Good morning, and welcome to the PG and E Corporation's 2nd Quarter Earnings Conference Call. All lines will be muted At this time, I would like to introduce your host, Gabe Tanieri with PG and E. Thank you and enjoy your conference. You may proceed, Mr. Tanieri.
Thank you, Jackie. Hello, everyone, and thanks for joining our call. Before you hear from Tony Early, Chris Johns and Kent Harvey, I'll remind you that our discussion is going to include forward looking statements based on assumptions and expectations reflecting information currently available to management. Some of the important factors that could affect the company's results are described in Exhibit 1 located in the appendix of today's slide. We also encourage you to review the discussion of risk factors that appears in our 2011 annual report and in the Form 10 Q that will be filed with the SEC later today.
And with that, I'll hand it over to Tony. Well, good morning, everyone, and thank you for joining us.
I'm going to provide some opening remarks and then I'll turn it over to Chris and Kent to cover operations and financials in more detail. On slide 2, you see the 3 key objectives that we have been talking about this year. I'll speak to the first resolving gas issues. We've been in settlement discussions regarding the regulatory proceedings. These are multiple proceedings.
There are multiple parties and they're complex issues. And beyond that given where we are in the discussions, I just don't think it's helpful to go into any more detail about where we are. But I will say that if and when we have news to share, we will in fact share that at the appropriate time. We continue to believe that resolving the So we will continue to push forward on that. I do want to comment on 3rd party liability, our civil cases.
We're making lots of progress in resolving these claims. We've settled several more of the most serious cases and our intent continues to be that we provide victims with fair compensation and doing that as soon as possible. Meanwhile, we continue to make good progress on our work in the field. As we've done this and as we've added new experienced leaders, going to describe that in more detail shortly. As I've indicated in the past, there's no quick fix, but we're going to do whatever it takes to meet the commitments we've made related to system safety.
With respect to our second objective for the year positioning the company for long term success, last month we filed our 2014 general rate case notice of intent and it reflects the important work we should be doing over the next several years. So we'll spend some time discussing that in this call as well. We've also introduced a new planning process. It's one that I've used in the past to more effectively manage the business. This process focuses first on developing a long term strategy and identifying the critical objectives that we want to accomplish.
Once the team has clear alignment on this, we develop tactical plans and budgets that then can be implemented on a company wide basis. I think this is a process that will keep us focused on our key objectives and ultimately help us deliver results for many years to come. Finally shifting to our 3rd objective rebuilding relationships. We've seen a slight uptick in customer satisfaction, but I think it's a little too soon to predict that that is a consistent trend. In the last month, we launched a major new customer outreach campaign.
This effort combines advertising, social media, online information, community outreach and a variety of other elements. It will feature our own employees and provide concrete examples of the work we're doing to improve safety and reliability and we anticipate that this is going to be a multi year educational effort as we continue to work on our system. Our research had told us that our customers really like the work that our employees are doing and they respect them, but they do want to know what specifically that the company is doing to make our system safer. This multi channel communications campaign will underscore the message that this is a new PG and E that serious about making improvements. And ultimately, we believe that this educational campaign is an investment in our relationship with our customers and our communities and part of the recovery plan that's essential to our long term success.
So we're focused on these key objectives resolving our gas issues in the near term, positioning the company for success and rebuilding the relationships and I believe we're making good progress. It's going to take some time, but the long term prospects for the company are positive. So with that, let me turn it over to Chris to discuss our operations in more detail.
Great. Thanks, Tony, and good morning, everyone. I'm going to provide the regulatory and then the operational updates that are summarized on Slide 3. I'll start with our general rate case notice of intent filing, which covers the gas and electric distribution and electric generation parts of the business. You recall that the gas transmission and electric transmission are handled in other proceedings.
The key themes in the general rate filing are investing in our infrastructure and leveraging technology in order to improve operations and achieve significant gains in safety and reliability performance. The 2014 proposed revenue increase of $1,250,000,000 represents the funding necessary to cover operating expenses and provide for the annual costs associated with roughly $4,000,000,000 of infrastructure improvements. Expenditures in the general rate case should represent roughly 2 thirds of the company's total CapEx in 2014. The biggest percentage increase in the GRC filing is in the gas distribution area where we would be replacing a substantially greater number of older gas distribution lines than in the past, improving the technology we use to detect gas leaks and significantly upgrading asset management capabilities. For electric distribution, we'll be replacing more overhead electric lines based on their operating performance and installing more automation to limit the impact of outages.
The next step in the process is a full review of the filing by the division of ratepayer advocates followed ultimately by the filing of our formal application before the end of the year. Turning to the operations side. As you can see on this slide in the appendix, we're on track for many of our high level operational operational performance metrics. We've also made substantial progress this quarter on several of our key initiatives. We validated and documented the maximum allowable the 3,400 miles planned for this year.
We've completed 41 miles of hydrostatic tests during this quarter and remain on track to test 160 miles during the year. And we've installed 24 new automated safety valves on our gas transmission system and plan to have 46 by year end. We've also been doing some follow-up field work on class location and related issues and this is where we've identified the additional work that Tony referred to earlier. Specifically, we found vegetation and structures that are encroaching on our rights of way over our transmission pipelines. As a result, we'll be conducting a comprehensive survey of the entire gas transmission system to identify all of the encroachments, assess the cost and scope of the work and begin taking action.
We've also identified additional integrity management work that's necessary and this includes completing more internal pipeline assessments and other types of inspections to confirm the quality of our pipelines. Now most of this work will ramp up next year and we expect that addressing these issues may take several years to complete. Next, you'll recall that we identified roughly $200,000,000 in incremental work that we decided to undertake across the utility this year and next. To date, we've made solid progress in carrying out that work. In the electric operations, we've increased maintenance and repair work on both our overhead lines and underground cables and structures.
We've also increased our patrolling of poles by tens of thousands of units and have taken appropriate corrective maintenance actions to reduce fire risk and improve safety. On the gas side, we've completed more repairs to lower grade distribution leaks as shortened our recheck intervals and have performed more maintenance work on our gas distribution lines. In putting together our 2014 general rate case filing, we have identified some additional work mainly in the gas distribution area that we expect to undertake going forward. It includes a higher volume of gas meter and service work as well as some mark and locate work. Consistent with our commitment to safety and compliance, we're not going to be able to wait until 2014 to begin some of this work.
This will result in an increase in the annual incremental spend from about $200,000,000 to about $250,000,000 However, there are some other areas like the light storm season we experienced earlier this year that create headroom for us to maintain our 2012 guidance for earnings from operations. Finally, I know a number of you have an interest in our progress on the Diablo Canyon seismic studies. There are a couple of authorizations that are pending to allow us to conduct the offshore seismic mapping. We're hopeful that we'll receive these authorizations in the next few months to allow us to complete the work by the end of this year. And with that, I'll turn it over to Kent.
Thanks, Chris, and good morning. As usual, I'm going to go through the results for the Q2 and discuss our outlook for the rest of 2012. I also plan to provide some observations about post-twenty 12. I'm going to start on Slide 4, which summarizes our results for the quarter. Earnings from operations were $0.81 per diluted common share, while GAAP results were 0 point and comparability for natural gas matters, which totaled $0.26 for the quarter.
The components of that are broken out in the table at the bottom in pre tax dollars. The pipeline related costs totaled $128,000,000 during the quarter and include the pipeline validation and strength testing work in the field as well as our legal costs. In general, the field work has been on plan, although we continue to experience higher than planned legal costs. We also took an $80,000,000 accrual during the quarter for 3rd party liabilities. And this reflects the results of the recent settlements reach, which Tony discussed, as well as the latest information that we have about the remaining claims.
It brings our total accrual for third party liability claims since the accident to $455,000,000 The upper end of our estimate for 3rd party liability remains at 600,000,000 dollars Finally, we booked insurance recoveries of $25,000,000 for the quarter, bringing us to $135,000,000 of insurance recovery booked since the accident. We continue to believe that a significant portion of the costs incurred for 3rd party claims will be recovered through insurance, but will wait until we've resolved claims with each carrier before booking future recoveries. Moving to Slide 5. You can see the quarter over quarter comparison for earnings from operations, including the primary factors that take us from $1.02 in Q2 last year to $0.81 in Q2 this year. First off, results for the period last year reflected 2 quarters of incremental revenues due to approval of the 2011 general rate case and gas transmission and storage case, which were both retroactive to January 1.
So there's a $0.13 adjustment to normalize the timing of those decisions last year. There was also a $0.09 reduction due to our planned incremental spending this year to improve our operational performance across the utility. And then finally, share dilution accounted for a $0.06 reduction. And this reflects the share issuance during the quarter as well as the full effect of our equity offering completed late in Q1. Those items were partially offset by a $0.05 increase due to higher authorized rate base investments this year compared to last year and then we had another $0.02 positive due to other smaller items.
Slide 6 summarizes our 2012 guidance. The guidance range for earnings from operations remains at $3.10 to 3.30 per share. The range for the item impacting comparability for National Debt Matters has been updated to reflect the accrual this quarter, the 3rd party liability and our insurance recovery. In the table at the bottom, you can see the ranges for each component of the natural gas matters in pre tax dollars. The range for pipeline related costs is unchanged at $4.50 to $5.50 for the year.
However, we continue to trend towards the upper end of that range, primarily due to legal costs, so we're continuing to watch this one. The range for 3rd party liability claims is now $80,000,000 to $225,000,000 The lower end reflects the accrual taken in the quarter and the upper end is unchanged. For insurance recoveries, you see the $36,000,000 we booked during the 1st and second quarter. As in the past, we're not providing guidance for future insurance recoveries or for additional penalties beyond what we've already accrued. In terms of equity issuance, we continue to expect to need roughly $700,000,000 this year based on our guidance Through the end of the second quarter, our total issuance was $572,000,000 so we're well along with our plans.
Obviously, our actual issuance during the year will depend on a variety of things, most significantly, of course, developments related to the gas matters. At this point, I thought I'd also provide some observations to help you think about our profile beyond 2012. Clearly 2013 looks to be a down year for earnings from operations, primarily due to year over year dilution case period. As I go through this, I expect that you'll have some questions for which you'll want quantitative answers. However, much of what I'm going to say will be more directional, more qualitative than quantitative.
We certainly want to be transparent with you all, but we won't be in a position to provide guidance for future years until at least we have more visibility around the outcome of our gas issues. In the meantime, this somewhat qualitative approach seemed to be the best option. I'm going to start on Slide 7 and there you can see that we listed some factors for you to consider in thinking about our future year earnings from operations. In terms of capital expenditures, this year we expect to be approaching $4,800,000,000 In 2013, we should be at or above that level since we have important investments planned throughout our business. As an aside, if bonus depreciation is extended next year, that would cause us to be somewhat above our authorized rate base in 2013 and we'd intend to true that up in the 2014 general rate case.
For capital expenditures in 2014, we proposed a higher level in the next general rate case. In terms of our authorized rate base, which we earn on, we expect it could increase from around 24 point $5,000,000,000 this year to about $26,000,000,000 in 2013 based on our last general rate case and other proceedings, including the pipeline safety enhancement plan request, which obviously hasn't been decided yet. Our authorized rate base for 2014 will be reset in the upcoming general rate case as well as other proceedings. Because we intend to true up historic rate base in the general rate case, we'd expect a more significant increase in authorized rate base in 2014, maybe in the 10% range or so based on our general rate case and our pipeline safety enhancement plan requests. But we'd expect rate base growth after that to return to more normal levels during attrition years.
Our authorized ROE and equity ratio for 20 13 will obviously be set in the cost of capital proceeding, which is now underway. We've proposed a reduction in ROE from 11.35 percent to 11% next year and we propose maintaining our common equity ratio of 52%. In addition to deciding those levels, the PUC is also going to consider a mechanism for adjusting ROE in 2014 and beyond, but we don't expect them to address that until the early part of next year. Next is the incremental spend. As Chris discussed, we expect it to total about $250,000,000 across the utility this year and to continue next year.
As you know, these costs are not currently reflected in our rates. However, we will be seeking cost recovery in our general rate case starting in 2014. Next is earnings on QIP, our construction work in progress. You'll remember that we accrue AFUDC on QIP and our 2012 guidance assumes that about half of that is offset by below the line costs that are not recovered from customers. And those are things like charitable contributions, advertising, public affairs work and so forth.
Of course, that reflects the minimal advertising we've done the last few years. And given the recovery plan that Tony talked about, offset our QIP earnings in the future. So you want to keep that in mind. Finally, we've seen significant equity issuance this year, much of which has been driven by unrecovered gas pipeline costs. You'll see our equity need estimate of roughly $700,000,000 for 20 12.
Our equity issuance beyond this year is expected to continue to be significantly higher than would be satisfied by our internal programs, our 401 and dividend reinvestment plan. Of the key drivers for this are our capital expenditure levels, year over year differences in our cash flows, the potential expiration of bonus depreciation, which I mentioned, our planned incremental spend across the utility and then the level of future gas pipeline costs. So let's go to Slide 8 now. And here we've shown some factors to consider in estimating future unrecovered pipeline related costs. And let's start with 2012 at the top.
You can see our current guidance for unrecovered pipeline related costs of $450,000,000 to $550,000,000 That includes the 4 components you see listed. The pipeline safety enhancement plan expenses, which we've been seeking recovery of, but for which a final decision isn't expected until late in the year. The pipeline costs that we're not receiving recovery of, such as work on post-1960 pipe. And then other work that's been identified since the PSEP filing last summer and then legal and other costs. In 2013 2014, the PSEP expenses we are seeking recovery of are shown as to be determined pending a decision by the PUC.
And of course, you can go back to our PSEP filing from last summer to see our original request over this time frame. The PSAF cost we are not requesting recovery of will continue in 2013 2014, but the level of expenditure is expected to decline after this year. That's why we show it as lower. Other work refers to the pipeline rights of way and integrity management work that Chris discussed, which we're in the process of scoping out. We do expect it to ramp up next year and it takes several years to complete.
So we show it as higher next year. Finally, we expect our legal costs to decline significantly after this year, so we show it as lower in both years. Obviously, that profile will depend on how quickly the various proceedings are concluded. Down below, you see the other components of our item impacting comparability for our natural gas matters, penalties, 3rd party liabilities and insurance recoveries along with some commentary there. In particular, I think we've made good progress in resolving a number of significant third party claims and we hope to be able to resolve many of the remaining claims in a timely manner.
I'd expect the timing of insurance recovery to generally follow from that, but it's hard to predict exactly when that will occur. So that's an overview of some of the major factors likely to affect our earnings from operations and our unrecovered natural gas costs
going forward.
I know it's a lot to digest, but I do hope my comments are helpful to you in keeping track of the various pieces that are likely to influence our results over the next few years. Tony?
Well, thanks, Ken. We have a number of challenges and uncertainties that we're working our way through. And I know it can be frustrating that we can't be more specific about timetables or predictions for all of the different regulatory proceedings, but that is the nature of the regulatory process. But I do believe we're making good progress. We're focused on resolving our outstanding issues and running the business well, so we can be successful in the long run.
We continue to get positive feedback from many of our constituents regarding the direction that we've been moving in. As a result, I believe company has a promising future and an attractive value proposition over the long run. So with that, let me open it up for your questions.
Certainly. We will now allow questions from the phone lines. Our first question comes from the line of Mr. Michael Goldenberg with Luminess Management. Please proceed.
Good morning.
Good morning.
I wanted to get a better understanding on the equity issuance that you mentioned the significantly higher versus 401 can DRIP. Can you provide some color as to how much of that is related to the substantially higher capital expenditures in the following rate case that you preliminarily filed for versus expenses and other things that are running above previous expectations that now will have to be plugged by equity?
Michael, this is Kent. We're not in the at the point of providing any guidance for the future years. But I think you should be able to get a general sense of our CapEx levels and to determine from that sort of how much of that is driving year over year equity needs as compared to where you end up with looking at un unrecovered costs. And those obviously hit our equities, so they drive our equity needs in order to maintain the balanced capital
Our next question comes from the line of Mr. Greg Gordon with ISI Group. Please proceed.
Thanks. First a quick follow-up on that question. In the normal course
of business, Kent, what is the amount of equity that you issue through those programs?
For the 401 and dividend reinvestment plan, we typically have issued between $200,000,000 $300,000,000 per year.
Okay. So you're telling us that given the level of capital expenditures and everything else that in the future to maintain your cap structure
you would expect to have
to issue more than that?
Yes, significantly more. That's right.
Okay. Thanks. And then is there anything that you all can tell us about the possibility anything more you can talk about the possibility of resolving some or all of the outstanding pipeline matters via settlement at some point this year? Or should we presume that that's just too complicated and we're going to have to see litigate that outcome?
Great. This is Tony. It's still my objective to try and wrap up all of those issues through a settlement by the end of the year. But as I said, this is one of the more complex proceedings I've been involved in. We've got 3 investigations, one rule one rule making.
We've got multiple parties. We've got the Attorney General, the U. S. Attorney and several other prosecutors that I think where we are here in August, I still think that we can accomplish my stated objective of trying
Thank you, Tony.
Thank you, Mr. Gordon. Our next question comes from the line of Huynh with Sanford Bernstein. Please proceed.
Hi. I wonder if you might just help me sort through some of the strands of your disclosure here regarding factors affecting EPS. Just two quick questions on that. At the incremental spend that you mentioned on page 3 or rather I should say increased scope in incremental work that you mentioned on page 3. Is the implication of that solely the increase in incremental spend that you show on page 7 from an anticipated 200 to an anticipated 250 continuing on then into 2013?
Or is there something else that we need to be on the lookout for by way of incremental CapEx or incremental costs that are somehow not reflected here?
Hugh, this is Kent. The mention that's on slide 3, which talks about rights of way issues identified that actually ties to page to slide 8 and that's the incremental that's new spend in the pipeline area having to do with rights of way and integrity management. Also on slide 3 and this may be what you're referring to the increased scope of incremental work that is that relates to slide 7 and the item that is mentioned previously estimated previously estimated at $200,000,000 this year and next year. And we're saying that's going to be 250,000,000
Good. Okay. I think that's clear. And then on page 7, you mentioned that you've requested PSAP to be included in rate base over 2.12 through 2.14 and you give the annual amounts. Is that included then in this authorized rate base number that you show up in 2012 and 2013?
It is, yes. So you will it is so you'll want to keep that in mind and that's why we provided you the details down below in the footnote.
Okay. So the point that you're making is that you've spent this money, but you actually don't have the rate base revenues at this
point. Correct.
Okay. And then just a final quickly. You mentioned or Tony mentioned that the Attorney General of the State of California and the U. S. Attorney were involved in the settlement discussions.
Are the Feds and the California authorities then continuing to proceed with a criminal investigation of the case. Is that what we should read into that?
They have been involved. They have interviewed employees. Obviously, it's not as high on their priority list as it is on ours to get this done. They've got lots of other things. So they've kind of gone in fits and starts been involved in that, but we have reached out to try and get everybody involved in an overall settlement.
All right. Thanks very much.
Thank you, Mr. Wen. Our next question comes from the line of Michael Lapides with Goldman Sachs. Please proceed.
Yes. Hi. Maybe a few questions for Ken. Just curious at the end of the quarter, how were some of your key balance sheet how are some of your key balance sheet metrics meaning like how much short term debt did you have outstanding? What was debt to cap?
And then when we think about kind of cash requirements going forward, how much of what's been accrued for 3rd party liabilities have actually been paid? And what are your expectations for things like either Hinkley related payments in the next or CapEx related items in the next few years, etcetera?
Yes. Michael, in terms of sort of major changes in cash and our balance sheet, I don't think there's anything very significant there. I think our amount of commercial paper outstanding is down by a few $100,000,000 since the end of last quarter. That's kind of normal course of business for us. In terms of the cash requirements associated with things like 3rd party liabilities and stuff, we've accrued $455,000,000 to date.
I think the actual payments that have been made through the end of the second quarter were $145,000,000 And then again on the insurance side, we've booked $135,000,000 of insurance. So we tend to pay those settlements as the settlements are concluded and some of those are fairly recent.
Got it. And Tony, just I'm seeing a lot of the items on Page 7 and Page 8. And just want to kind of get a feel, I think going back to the Q3 call, you may have made some comments about the goal is to get closer to earning your authorized ROE by 2014. Do you still view that as the goal? And are there any items that have been outlined here, which clearly won't be recoverable in rates by 2014?
Well, that is still our goal. I think the big driver for 2014 is going to be how the GRC, the general rate case comes out. That's a large number $1,250,000,000 and we think that we're able to justify that level spending, but the results of that are going to dictate a large part of our ability to achieve our allowed returns there.
And this is Kent. The only other thing I'd add, obviously, the general rate case covers electric and gas distribution and electric generation. In terms of gas transmission that rate case is not until 2015. So our opportunity to true up costs there that are outside of the PSEP proceeding is really a year later in 2015. So does that imply there's
a little bit of drag or a little bit of kind of regulatory lag on the gas pipeline side? I think that would be a reasonable
Mr. Lapides. Our next question comes from the line of Jonathan Arnold with Deutsche Bank. Please proceed.
Good morning, guys.
Good morning, Jonathan.
Quick question on the $250,000,000 number that you're now giving for incremental spend that's to continue into 2013,000,000. Did I hear you correctly that you think you can offset that partly because you've had below trend storm costs in 2012, but we shouldn't necessarily assume that that offset would continue into 2013 or do you have some other offset to the kind of incremental $50,000,000 since last quarter?
Hey, Jonathan, this is Chris. And you're right. When we look at this year, we've had the lighter storm season. We've also had some tax benefits and some other savings that we focused on and that's been able to offset that. And we anticipate that that level of spend will continue into next year.
I mean, obviously, we're always looking for ways to continually improve on there, but we wanted to make sure that you all were alerted to that higher level.
So that the higher level continues with the offset unless something else materializes, it doesn't necessarily? That's true.
Okay. And
then secondly on in the Q1 you had 7,000,000 dollars of sorry, dollars 0.07 a share of miscellaneous items that were positive that you'd said you thought would reverse over the course of 2012. And obviously that didn't show up as a driver in the Q2. Is it do you still anticipate that through the balance of the year? And any comment on that?
Jonathan, this is Kent. We do still have the same view of that. And that was a lot of a number of small items that many of which were timing in nature. So we do anticipate that trending down during the rest of the year.
Okay. And then finally, Kent, if I may just on well, your comments around equity, are those sort of premised on the 52% that you requested in the cost of capital case and I would presume. Firstly, is that correct? And secondly, does that comment change significantly depending on where that shakes out?
Yes. No, I think that's reasonable. I think that would be a driver if we ended up with a different authorized equity ratio. There really aren't indications that's going to be the case at this point. We filed obviously for 52%.
We think it makes a lot of sense from a credit perspective and otherwise. And we noticed last night when the interveners filed their testimony, I think everyone's at 52% common equity as well. So we're at least in alignment on that dimension of the case. Certainly, we're not in alignment in terms of the recommended ROEs that they proposed. But that's no surprise.
Okay. And then, FEMALE just one final thing. There was a date in the schedule in the OIR for a proposed decision I think yesterday as well. Is it a reasonable working assumption that given you said you're still in settlement talks that there will not be a PD in the meantime? Or any kind of help you can give us on what to expect there?
Yes. This is Tom Bachtler from Regulatory Relations. We haven't heard anything different from the PUC on the schedule for when that proposed decision would come out. We have no indication that it's scheduled to come out on that date either.
Okay. Thank you.
Thank you, Mr. Arnold. Our next question comes from the line of Tom O'Neill with Green Arrow. Please proceed.
Good morning. I was just curious if
you could review the longer term dividend policy and just whether we should recalibrate that if CapEx levels are approved as proposed?
Well, let me just reiterate. We're committed to the dividend. We believe that's important part of the value proposition for a company like ours. But in terms of policy, we can't revisit what we're going to do until we get some major things behind us like the gas proceedings. We've got cost of capital.
We've got to take a look at some indication of where the general rate case is going to be going before we would be able to say any more about policy going forward. So what we've been saying we're committed to the dividend, but are going to have to resolve a couple of these major issues before we start to give you some guidance on what you might expect.
Okay. Understood. Thanks.
Thank you, Mr. O'Neill. Our next question comes from the line of Steve Fleishman with Bank of America. Please proceed.
Yes. Hi. Can you hear me?
Yes, Steve. Hi, Tony.
Just one clarification on the settlement discussions. When you say you're targeting have a resolution by the end of the year, are you targeting a settlement by then or approval by the TUC of a settlement by then?
I think you're cutting too fine a line there.
But it could be several, 3, 4, 5 months?
It could or it could go very quickly. It probably depends on how many parties you can get to sign on. Is it a heavily contested settlement? Or is it one way you've got a number of parties? So I've said I want to try and get them wrapped up by year end.
Either one of those would be real progress if we just got an agreement even if it wasn't yet approved by the commission.
At one point you had mentioned the 2 year anniversary of San Bruno as a potential kind of goalpost on this? Is that should we not really focus on that as a potential goalpost date on this?
Well, it certainly continues to be a driver of trying to move things along. Here, we're about a month away. It may not be well, certainly, you're not going to get total resolution by then, but it continues to be in everyone's mind that we'd like to make a lot of progress by then.
Thank you.
Thank you, Mr. Fleishman. Our next question comes from the line of Travis Miller with Morningstar Securities Research. Please proceed.
Hi, thanks. With the docket right now, all the dockets right now of the CPUC, what's your sense for where you stand for each of these proceedings in line in the Q? And how would you rank each one of the 4 outstanding in the regulatory calendar that you guys give there?
This is Tom Batorf again. The rulemaking is the furthest along and it has again the proposed decision scheduled for release this month. That hasn't happened yet. We're not sure when it will happen. But it calls for a final decision as early as September.
But again, I don't see that on a track where that's likely to happen, but that's what the current schedule calls for. The 3 investigations are all on similar timelines right now. PG and E has filed its responses. We expect rebuttal testimony from the staff in August and hearings will probably take place either in late August or early September. So the procedural time line for the three investigations have probably proposed decisions by the end of year or early January and final decisions in the Q1 of 2013.
And is there a reasonable to expect that those will be on time?
As of now, they've been on schedule. Yes. So if they've absent a settlement, I'd expect those schedules to proceed on that timeline.
Okay, great. Thanks a lot.
Thank you, Mr. Miller. Our next question comes from the line of Anthony Krowdell with Jefferies. Please proceed.
Good morning. You may have addressed this already, but I was wondering if the company could comment that they've been successful in maybe getting all of the OII is wrapped up into like one settlement discussion. I know maybe on the previous earnings call you mentioned that was your goal, that was your hope. Could you give any status on that?
As I said before, these are complex issues. We are trying to get a global settlement, but I really don't want to get into the details of the discussions.
Great. Thank you.
Thank you, Mr. Craddell. Our next question comes from the line of Ashar Khan with Visium Asset Management. Please proceed.
Hi. How are you doing? I just wanted to as you were trying to point out directionally the earnings, Is it fair you're saying from what I heard, 13% is down versus 12% of course, because of the ROE issue. And even the rate increase and everything is not going to offset rate base increase is not going to offset of course lower ROE what you're predicting. But then you're expecting 2014 to be higher than 13.
And can you point out whether you expect 14 to be equal to 12 higher or lower? Can you give any kind of indication from that perspective?
Are you referring to overall like earnings from operations?
That's correct.
Well, I think the key drivers in 13 that I mentioned were the fact that there will be some reduction in the ROE that's authorized. And then in addition to that, we do have the cumulative impact of dilution, some year over year dilution because of the equity issuance that's happening throughout this year for example and will be outstanding for all of next year. Probably one of the bigger factors in 2014 is that it's a general rate case, which will affect our authorized rate base and it will affect our ability to earn an authorized return given that we're doing incremental spend this year and next year in the $250,000,000 range. So we are looking to the general rate case as a way for us to address a lot of the activities that we're doing over the next few years and to make sure that our revenues are aligned with what we think we ought to be doing on our system.
Okay, understood. But is there any guidance that you can give in terms of I know, I guess, we don't know what will out in the rate case. But are you pointing that 14% any directional guidance of 14% versus 12%?
We're not providing guidance for either year at this point.
Okay. Okay. Thank you.
Thank you, Mr. Khan.
Jackie, is that an indication that there are no further questions?
Yes, sir. And there are currently no additional questions waiting from the phone lines.
Right. In that case, I would like to thank everybody for spending some time with us today. I know it's a very busy earning season and this is towards the tail end. So have a great day. Thanks
again.
Ladies and gentlemen, thank you for attending the PG and E Corporation Second Quarter Earnings Conference Call. This now