Ladies and gentlemen, thank you for standing by. My name is Krista and I will be your conference operator today. I would like to welcome everyone to the PG&E third quarter 2026 earnings release. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question- and- answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, again, press star one. Thank you. At this time, I would like to turn the conference over to Jonathan Arnold, Vice President of Investor Relations. Jonathan, please go ahead.
Good morning, everyone, and thank you for joining us for PG&E's third quarter 2026 earnings call. With us today are Patti Poppe, Chief Executive Officer, and Carolyn Burke, Executive Vice President and Chief Financial Officer. We also have other members of the leadership team here with us in our Oakland headquarters. First, I should remind you that today's discussion will include forward-looking statements about our outlook for future financial results and other matters.
These statements are based on management's current expectations, assumptions and estimates. Some of the important factors which could cause our actual results to differ materially are described on the second page of today's earnings presentation. Today's discussion will also contain non-GAAP financial measures. The slides provide important information regarding these measures, including reconciliations between non-GAAP and GAAP. They can be found online at investor.pgecorp.com, along with other relevant information. We also encourage you to review our quarterly report on Form 10-Q for the quarter ended September 30th, 2026. With that, it is my pleasure to hand the call over to our CEO, Patti Poppe.
Thank you, Jonathan. Good morning, everyone. Our core earnings per share were $0.41 for the third quarter and $1.24 for the first nine months. Today, we are reaffirming our 2026 core EPS guidance of $1.64 to $1.66, up 10% from 2025 at the midpoint. We are also reaffirming our 2027 core EPS guidance of $1.78 to $1.82, up 9% at the midpoint. While we are no longer providing guidance beyond 2027 during our strategic review, we already addressed our anticipated equity financing needs through 2030. On the common dividend, we typically set our annual rate for the upcoming year in December, and for 2027, you should expect our recommended increase to be consistent with our prior stated trajectory. Turning to slide four. We know there are two topics that are top of mind today, wildfire policy reform and our previously announced strategic review. First, on wildfire policy.
Comprehensive reform has not yet been enacted, and action is needed to address the tail risk that exists under the current framework. At the same time, it's important to recognize that California's utility wildfire framework has evolved significantly from SB 901 in 2018 through AB 1054 in 2019, and most recently with SB 254 last year. Along that journey, our state policymakers have established important and substantive features, including self-insurance up to $1 billion, liquidity from the Wildfire Fund and Continuation Account, a revised prudency standard, a presumption of prudency for utilities meeting rigorous safety certification, limits on Wildfire Fund reimbursements if found imprudent, and precedent for securitization of claims exceeding fund capacity. Collectively, these protections have strengthened California's ability to compensate wildfire survivors while supporting safe, reliable, and affordable service.
Yet, key voices have plainly acknowledged that there is more work to do, including Governor Newsom, the CPUC, the Wildfire Fund administrator, and the credit rating agencies. We remain committed to working constructively with policymakers and stakeholders to build on the progress California has made to date. We look forward to the governor's requested CPUC report due November 1st, which should further quantify the unsustainable impacts of the current framework on California and utility customers. While legislative action has not materialized yet this year, we're moving forward to unlock value for customers and investors. As you know, since 2020, we've been reinvesting nearly all of our earnings into the system to benefit customers. However, sustaining this level of investment requires a wildfire liability framework that supports affordable access to capital.
Reflecting current high financing costs, we previously announced a $2 billion reduction to our 2027 capital plan, and we recently began notifying customers whose projects may be delayed. These changes will affect the connection of new clean energy resources, system expansion to meet growing demand, and new or upgraded customer projects, including those supporting much needed housing in California. We do not take those impacts on our customers lightly, but our current financing cost is too expensive for them. With our strategic review, we've also taken the initiative to start exploring solutions which could add protections and unlock value for customers and investors. As we announced on September 2nd, we are assessing the full range of options for how PG&E is organized and financed. A key foundational objective is to achieve investment-grade credit ratings, which we view as critical to maximizing the value we can deliver for our customers.
While policy reform through legislation remains the fastest and most effective solution, we're also evaluating other options, including possible regulatory reforms, further reassessing our capital allocation priorities, and revisiting our corporate structure. On structure, options range from corporate ring-fencing to sales and separations. Today, a discount for wildfire risk burdens all of our assets, including businesses with little or no exposure to that risk. Our review is evaluating whether alternative structures could better reflect the value and risk profile of those businesses in order to lower financing costs for customers. We expect to share the outcome of our review and our planned path forward with you no later than next summer. In the meantime, we plan to keep you updated on our progress through future earnings calls, or sooner if there are material developments to share.
The important point is this, PG&E has more than one way to move forward and create value. We have several attractive businesses with unique and hard-to-replicate assets, providing essential electric and gas service to over 16 million people in a service area that includes the heart of the world's innovation economy. Turning to slide five, the story here is simple. Our investments are producing measurable results. Today, our Hazard Awareness and Warning Center has real-time visibility across our system through more than 700 AI-enabled cameras and 1,600 weather stations. The results are clear. We're now in our fourth year without a major wildfire associated with our equipment, and our weather-normalized ignition rate has declined 74% since 2017 to its lowest level since we began tracking the metric. We're also seeing tremendous progress in our gas business, where aerial and drone inspections have significantly improved leak detection efficiency and safety performance.
Additionally, we remain first quartile in both dig-in performance and emergency response, with first responder arriving on-site in an average of 20 minutes. We're also on track to achieve a 62% reduction in annual methane emissions compared to the 2015 CPUC-approved baseline, continuing to outperform our 2030 target. We've made similar improvements across our large and growing transmission and power generation businesses. Our electric transmission system spans 18,000 circuit miles with $13 billion of FERC rate base, along with significant opportunities to increase investment in the future. While our power generation portfolio includes 7.8 GW of capacity, including our hydro system and top-performing Diablo Canyon Nuclear Power Plant. Turning to slide six, we're continuing to build a high-quality data center pipeline and providing visibility into how projects advance from application to energization.
This quarter, we're showing a new category for megawatts that are now successfully connected to our system and receiving service. Since 2024, we've brought approximately 174 megawatts of data center projects online. As we look to bring more of our pipeline into service, our focus will continue to be on doing so in a way that will improve affordability for existing customers. We're focused on connecting the right projects, pricing them right, and ensuring large load customers make meaningful financial commitments as they advance through the process.
Turning to slide seven, there's a common thread across the themes I've discussed this morning. Whether it's continuing our transformation and strengthening our layers of protection, advocating for durable wildfire policy reform, advancing rate reducing load growth, or progressing our strategic review. We're guided by a simple principle. What's good for our customers is ultimately good for our investors and good for California.
We'll continue to stay grounded in our customer-first approach and pursue opportunities to deliver a safer, more reliable, and more affordable system so that our customers and shareholders can prosper. We're proud of the progress we've made, and we're ready to tackle the work ahead. With that, I'll hand it over to Carolyn to cover our financials in more detail.
Thank you, Patti, and good morning, everyone. Turning to slide eight, we're showing you our earnings walk for the first nine months of 2026. Our core EPS year- to- date has reached $1.24, up from $1.14 in the same period last year, keeping us on track to deliver on our full year core EPS guidance. As in prior quarters, customer CapEx continues to be the primary driver of our earnings growth, contributing $0.12 over the first nine months. We also continue to make steady progress on our O&M savings goal with $0.04 year-to-date. This puts us on pace to deliver our savings guidance once again while redeploying $0.02. Timing and other items reduced earnings by $0.04 year-to-date. This mainly reflects the benefit we realized in the third quarter of last year from implementing a tax method change.
While we benefited from the method change in the third quarter of both years, last year's third quarter also included a catch-up for the first and second quarters. Turning to slide nine. Our updated 2027 capital guidance of $11.4 billion reflects the $2 billion reduction we announced on September 2nd. You might have noticed that our 2027 rate base guidance remains unchanged. Many of the projects impacted by our capital deferral have longer development and construction timelines and were not expected to enter service until after 2027, limiting the impact on next year's rate base. We also continue to see strong operational execution across the company, including efficiently converting construction work in progress into rate base. We expect to finance our 2027 capital investments with cash from operations and $4 billion-$5 billion of utility debt financing, which includes around $1 billion of maturities.
Importantly, with our updated capital plan, we remain fully committed to executing our wildfire mitigation plan, maintaining our annual safety certificate, and continuing the critical work required to operate our system safely every day. On slide 10, we've made significant progress over the past several years improving our credit profile. The rating agencies have recognized for some time that our financial metrics are consistent with investment-grade performance. At the same time, they've also been clear that policy risk remains the primary constraint on further ratings improvement. That dynamic was reinforced during the quarter when Fitch revised its outlook on PG&E to negative, and S&P highlighted the heightened risk faced by California investor-owned utilities. Together, these assessments reinforce the importance of a durable wildfire liability framework, which would support investment-grade ratings and more affordable access to capital for the benefit of our customers.
On slide 11, we continue to execute our plan to reduce non-fuel O&M by 2%-4% annually. Our results reflect the ongoing transformation underway at PG&E as we continue executing our performance playbook and eliminating waste. Turning to slide 12, we're highlighting several important regulatory and legislative milestones. In our 2027 general rate case, we received a favorable proposed decision that would authorize interim rate recovery of $456 million to be collected over 12 months, starting in January. If approved, this would promote more stable customer bills, better align cash flow with costs, and reduce financing expense. The commission may take up the PD as soon as next Thursday's voting meeting.
At the end of September, we filed our 10-year electric undergrounding plan, or EUP, proposing 5,000 additional miles of undergrounding between 2028 and 2037 and building on the approximately 1,900 mi we expect to have completed by the end of next year. The plan contemplates an investment of $16.6 billion. That investment is expected to deliver approximately $117 billion of long-term customer benefits while also avoiding $6 billion of future vegetation management, operations, and maintenance costs. Our safety regulator, OEIS, has nine months to review the filing, and if approved, we would then submit the plan and an application to the CPUC for approval of the cost, which is also a nine-month review. As a result, we expect to complete the approval process in the second quarter of 2028. Separately, last week, the CPUC issued a proposed decision on the benefit-cost ratio methodology for utility EUPs.
We are evaluating the PD and expect to submit comments by November 5th, ahead of a potential commission vote as early as November 19. We are concerned that the proposed methodology would prevent undergrounding from reaching thousands of customers in high-risk communities, even where it offers the most effective means of reducing wildfire risk and improving reliability at the lowest cost. Next month, we anticipate a proposed decision in our Kincade and Dixie cost recovery proceeding. As a reminder, this is the first wildfire recovery case for a utility operating under the AB 1054 safety certificate and benefiting from the associated presumption of prudency. Finally, turning to slide 13. The consistent execution, operational improvement, and financial discipline we have highlighted this morning demonstrate PG&E's differentiated story. Our continued transformation benefits customers and investors today while strengthening the foundation for the future. With that, I will turn it to Patti.
Thank you, Carolyn. The facts don't lie. The foundational operations of PG&E are strong and improving every day. Our performance playbook is doing what we designed it to do, deliver for our customers. In the absence of wildfire liability reform, we will keep advancing our strategic review with the ambition of becoming a sustainable investment-grade business that unlocks the full value of our company for our customers, our state, and our owners. With that, operator, please open the lines for questions.
Thank you. We will now begin the question- and- answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, again, press star one. We do ask that you kindly limit yourself to one question and a single follow-up. For any additional questions, please re-queue. Your first question comes from Steve Fleishman with Wolfe Research. Please go ahead.
Morning, Steve.
Hi, Steve.
Hey, good morning. So I guess, just curious what signals, if any, you're getting on desire, interest of the legislature to address the wildfire liability this year. I know there's assembly hearings and maybe some more. Maybe you could talk about what you've heard and know so far. Just any sense that the Senate may want to look to do any hearings?
Well, thanks, Steve. Obviously, top of mind for everyone. Look, we continue to see progress. The hearing this week, I think, was effective at continuing to make the case that the status quo is unacceptable. As long as nothing happens, no legislation is passed, our customers continue to pay, and it's a status quo that needs to be resolved. The job's not done yet. So we found the hearings that are scheduled next week, another one just got scheduled, so there's two next week that I think are addressing the right questions and the right issues, and we're encouraged by that. In the meantime, obviously, we continue to lean forward and move forward on other alternatives to unlock the value.
Obviously, policy reform would be our number one desired next step, but we have a lot of value that is, I would suggest, trapped in the company right now. We're working hard to create parallel paths and move forward. We're hopeful that the legislature does continue to act out. The Senate, we're looking to see if they would schedule any hearings. That hasn't happened yet. Obviously, these hearings are very public, and the information is clear, and many people and many key leaders in the state continue to speak that action is absolutely required.
I guess just related, I think we're still supposed to get the CPUC report on this topic November 1st, and just any sense of what may come out of that?
Yeah, I think it'll be another good case in why the status quo is unacceptable. I don't know how many different ways that people are going to be able to publish and say, but I expect the CPUC report to be substantive. They've asked really meaningful questions in their discovery, so we were providing very important information to them. It'll be good for them to be able to share that November 1st at the request of the Governor. We expect that that is just another signal that the status quo is just unacceptable.
Okay. Thank you.
Yeah. Thanks, Steve.
Your next question comes from the line of Shahriar Pourreza with Wells Fargo. Please go ahead.
Hey, good morning.
Morning, Shah.
This is Marcella on for Shah.
Oh. Hi, Marcella.
Hi. Thanks for taking my question. Thinking about the strategic review, and without asking you to prejudge any specific outcome, can you just frame kind of the criteria that you're using to evaluate potential pathways, specifically around weighing options, ability to unlock value with their potential regulatory risk or reliance on processes outside of your control?
Yeah. Great question, Marcella. Look, first and foremost, we want to unlock value. We want to target investment-grade business or businesses to unlock that value for customers and owners. Obviously, feasibility and ability to execute a transaction is a priority. A lot of people ask us about PacGen and what was different about PacGen when the regulator didn't approve a minority interest. There was a totally different time and a different set of facts. During that time, we were looking to raise cash and were unable to share benefits with customers.
We think in this scenario, we've got a much more compelling case to make with our regulator that, for example, our gas business, our 4 million gas customers are paying sub-investment grade borrowing costs because it's part of the holdco related to wildfire risk. That seems like an issue that should be resolved one way or another, whether it is resolved through policy reform, which would be great. If not there, then would we unlock that value and lower borrowing costs for our gas customers through a regulatory approved spin or sale or a separation of some kind.
Got it. Appreciate that.
Yep
You spoke a little bit about conversations around the current legislator and state leaders, but any sense of conversations with gubernatorial candidates or lawmakers who are running to be part of the next legislative body and how they are thinking about wildfire liability as potentially a day one priority?
Yeah. The governor's race is not over yet. We do know that Xavier Becerra, who is leading in the polls by a pretty wide margin today, has stated publicly support for action. I think he is hopeful like we are that we do not kick the can down the road into next year. That is certainly a possibility. So he has spoken publicly that he is supportive of reform. We are hopeful that that reform does not wait for that.
Got it. Thank you.
Thank you, Marcella.
Your next question comes from the line of Nicholas Campanella with Barclays. Please go ahead.
Morning, Nick.
Hi, Nick.
Good morning. I guess in the last legislative session, there was obviously heavy input from the insurance industry right at the end. I am just curious if you could kind of elaborate on how conversations with that stakeholder has trended since then. Is there a possibility to kind of come to some type of agreement with them just to help increase the odds of any kind of special session? Thanks.
Yeah, you bet. The reality is nothing was passed. No law was passed at the end of the session. I am stating the obvious, but in the nuance of what does that mean to insurance, that means insurance still needs to join in on discussions about what is going to occur to make sure that claims are limited and our customers are not the infinite backstop for insured properties. I would suggest that conversations have been productive. They have continued. Next week's hearing on the 29th is intended to discuss subrogation, my understanding is.
Given that, I think we will hear continued discussions with insurance as well as all of the stakeholders. There is a wide coalition of interested parties, our builders, our real estate agents, our plaintiffs' attorneys, our environmental groups. There are large groups of stakeholders who are interested, obviously, in making sure that this is an affordable framework and that it is a sustainable framework. I would suggest those discussions continue and are constructive, and we will hear more publicly next week through the hearing process.
Thanks for those thoughts. I guess you are telling folks that no later than summer, I guess you would have an answer on the strategic review. Is this really that you guys are going to take time to do the work and finalize the plan by then, or could you be actively pursuing things today that could result in things happening to the corporate structure or maybe regulatory filings being made ahead of that summer date? Thanks.
Yeah, we will definitely be updating through our normal quarterly process, and what we have said is we will have a more definitive determination by next summer. As things occur, we will obviously be communicating, and if there is something to be discussed between quarterly calls, we will certainly do that. We are moving with a sense of urgency. We see real opportunity here. These assets are extraordinarily valuable, and they are operated by the best in the world, I would argue. We have incredible people who operate these assets. They become very valuable, and I think our ability to unlock that value could take a lot of different forms.
As we have said, policy reform is our first preference. Hopefully we could have some update on that sooner than next summer. Otherwise, these other alternatives, as they materialize and as concepts and opportunities and potential filings become possible, we are not going to stick to the timeline of we have to wait until next summer. We are going to work aggressively between now and next summer. We just wanted to be clear that there was a finish line in mind.
Thank you very much.
Yep, thanks Nick.
Your next question comes from the line of Ross Fowler with Bank of America. Please go ahead.
Morning, Patti and Carolyn. How are you?
Good.
Morning. So a couple of questions. Obviously, it seems like investment grade is sort of the foundational objective of the strategic review. So a couple of things on that. What's the realistic time to get there? Can you do it on your own? Does it depend on legislative and regulatory outcomes, and is 14% kind of what we should mark to for an FFO to debt level?
I would say a couple things. We do think it's realistic. It's very realistic that this business be investment grade. The question is what's the best framework and organization of our lines of business that we have today to maximize the value for our customers as well as our owners. Some things we can do on our own, like capital allocation strategy. That would be a strategy to unlock value. As you know, we've held back on an aggressive dividend because we've been reinvesting in the business for the benefit of customers and for stabilizing the financials of the company and making our investment-grade credit rating. We would look at capital allocation as a strategy. That's probably the most independent. We would look at ring-fencing. We would look at, as we've said, other corporate structures that would enable unlocking that growth.
In those cases, the regulator obviously has an important decision-making role to play in that, but we would only bring it to the regulator if it was truly in the best interest of customers and actually created real value for them that we can pass along to customers. I think given our valuation today and the valuation of these assets and their actual physical value, there's some real arbitrage in that distance between the current valuation and what we think the true value of these assets are to provide benefits for customers. We would think that we would have a compelling case for our regulator. All that to say, I'll just reiterate that the fastest way to unlock the value is policy reform, which of course we are not giving up on.
Yeah, that makes sense.
Go ahead, Carolyn.
Yeah, I'll just add that as we look at all of the alternatives through a lens of investment grade, we want to continue to target that mid-teens FFO to debt. That's how we model things, that's how we look at things and that's the goal.
Yeah, that makes sense, Carolyn. Then one more from me. I'm just trying to square these two things. Clearly I understand why there's no sort of guidance beyond 2027 at this point as you go through the strategic review, and you look over everything as you get to next summer, and you look at all the alternatives in front of you pending where policy goes and all the other things we're dealing with right now. But you have made a declarative financing statement through 2030. So what gives you the level of certainty that there's no equity needed in this business through 2030 when there's all the uncertainty related to CapEx rate base growth, earnings growth guidance, et c, past 2027?
So we funded our equity under our plan, our original plan of a $73 billion capital program. We know that our equity program supports that. We love that plan, by the way. We absolutely love that plan and want to execute for our customers under that $73 billion plan. Any other alternative that we're looking at would be equal to trying to support the $73 billion plan as well. That's where we feel comfortable that under any other option that we're considering, that we would not need new equity through 2030.
Yeah. I'll just reiterate, we would not issue equity at these current stock price, our valuation. That's not an option for us.
Yeah. That's certainly the wrong cost to capital, I would say.
Yeah. I'll just say, as we continue to look forward on our financing plans, the principles that we've talked about before still hold under this strategic review. We plan conservatively. We plan with customers at heart. We're always mindful of market conditions, and particularly our current value discount, and our primary focus continues to be IG supportive metrics.
All right. That makes sense, Carolyn. Then you do talk about this amortization or the faster amortization of the Wildfire Fund. You're calling that out this quarter. I don't think that accelerated amortization would, that seems like an accounting consequence, I should say, rather than an economic and credit consequence, because I think it's pretty well known that that Wildfire Fund asset might change given other things going on in California. But I'm just trying to check in and make sure that really has no bearing on your financing plan, credit objectives, strategic review analysis.
That's right. It has no bearing. You're right. It's an accounting charge. We're just waiting for the right trigger.
Yep. Okay. Makes sense to me. Thank you.
Thanks, Ross.
Your next question comes from the line of Carly Davenport with Goldman Sachs. Please go ahead.
Morning, Carly.
Hi. Good morning.
Hi, Carly.
Good morning. Thanks so much for taking the questions. Appreciate the time. Maybe just one on the data center pipeline. Any guidance on how we should just think about the pace and the opportunity to connect data center load in the face of the reduction to the capital plan? Any guidance that you can share on where the data centers may fall in the queue of projects that could be impacted by potential CapEx reductions?
Yeah. So first of all, keeping in mind that our pipeline is a multi-year pipeline and our capital reduction is today specifically for 2027. We see that our 1.8 GW of projects that we have previously signaled would be online by 2030 remain in that plan. When we talk about our capital reset, we reduced $2 billion of capital, but we're still spending $11.4 billion of capital next year. So there's still obviously capital to deploy to our critical safety issues, our critical compliance issues, and projects that are well on their way to reducing rates for customers. Those are obviously very important to us. As we think further on down the line during the strategic review, obviously, as we've said, capital allocation will be an area of focus, and we'll look at how we can continue to help power California's prosperity and our growth.
But certainly, under this liability framework, we're limited in that way. That's why when Carolyn Burke says we love our $73 billion plan, it can help fuel that growth and prosperity for customers and lower bills and bring jobs and new tax revenue to the state. I would just advocate strongly that a healthy PG&E, a wildfire reform, a wildfire liability policy that enables us to grow, enables California to grow and prosper. So, we're fans of what we've referred to as our Goldilocks data center pipeline, and our ability to serve the tech industry of California is an honor and a privilege, but we need a liability reform that enables that to happen sustainably and for the long haul.
Great. Very clear. Thank you. Then just a housekeeping item. On the dividend, is the shift in presentation there in the slides just a function of the strategic review, or is there anything more explicit that you're messaging there with the consistent growth versus the prior 20% payout guidance?
No, I don't think it's any new signaling there. As we've said before with our strategic review, everything's on the table, including the dividend policy. But we've also been very consistent that for 2027 in particular, where we get a lot of questions, is that you should expect 2027 to be in line with our prior trajectory.
Which is in line with the 20% by 2028. We'd noted that it would be ratable. Ultimately, our Board will set the dividend in December of this year, but that's what we were signaling. But everything's on the table under the strategic review.
Great. Thank you so much for the time.
Your next question comes from the line of Anthony Crowdell with Mizuho. Please go ahead.
Hey. Good morning, team.
Good morning, Anthony.
Just a quick question, quick follow-up. I guess one on the strategic review. You are very clear you hope to have it no later than next summer. Is there a point where that review becomes more urgent, whether it is a credit rating action or another wildfire season? I guess how flexible is that date on external factors? Then I have a follow-up.
Yeah. It is a great question, Anthony. Obviously, as we go through the reform, we will be watching current conditions and whatever conditions within which we are operating will have an influence on our trajectory. But what we are really looking for is a long-term sustainable business organization and financing model that delivers value. We know that it can, and we know that this model works. We know that the investor-owned utility model works for customers as well as shareholders and investors and owners, and financing entities. We will obviously respond to current conditions, but more importantly, have an eye on the horizon for what is our long-term value proposition and actually unlock that value.
Great. The follow-up, it may be more focused for the legislature, but I am just wondering, it seems like the cycle of decisions, or when I think about the success of AB 1054 and SB 254 were both after catastrophic events and the legislature acted. This year, again, all of the physical enhancements that companies have made across the state, we fortunately didn't have an event this year, but also weren't as successful in legislature. What decouples that of in order to get supportive legislative action, we don't want to have to have a catastrophic event?
Well, I will remind us, we did have a catastrophic event, obviously significant one back in 2025, which is when this legislative package started. So this has been a two-year package in response to the issues in 2025, and I would just suggest that PG&E remaining sub-investment grade is a major issue that must be solved. When Fitch put us on negative outlook, I think that really reiterated that inaction will continue to get increasingly expensive for our customers. In fact, for all of the debt that we have issued as our sub-investment grade since 2017 will cost our customers an incremental $4 billion in interest expense over the life of that financing.
That is as a cost that can be immediately remediated with good long-term policy. I would like to think, Anthony, that we have got a real sense of urgency because customers are paying today, and our customers are waiting on our legislature to take the necessary actions to put us back in a position to be investment grade, given we meet all of the criteria for investment grade, but for California liability policy.
Great. That is all I had. Thanks for taking the questions.
Thanks, Anthony.
Thanks, Anthony.
Your next question comes from the line of David Arcaro with Morgan Stanley. Please go ahead.
Morning, David.
Thank you. Good morning. Sorry if this is a little duplicative, but I was just wondering if there is no special session, if there weren't legislation passed this year, would you consider that to be a potential catalyst for accelerating and taking additional actions within the strategic review?
Well, it definitely is a driver for the fact that the strategic review has been initiated, and so we will continue to do the work of that strategic review. I will reiterate that we didn't just start thinking about the strategic review. We started our internal process a year ago, thinking about what would be a response or what would be our actions that we could take in the event of inaction. So we've been working on this for some time, so we're not starting from a standing start. We've got a lot of momentum. We've been doing a lot of work, and so we want to make sure that we continue to operate with a sense of urgency.
Yeah. Good. Understood. Thanks. As you've had to make tough decisions around capital prioritization, in deferring some of your CapEx, I guess I was wondering with the undergrounding plan, very big amount of capital that you've proposed here, I guess how do you think about that in the prioritization within the strategic review? How you prioritize capital, is that something that would be an anchor in your overall longer term CapEx intentions? How important is that in your overall thinking?
Yeah. We think undergrounding is incredibly important. Not for every mile, but for the most risky miles. Our 5,000-mi plan, which we've spread out over 10 years, takes in mind spreading that cost out over a longer period of time. It's just over $1 billion a year throughout the life of that 10-year plan. We think it's a very important part of risk reduction and cost reduction. The annual cost for inspections and vegetation management for those miles and the reliability impact and the cost of the reliability impact for our customers is real. On those 5,000 mi, we think it's the most and best prudent deployment of capital.
Obviously, that has to be approved by the commission, and as Carolyn Burke mentioned in our prepared remarks, we're concerned with the current PD on the benefit-cost ratio that would dramatically reduce the number of miles we would do. We've got a lot of talking to do here in the state about that because we know that customers should not have to choose between being safe and being reliable and affordable. We think that undergrounding is the best answer in certain miles. We would say even in a recapital allocation world, that undergrounding is an important part of the plan. Now, I will also say, when we think about our $73 billion plan that we had previously declared, it's a small percentage of the total plan.
So the plan doesn't hinge on underground. I guess I just want to say out loud for the world to hear, we're not doing undergrounding to make our earnings numbers and to grow CapEx. We're doing undergrounding to keep people safe. So, as we think about the role that undergrounding plays, it's a key part of our safety investments on behalf of customers.
Yeah, great. Thanks for that. Really appreciate it.
Yep. Thanks, David Arcaro.
Your next question comes from the line of Richard Sunderland with Truist Securities. Please go ahead.
Hey, morning, Rich.
Good morning, Rich.
Hey, good morning. Good morning. Thanks for the time. I'll follow up on that last point around undergrounding and the methodology concerns. Could you speak a little bit more to how many miles of your filing would be impacted by that? I think you said significant potentially, but I guess more importantly, how that would impact the quantified benefits you laid out in your filing?
Yeah. We're still working through that on the exact number of miles that would result if we use this benefit-cost ratio. I think the thing that we're concerned about is it doesn't match the standard that we use for all other investment benefit-cost ratios that we make. So, we're definitely concerned about the impact on our customers to that. So we're working through what those miles would be, and obviously it's a proposed decision and hopefully we'll see some movement.
Got it. That's helpful. And then switching gears back to that November 1 CPUC report. I know you addressed this earlier, but thinking about the strategic review context alongside that, I'm curious if you have any sense of if this could have potential signals from the commission that could inform your strategic review, or I guess maybe putting this another way, do you see review opportunities that are logical to pursue and put in front of your regulators, even if there is legislative action later this year?
Oh, that's a good question, Rich. We are thinking about that as we do all of this analysis, and we see the value of our assets and the incredible people who operate them and the benefits to customers. If there's a customer beneficial outcome that even with legislative action would still be considered, we obviously will keep that on the table. We do know that the fastest way to unlock value is policy reform, and if that were to occur here in the near term, we'd be thinking hard about the scope and scale of the strategic review. But obviously, we're learning a lot about where we think the full potential of our businesses are, and like any good management team and board of directors, we're looking at the best way to unlock that value for customers and investors.
Very clear. Thank you for the time today.
Your next question comes from the line of Aidan Kelly with JPM. Please go ahead.
Morning, Aidan.
Hi, Aidan.
Hey, guys. Good morning. Thanks for the time today. Maybe just going on the debt front of the strategic review. Carolyn, I know you mentioned mid-teens FFO to debt as maybe a North Star to think about long term. I think previously you also mentioned holdco debt below 10% of total debt. Is that also kind of intact as well, or is there kind of flexibility to revisit that threshold?
Yeah. As we've said, everything's on the table. We are considering both our debt profile, our capital growth, and our capital return. I would say that we're not necessarily indicating any target for parent debt at this point in time.
Got it. Then just one kind of lingering question on the timing of the strategic review. I believe in the past, in September, you kind of mentioned there's maybe a default 12- 18-month timeline, and now we're kind of seeing summer 2027 as the target. Is there any kind of rationale behind the acceleration in that timeline over the past month and a half? I know you kind of mentioned urgency. Is it just simple as taking that as the reason, or is there anything kind of deeper to read into that?
Yeah. When we had previously mentioned 12- 18 months, Aidan, we were talking about that is typically what you would see from companies. We weren't intending to signal our timeline. So that is why we wanted to clarify today. We want to really push to have a definitive direction forward that we can communicate by summer of next year.
Understood. Well, appreciate it. Thank you.
Yeah. Thank you.
Ladies and gentlemen, that does conclude our question- and- answer session. I would now like to turn the conference back over to Patti Poppe for closing comments.
Thank you, Krista. Thank you everyone for dialing in today. Look, our electric, gas, and generation businesses are strong, and they are operated well, and they are getting stronger every day. While legislative action is still possible this year, we are moving forward, and we are advancing our strategic review. We are evaluating all our available paths to unlock value for customers and owners. You can imagine that we are doing that with a sense of urgency. We look forward to seeing you at EEI. Please stay safe out there.
And ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.