues retroactive to January 1 this year. As a reminder, the final decision on the order to show cause related to ex parte communications in the gas transmission rate case called for a disallowance of up to 5 months of the increase in the authorized revenue. As you know, we've appealed that portion of the decision. In other regulatory matters in December, the commission approved an incentive award for our energy efficiency programs and our cost of capital mechanism was extended for another year.
It will now be in place through the end of 2016. So with that, I'll turn it over to Ken.
Thank you, and good morning. As usual, I plan to go through our Q4 results and then I'll provide some insights about our 2015 outlook. Slide 5 shows our results for Q4 and full year 2014. Earnings from operations came in at $0.53 for the quarter and $3.50 for the year. GAAP earnings including our items impacting comparability are shown here as well.
We've got the details regarding the natural gas item in the table at the bottom in pretax dollars. Our pipeline related expenses came in at $102,000,000 for the quarter $347,000,000 for the year, which was just below our guidance range. As Chris mentioned, a modest amount of PSEP related expense work will spill over into 2015. Next is the disallowed capital write off for PSEP of $116,000,000 related to the higher cost to complete the remaining PSEP capital work. Because there's a cost cap in place, we wrote off those costs that we anticipate will come in above the cap.
On the next line, you see that we recorded $12,000,000 of fines mainly for the gas distribution accident in Carmel last March. We believe that fine is excessive and we've requested a rehearing. We adjusted our 3rd party liability claims related to San Bruno down by $7,000,000 as a result of settling the last few claims in Q4. That leaves our total loss at $558,000,000 versus our previous estimate of $565,000,000 Finally, we booked $26,000,000 in insurance recoveries in the quarter for a total of $112,000,000 for the year. Slide 6 is the quarter over quarter comparison for earnings from operations and you've seen many of these same drivers in previous quarters.
The first three items relate primarily to 2014 general rate case and they total $0.19 I'm just going to go through each of them briefly.
First, as a result of
the GRC decision, our expense recovery increased $0.08 quarter over quarter. This represents the impact of recovering higher levels of spend that were not being recovered in 2013. 2nd, we had a positive $0.06 resulting from tax benefits related to our federal tax deduction for repairs costs. 3rd, we recorded earnings on a higher authorized rate base. This totaled $0.05 As you see, we also had some smaller positive items in the quarter, a pickup on some regulatory matters, the absence of some project and lease charges experienced in the prior year and various other items included in miscellaneous.
These positives were partially offset by a $0.14 timing item related to taxes and operating expenses that was driven mainly by the delay in our general rate case. You may remember this from last quarter's call. In Q4, this item turned around as expected, reversing out the impact experienced earlier in the year. Finally, our share dilution came in at $0.02 negative quarter over quarter. Now I'd like to provide a few thoughts about our future performance.
Since we're still awaiting resolution of the gas pipeline investigations by the CPUC, we're not providing guidance today for 20.15 earnings. However, we are providing key assumptions for earnings from operations and items impacting comparability to help you understand our profile. If you turn to Slide 7, you'll see some key assumptions for 2015 earnings from operations. First in the upper left, you see we're assuming capital expenditures of roughly $5,500,000,000 this year. The breakdown by line of business is included here as well.
In the upper right, you see that our estimate of weighted average authorized rate base is about $31,000,000,000 Both the CapEx and rate base assumptions are consistent with ranges we've previously provided, so no real change there. In the lower left, you'll see that there also are no changes to our assumptions regarding authorized return on equity and equity ratio. At the bottom right of the slide, we list some other factors we believe will affect 20 15 earnings from operations. Our objective for EFO is to earn our authorized return on rate base for the enterprise as a whole plus the net impact of the factors listed here. Many of these should look familiar from last year and I'll briefly touch on them and reiterate what we've previously told you about them.
In terms of the gas transmission and storage rate case, the first bullet is just a reminder that the outcome of the case is not known at this stage. So we have some uncertainty regarding the impact on 2015 results. The second bullet under the gas transmission case is also a reminder that we've not sought recovery of some operating expenses in 20 15 beyond. These are for certain corrosion and strength testing work. We previously indicated that these expenses taken together should average roughly $50,000,000 annually over the 3 year period, although the amount may vary year to year.
Next is the tax benefits associated with the repairs deduction. Last year, the net impact from this item was almost a quarter and we've indicated that we expect it to be a similar order of magnitude in 2015. The next two factors, incentive revenues and monetizing SolarCity shares you saw last year as well. In terms of Solar City, we said that about 2 thirds of the shares were monetized in 2014. As a result, you should expect a smaller impact this year than last.
Finally, like last year, we expect earnings on construction work in progress to be roughly offset by the below the line costs. So these include advertising, charitable contributions, environmental costs and so forth. Before I move on to the next slide, I want to make one more point. We won't receive a final decision in the gas transmission rate case until at least the Q3 based on the current schedule. Because the decision will be retroactive to January 1, the timing should not affect our annual earnings from operations but it will have an impact on our quarterly results just as you saw with our general rate case last year.
Okay, turning to Slide 8. You'll see our assumptions for items impacting comparability in 2015. Our framework for 2015 will have 3 components: pipeline related expenses, legal and regulatory related expenses, and fines and penalties. I'll walk you through each of these. First, we're providing an estimated range for pipeline related expenses of $100,000,000 to $150,000,000 which represents a significant reduction from prior years.
The majority of the dollars here are for clearing our pipeline rights away. We're now beginning the 3rd year of that program, which we have estimated to cost up to $500,000,000 from its inception in 2013 through its planned completion in 2017. The range for pipeline related expenses also includes a smaller amount roughly $25,000,000 for the PSEP expense work that was carried over from last year. 2nd is legal and regulatory related expenses, which we estimate to be between $25,000,000 $75,000,000 for the year. Here we've consolidated all legal and other costs expected to be incurred in connection with litigation and enforcement activities related to either natural gas matters or regulatory communications.
3rd are potential fines and penalties, again related to either natural gas matters or regulatory communications. For example, this would include resolution of the gas pipeline investigations by the CPUC. It would also include gas transmission rate case revenues disallowed by the CPUC as a penalty for ex parte communications. As has been our practice in the past, we're not providing guidance for fines and penalties in 2015. Moving on to Slide 9.
We assume equity issuance of $400,000,000 to $600,000,000 in 2015. That compares to equity issuance last year of $827,000,000 This range is consistent with the other assumptions I've provided this morning, including our CapEx profile and our items impacting comparability and assumes we receive a reasonable outcome in our gas transmission rate case. Importantly, the range does not reflect additional fines or penalties in connection with natural gas matters or regulatory communications. Those would be incremental to this range. Finally, Slides 1011 summarize our assumptions for CapEx and rate base through 2016 and these are consistent with what we've shown you previously.
Our total CapEx is expected to remain
well above
$5,000,000,000 annually during this period. Our average rate base is expected to grow to more than $33,000,000,000 in 2016, representing about a 9% CAGR over 20 14. We anticipate providing you with CapEx and rate base numbers beyond 2016 once we file our 2017 general rate case this fall. I'll end with that and we'll open up the lines for your questions.
Thank you. Our first question comes from the line of Julien Smith with UBS. You may proceed.
Hi, good morning. Good morning. Hey, so congrats again on a good decent quarter here. And just wanted to kind of kick it off with a question on bonus DNA here, if you don't mind rehashing. It doesn't look like the rate base has shifted all that much versus what you'd last projected here.
How does that flow through, if you can kind of remind us?
This is Din Yarmistri, the Controller. So, as you know, a bonus was passed all the way at the end of 2014. And in our general rate case, we have a mechanism that's similar to what we've had in the past. It's called TAMA. And it basically provides for us to use that bonus benefit for additional CapEx.
Since we got bonus all the way at the end of the year, it really didn't have very much impact and we factored that into the rate base numbers that you see here.
Got you. So no real negative
Great
Great. And then secondly, bigger picture here, as you look at the renewable portfolio standard and the potential shift to 50%, what does that mean near term in terms of spend, just broadly speaking, in renewables? And secondly, your specific spend, whether it be directly in renewable technologies broadly or frankly from a T and D perspective, what does this mean in terms of accelerated deployment?
Well, this is Tony. I'll start off. First of all, there's a long way to go between where we are today and a specific plan for California that the governor of course in the state of the state speech outlined some long term objectives. The utilities here in California are all working together and want to work with the state to develop what those policies are. Clearly, we'll be going above 33%.
We think a clean energy standard that gives us some flexibility going forward makes sense. But in any event, even assuming we're going to be continuing to develop our renewable portfolio, Most of the renewables now are part of our purchased power portfolio. We did do some utility owned solar early on, decided that wasn't a strength for us. So I would anticipate that in the future as our renewables go up, it just will flow through our purchase power accounts rather than being an investment in capital. Although we continue to look at new technologies, what it will do is as renewables go up, the grid becomes more complex to manage.
And as Chris has said in a number of speeches, that's our investment opportunity to invest in going from the traditional one way flow of power on the grid to multi flow power that is not as predictable and that's going to be where we think there are growth opportunities.
Great. Could you elaborate just a little bit about the growth opportunities? I mean, what's the timeline here with which you think the 50% move happens, if you will? What could we see the dollars flowing? And how do we get from A to Z here, if you will?
Yes. This is Chris. First of all,
we don't know, again, as Tony said, on the timing of what the 50% would look like. And again, we most likely wouldn't be making investments in any of the facilities themselves. But as far as the future of the grid, we've actually already started that and been working on it for the last several years. You may remember our cornerstone project that helped us start to make investments in modernizing the grid, and we're going to continue to do that. We don't have projections out there as to what the dollars look like, but those are dollars that we've already started to put in place.
And some of our projections that you already see here around 2015 and 2016 include some dollars for continuing to modernize. So as we've continued to move forward with making sure that we're in a position to be able to hook up the solar panels and the batteries and the plug in vehicles into our system, we've continued to evaluate not just replacing old wire, but modernizing the entirety of the system and putting more technology into it. And that's what you'll continue to see from us and we'll just continue to build them into our rate base growth.
Great. Thank you.
Thank you. Our next question comes from the line of Greg Gordon with Evercore. You may proceed.
Thanks. Good morning. Good morning, Greg. The tax benefits, should we assume that they'll repeat, but at a lower level in 2016 and then sort of work and then be gone post 2016? Or I don't recall if you've given any guidance with regard to the trajectory post 2015?
Greg, this is Kent. We really just indicated that the tax benefits were really in connection with our general rate case, which is a 3 year proceeding. So yes, you should expect them through 2016.
Okay. And then you have a rate case in 'sixteen and the rates in 2017 and so that would get It would
get reflected in that proceeding. That's correct.
Okay.
Energy efficiency revenues, you booked I think you booked $0.04 in fiscal year '14. Based on the new scheme, should we expect that you have an opportunity annually to continue to book earnings in that net order of magnitude? And how should we think about that?
Well, last year, we did book in December. The award was for 1.5 years. So it was a little unusual. It wasn't just a single year. And again, it's with significant lags, these awards.
So the awards we just got were for 2012, I think, and half of twenty thirteen. So I think what we'll be booking this year will probably be for subsequent to that, the new scheme will be in place after that.
Okay. And then finally, on Page 8, you of your handout, you pointed out there's a placeholder for fines and penalties. Just to make sure I have this right, that's for potential fines and penalties in the San Bruno cases. You also could potentially be disallowed some revenue requirement in the GT and S case. And then should we also sort of notionally have a placeholder there for the potential for financial impacts from the criminal indictment?
Is there anything else out there that I'm missing that would sort of go into that catchall?
Well, right now, it's hard to know what's going to happen with all the ex parte stuff because there's a lot of stuff that we have filed at the commission and we're not really clear what will come out of that. In addition, we do know that there are investigations related to the regulatory communications by the state attorney general as well as federal prosecutors and that's also unclear.
Okay. Thank you.
Thank you. Our next question comes from the line of Ben Ayers with Credit Suisse. You may proceed.
Hey, good morning, guys. Just maybe as a follow on to Julian's questions. Can you maybe Tony just give a little more explanation of all the things that are going into the grid of things project that's going on? How much CapEx is going to that right now? And kind of the scalability of that?
How long you think it would be before that was more broadly deployed on the system?
Yes, Dan. We haven't broken out the specific capital investments associated with the grid. But you see our capital budgets next year about $5,500,000,000 I think is our spend. We haven't given guidance for future years, but we have said that you can expect comparable levels of capital investment. Now within that, there is a big chunk for upgrading the grid.
So you go back couple of years and you start with going to virtually 100% smart meters. We've talked about then automating switches on the system so that we can automatically shift when we have outages and that has paid tremendous benefits. The Napa earthquake and the storms that we had at the end of 2014, in fact, just last week, we had some major storms here in California and had really superb results because we're able to immediately detect where the outages are and then automatically reconfigure the system. So we're doing that. And then the other future investments will be control systems, A, to monitor the state of the grid as you've got all of these renewables dumping into the system at points that we never anticipated when the system was built.
So to be able to detect and then to be able to control voltages on those systems and that's an ongoing program. Chris, I don't know if you want to comment on
the specifics, but I think that's going to be something that's going to
be in every capital budget going forward. Yes, I agree. And again, we haven't put out what those dollars look like on a forecast basis. But they are
proposing about $100,000,000 a year investment in proposing about $100,000,000 a year investment in charging is also part of that. I mean our view is that as we go forward, as we renovate different circuits, we ought to be installing EV charging at appropriate places within that renovated circuit because that's what the grid ought to look like going forward.
Tony, just on the charging release, how is the approval process going to work from that? And those are the people who are trying to do it on a merchant basis who no doubt will challenge you. How do you guys kind of defend this as a utility investment opportunity?
So let me start off with the issue around challenging as a merchant activity. I mean California for a number of years did not allow utilities to participate in the public charging market. We could build charging stations for our own fleet, but not for the public on the theory that entrepreneurs would jump in and provide this service. I can tell you not only from our experience here in California, my experience at DT where we had unregulated subsidiaries that at times would look at this. The entrepreneurial model just isn't going to work.
There isn't enough margin in that business. Where it might work is for some of those entrepreneurs that actually produce the charging stations to partner with us and we'll install the infrastructure. Let me ask Steve Meline, who's here with me to talk about what the regulatory process looks like going forward.
Yes. Hi, this is Steve Meline from the Regulatory Affairs team. So we filed our application, and we will be looking for the commission to issue a schedule for that proceeding. As you know, Southern California Edison and San Diego also have proceedings that are going on at the same time. So we'll wait to see what that schedule will look like as it comes out.
And the only other thing, Dan, that I would add to that, this is Chris, is that our filing, we are only looking at about 25% of the marketplace. So there's still huge amounts of room for competitors if they want to try to continue to operate in that market. There's plenty of opportunity for them.
Got it. And I guess one last question just on, I guess, your challenge or your appeal to the delayed revenue recovery because the RxTx Part A Communications on GT and S. Can you just walk through the process and the schedule for this to get resolved? And is this something that could be settled at some other number rather than having to go through a fully adjudicated process?
Let me let the Yun Park, General Counsel talk about the schedule for that.
Yes. So Dan, we filed an application for rehearing of that decision that was filed on December 26. And all the briefing has been submitted by all the parties. So it remains to be seen when the commission will act on that rehearing. And as you know the GT and S case is currently going through hearings right now.
Okay. Thank you, guys.
Thank you. Our next question comes from the line of Anthony Croda with Jefferies. You may proceed.
Hey, good morning. I guess I won't ask the same question of what does 2017 CapEx look like. So just moving to a different you seem like you've punted on the first two. I guess just two quick questions. One is, you've given us equity guidance in 2015.
I mean, any thoughts to doing converts or something else something other than equity going forward with this large CapEx forecast? And the second, the GT and S rate case is delayed, but I think there's a GT and S II that's down the pipe, when does that get filed?
Anthony, this is Kent. Let me take the first one. In terms of our equity needs, you can see they are more modest this year for our normal CapEx program. The uncertainty that we really have obviously from a financing perspective or when the gas matters really resolves with the OAI. And that's really what's going to drive our financing needs.
And as I said in the past, depending upon the nature of that, the timing of it, the magnitude and the various components, that there are alternatives such as mandatory converts that we would consider. It all just depends on the details of the final decision. The second part of your question
This is Chris.
Your second one, I'm not sure if there's a specific GT and S Phase 2 that you're thinking of, but the next rate case with GT and S would be filed in 'seventeen for 'eighteen because it's a 3 year cycle.
Okay. So I guess just in your electric case ends in 'sixteen, new electric rates, I guess, in 2017 and then new gas rates would be in 2018. Is that correct?
For the pipeline, yes. For
the pipeline. Great. And you're sure you don't want to give
us the 'seventeen CapEx or?
Let us think about it.
All right. Thank you.
Thank you. Our next question comes from the line of Michael Lapides with Goldman Sachs. You may proceed.
Yes. Couple of questions. First of all,
I know somebody asked about bonus D and A in terms of what it means for rate base.
But can you talk about what
it means for cash flow in 2015?
Hi, Michael. This is Dinyar again. So as I mentioned, we are in an NOL situation. So it really doesn't mean much for cash flow.
Okay. Can you talk about expectations kind of the spread you expect between kind of GAAP and cash taxes, meaning the fact you've got such a sizable NOL, does that imply that you're not really you're not much of a federal cash taxpayer this year? And how far out in the future do you expect that to extend?
Yes, that's correct. We don't anticipate being a federal cash taxpayer in 2015 or 2016. So I think it will extend out into 2017.
Got it. Thank you, guys. And one thing on CapEx.
Michael, I just wanted to add that that's already embedded in the equity assumptions that we've given out.
Right. Okay. So it already impacts the financing. When we look at CapEx, can you talk about the variability as part of the GT and S case, meaning how much how much can the GT and S case outcomes swing your expected CapEx in either 'fifteen or 'sixteen?
Well, you can actually see on Slide 7 that we show for gas transmission a couple 100,000,000 of potential variability.
Okay. So that's both for 'fifteen and for 'sixteen?
Well, we're showing that as for 'fifteen because that's the year that we're providing line of business guidance like that. But you could expect probably a similar type of impact in fees for years depending upon how the rate comes out.
Got it. Thanks guys. Much appreciated.
Thank you. Our next question comes from the line of Paul Patterson with Glenrock. You may proceed.
Good morning.
Can you hear me?
Okay. Yes, we can, Paul.
With respect to San Bruno, I know you guys were thinking that that was going to be done by the end of the year. And I'm just wondering what do you think has caused the delay? And how should we think about the conclusion of this process going forward?
Well, I think it's fairly obvious that the delay was caused by the issues around the ex parte communications. And then with the departure of President Peavey getting a new President appointed and then a new Commissioner in. But we now have all of those pieces in place with President Picker there and a new commissioner. So everything is now in the hands of the commission. They've got the recommended decision.
And so I think it's now in their hands to go ahead and make a decision. We don't think there's anything more the parties need to do in the case. Okay.
But you haven't had any word or anything about how of any sort of pencil in data or anything like that as to we should be thinking about? No, we haven't. Okay. And then just in terms of the ex parte stuff, I realize that there's several proceedings going on and we don't know how those are going to necessarily go or how long they're going to take. But is pretty much most of the ex parte communications, to the
best of your knowledge, now out there? I mean, is that should we
I mean, in terms of discovery and stuff, are we sort of finished with that, do you think?
As I said in the past, we have done a comprehensive search of all of the places where we believe there's some there's a possibility that there would be ex parte communications and have disclosed everyone that every instance that we are aware of. That said, there are multiple proceedings going on. There are lots of requests for more access to company records and e mails. When you put it in perspective, we've got 22,000 employees. If they produce 10 e mails a day, that's 1,000,000 e mails every 5 days.
So I get asked all the time, well, have you looked at every e mail? The answer is no. Have we looked where we think it's likely to have an ex party communication? Absolutely.
Fair enough.
Okay. And then just
on the criminal case, do we have a schedule now at this point? Or are we still sort of where are we in the process?
So this is Hyun Park. So we have a hearing that's scheduled for March 9. And I think the expectation is that's when the motion schedule will be set.
Okay. And then back to sort of Dan's question on the electric vehicles. It looked to me, I mean, from what I've read, it's $654,000,000 and it looked that there was going to be a charge for customers between 2018 2022. And that's what I'm piecing together. I haven't actually been able to look at the full filing.
Is there some sort of amortization that's unique to this CapEx that would suggest that the recovery would be over that period of time? Or just to sort of get a flavor for what exactly is going into this? I mean, it looks like it would be $26,000 per station. Is that a fair number? Or is that just also all the other stuff that's sort of supporting this kind of effort?
Do you follow me?
Yes. This is Steve Meline. Yes, the filing would just we're anticipating putting that capital into rate base normally as we do with our the rest of our capital. And the total cost that we've talked about is for all the costs associated with implementing that program.
Okay. And then the amortization or the collection period for customers that was mentioned between 2018, 2022 sounds kind of shortened. Is there something about these facilities that would suggest that the recovery should be over a short period of time? Or is that just how the release came out? I don't do you follow me?
Yes. The period of time
that you're looking at wasn't meant to be what the recovery period of time is. That's the expenditures in our implementation of them. So this is Chris. So the recovery would just be a normal recovery period of time. And I think that's why it says it's about, I think, an $80,000,000 annual revenue requirement stretching out beyond that 5 year or that 6 year period of time.
And you mentioned the margins were low. Just to clarify this, how much of if we were to talk about the revenue requirement associated with these stations is being covered by customers versus what the marketplace would be theoretically covering? Do you have a rough breakdown of that?
Probably not to the level of detail that you're asking for. But what we're asking for the what would be included in the cover for the customer's charge is just the capital cost of putting the infrastructure in place. Then the meters would go on and the charges off of those meters would all cover the cost of electricity and everything else.
And we're actually looking at having a 3rd party manage the process. So we're not in the payment processing business. Users would use their credit card and there's a third party would manage that process.
Okay. Thanks so much.
Thank you. Our next question comes from the line of Huynh with Sanford Bernstein. You may proceed.
Good morning and congratulations on some of these achievements on the operational side. I just wanted to address an issue that I continue to be concerned about on the regulatory side, which is the OII into the accuracy of record keeping on the gas distribution side of the business as opposed to gas transmission. And I guess I'm still worried that if commission really wanted to get grotty about this, they could probably find enough inaccuracies in the records to come up with a substantial fine. Can you give us any parameters for how that investigation is going? What likely outcome you see?
What financial impact there might be?
Hugh, this is Chris. I wish I had more details for you, but we don't because we don't have information yet on the scope of the investigation. So they haven't they've done just a reminder for everybody, on November 20 last year, the commission issued an OII in an order to show cause to look into the record keeping around the gas distribution system. And they specifically referenced 6 incidents from 2010 to 2014 where there were no fatalities or injuries. But we've done a lot of work on our record keeping over the since San Bruno on not just the transmission pipe but also the distribution pipe, and we continue to do that.
But they have not had a scoping meeting or scheduling meeting yet at all. And so we filed our responses. But otherwise, we don't have a lot of information as to where they may go on this. We're waiting for the pre hearing conference and that has not even been scheduled yet.
Thank you. As I recall, there was a program of upgrading the gas distribution system that you conducted several years ago, which fell into the items impacting comparability because those expenditures were not recoverable. Is there do you foresee the potential for any further unrecoverable capital expenditures on the distribution side of the business such as
we've seen with the PSEF on the transmission side? Yes. I mean, obviously, again, we don't know what that record keeping OII would be about, but otherwise we wouldn't because we just went through our general rate case, which addresses our gas distribution side of the business. And we got the results of that and we're going to be operating under that. And so we don't see anything on the horizon that would say we believe we're at risk of non recovery of things that we're doing on our investments in the gas distribution piece of the business.
Great. All right. Thank you very much.
Thank you. Our next question comes from the line of Travis Miller with Morningstar Capital. You may proceed.
Good morning. Thank you. The TO-sixteen, I was wondering if you could talk a little bit about the key issues where you're the farthest apart, I suppose, in the settlement conference that's coming up? And then second, depending on that outcome, how would that affect the $1,000,000,000 plus that you guys have tagged for CapEx and presumably a similar amount in 2016, 2017?
Travis, this is Kent. Typically, we go through a TEO case every year. This isn't going to be any different than the other ones, but we really don't provide much commentary on it while it's underway.
Okay. And then would that affect if you were to get an unfavorable decision, would that affect the transmission spend material? Are those projects that are kind of in the process in the ground type of projects?
Well, we've had a pretty good track record in resolving T. O. Cases, and we're hopeful that's going to be the outcome this time as well.
Okay.
And this is Chris. Along those lines, as we do with all of our rate cases and regulatory orders, we try to operate within what they rule. So if there was something that wasn't going to be a project that they didn't think we need, we'd have to reevaluate whether we would do that or not.
Okay. I think everybody asked my CapEx questions before. So I appreciate it. Thanks.
Thank you. Our next question comes from the line of Brian Chin with Bank of America Merrill Lynch. You may proceed.
Hi, good morning.
Good morning, Brian.
Just on the slide where you're talking about 2015, what things to think about even though you haven't given guidance on the Solar City monetizing Solar City shares. Can you just give us a general sense of how big that should be? I realize you're not in a position to give full guidance, but at least a sense of scale on that part would be helpful.
Brian, it's Kent. Last year, I believe it was in the 3rd Q4, we monetized Solar City. 2nd and third, excuse me, we monetized shares. And I think each of those pickups were about $0.03 for each of those quarters. And that basically represents about 2 thirds of the total.
So I think that gives you a pretty indication of sort of roughly what we'd expect for this year.
Great. And lastly, my second question is when it comes to rights of way and surveying costs, it's been a little while since we've heard you guys talk about that in great detail. Should we be at the level now where we feel relatively comfortable that there aren't going to be unexpected additional costs there? Is there like a percentage of completion that we can think about going forward from
here? This is Chris.
And I think as we talked about last year, we did experience some delays in the pathway program because of some vegetation issues in some of the cities. But we still, at this point in time, are reiterating that we don't we believe we'll be able to finish the program by the end of 2017, which was the original 5 year schedule, and that we still don't expect it to be in excess of the $500,000,000 that we originally have put out there.
Great. Thank you very much.
Thank you. Our next question comes from the line of Steven Fleishman with Wolfe Research. You may proceed.
Hey, good morning.
Hi, Steven.
Hi. So just on the TO case, the transmission case, you're assuming kind of return similar to what you get in the California regulated business?
Steve, it's Kent. We have filed for 11.26. Over the last few years, we've just been telling people when they think about guidance, particularly given the relative size of electric transmission in the rest of our business, we've been telling people to do an approximation of a comparable authorized return as at the PUC. But the proceeding and the ROE is still underway at the FERC.
Okay. And then just going back to the emails and communications, aside from kind of I guess, do you still owe anything per the process to anybody beyond the 65,000 e mails you already filed? Is there something that you still have to provide?
I'll ask you to answer. As I said, we get discovery requests in all of our proceedings, but we're pretty much up to date on all the things we owe. Yes. So Steve as Tony said, the request from various parties for discovery and information is ongoing. So I would say we're current, but I'm not sure that
we're completely done with this. Okay. And then I guess Edison at times talks about kind of other programs that could add to their current rate base plan, things like storage and the like. Do you and obviously something like this electric vehicle program you announced, do you have some of those that are out there that would be kind of additive to the plan as it is now?
Well, we do anticipate that we'll be doing storage. We just went out for bids for proposals on storage, but we also have the opportunity to invest in storage. Quite honestly, we're early on and trying to figure out what forecast of as we upgrade our system, we'll be upgrading to the newest technologies.
Thank you. Our next question comes from the line of Michael Lapides with Goldman Sachs. You may proceed.
Hey, guys. Just real quick on electric transmission, where do you think
you are in the cycle in terms of the level of electric transmission capital spending each year? Meaning, do you think 2015 is a normal level and kind of a good run rate longer term? Do you think there's things that could make that number significantly higher going forward or significantly lower going forward? And if so, what would those type of drivers be?
Michael, it's Kent. We really only have guidance out for electric transmission for this year. So I can't really give you a view beyond 2015 at this point.
Yes. I'm just I'm not really looking for a number, more drivers. Like how do you think about just kind of where in the cycle and maybe not just for you, but kind of for the industry or for the State of California?
Michael, what I would say is, of course, the major projects are lumpy. They come and go as the needs I think you can assume if we continue to build the renewables portfolio in California to support that, there's going to be transmission investments. Whether we make those investments or not depends on a number of things. There's a bidding process in California. Now we did win a bid to jointly develop a new project that's underway.
In the future, we'll look at opportunities as they come along. But you can't assume where we're going to do them, maybe other parties that will build the transmission to support renewables and we just purchase the services.
Got it. Thank you, Tony. Much appreciated.
Thank you. Our next question comes from the line of Andy Levi with Avon Capital Advisors. You may proceed.
Hey, good morning. Good
morning, Andy.
I think most of my questions were asked, except to housekeeping. But I did see that you must have ticked the top on that SolarCity stock when you sold it. So very good on that. We'll have to give you a job here too. Just two housekeeping things.
Just on the $5,500,000,000 of CapEx for this year, do we back out any of that that's not recoverable? Like as part of that like PSIP costs or something like that, so it's not 100, it doesn't all go to rate base, I guess is the question.
Yes. So this is Dinyar. I think if you look at slide 7, you'll see the separately funded piece of $100,000,000 for PSEP. That's spending that we'll be doing in 2015 associated with the charge we took in 2014. So that would be the component.
And that's the only piece? Yes. Like none of this stuff on Page 8 gets backed out or those expense items?
No. So the way the accounting works is you take a charge for costs that you anticipate you will not recover on the capital side. So we haven't yet spent the capital, but we've had to take a charge in 2014. That capital will be spent in the future years.
Right. But that for rate base purposes, we should be adding $5,400,000,000 less depreciation and deferred taxes to our rate
base? You could think of it that way. We've already given you rate based guidance. No, I am not.
Yes, I just like to do it myself too.
Sure. Yes. That sliver would not be recoverable.
Okay. And then the second question, just on the insurance recoveries. Ken, is there like you've collected $112,000,000 $14,000,000 I don't know what the total amount is since the inception of the recoveries. Go ahead. I'm sorry.
Andy, the total was $466,000,000 to date.
Okay. $466,000,000 And
what's the maximum you can recover? Well, we can recover the full liability, which we have booked at $557,000,000 now I think. $58,000,000 excuse me. And then also the litigation costs associated with the 3rd party liabilities.
So how much could that potentially be?
That we haven't separately disclosed.
So it's up to $5.58 plus whatever litigation costs. And there's no maximum on that litigation cost?
That is our estimate of the litigation cost excuse me, the litigation cost there is no maximum. It's whatever was required to pursue the claims.
I think we
have one more question.
Okay. Thank you.
Thank you. And our next question comes from the line of Ashar Khan with Bizum Asset Management. You may proceed.
Good morning and great quarter. Ken, can you give us an idea like last year in the equity piece, there was a component which came in because of the late timing of the GRC. So in this year's equity $400,000,000 to $600,000,000 Can you give us some rough estimate what could be the impact? I'm assuming there's an impact for the late GTS rate case, which is coming in later than should have come in at the beginning of the year. Is there some way you can guide us on that?
Well, I'll say if you look at slide 9, we give some of the drivers to walk you from last year to 2015 and the equity need. And you're right, the first item is kind of a timing item related to when during the year you actually do the financings, but also in the case of last year the fact that the general rate case was delayed until fairly late means we had a lot of months during the year where we otherwise had to increase our equity component a little bit in order to manage our overall equity ratio. What you really asked about is, is there a similar phenomenon in 2015 for the gas transmission case? And there is. That's absolutely true.
It's probably not the same magnitude, but there is a similar phenomenon, which otherwise will cause us to have a little more equity this year as compared to the subsequent year when you have the revenues throughout the year. The other drivers up here just to quickly go over them, we do have because of rate base growth, we do have higher earnings in 2015. So that slightly reduces the equity need this year. We also have lower unrecovered costs. We've talked about that on the call.
Similarly reduces the equity need. But we have higher capital expenditures and that's the one factor that goes in the other
and we'll end the call now.
Thank you, ladies and gentlemen for attending today's conference. This will now conclude the call. Please enjoy the rest of your day.