Good morning and welcome to the PG&E Corporation's Second Quarter Earnings Conference Call. All lines will be muted during the presentation portions of the call, with an opportunity for questions-and-answers at the end. At this time, I would like to pass the conference over to your host, Chris Foster with PG&E. Thank you and have a great conference. You may proceed, Mr. Foster. Chris Foster - PG&E Corp.: Thank you, Leesa, and thanks to those of you on the phone for joining us. Here with me today in the room are Geisha Williams, Nick Stavropoulos, Jason Wells, John Simon and Steve Malnight. Before I turn it over to Geisha, I want to remind you that our discussion today will include forward-looking statements, which are 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 second quarter earnings call presentation. The presentation also includes the reconciliation between non-GAAP earnings from operation and GAAP measures. We also encourage you to review our quarterly report on Form 10-Q that will be filed with the SEC later today and the discussion of risk factors that appears there and in the 2017 annual report. With that, I'll hand it over to Geisha. Geisha J. Williams - PG&E Corp.: Thank you, Chris, and good morning, everyone. While we provided the market with an update related to the October 2017 Northern California wildfires accrual just over a month ago, there has been a number of developments since then that I plan to cover today. But before we get going, I wanted to open by expressing my appreciation to Nick Stavropoulos for all his contributions as President of Utility and for his time, leading our gas…

Certainly. Our first question comes from the line of Stephen Byrd of Morgan Stanley. Please proceed. Stephen C. Byrd - Morgan Stanley & Co. LLC: Hi. Good morning. Jason P. Wells - PG&E Corp.: Good morning, Stephen. Stephen C. Byrd - Morgan Stanley & Co. LLC: I wanted to touch on the cost of capital point that you raised, I think it's pretty clear that the cost of capital has increased in the state. But at a high level, is it possible to talk through sort of the methodology or the key elements of the changing cost of capital that we've seen for California Utilities overall? Since we've seen numerous, very large wildfires. What kind of key sort of points or key elements of that cost of capital methodology should we sort of keep in mind as we're trying to assess where that cost of capital might go? Jason P. Wells - PG&E Corp.: Stephen, this is Jason. Thanks for the question. It's clear that our cost of capital has significantly increased this year. I mean, I think probably easiest place to look is the cost of our debt which is up roughly 100 basis points and we know that equity costs are a multiple of that. I think as we look forward, we continue to push and believe that constructive reform and inverse condemnation it's important to keep our cost of capital cost effective for our customers. But in absence of legislative reform, I think we would have to consider the potential for future fire events. On what would be a sort of traditional foundation for the calculation of the cost of equity. And so in essence, I think, it's premature to quantify exactly how much but in absence of legislative reform, we could see significant increases in cost…

Thank you. Our next question comes from the line of Jonathan Arnold of Deutsche Bank. Please proceed.

Good morning, guys. Geisha J. Williams - PG&E Corp.: Good morning. Jason P. Wells - PG&E Corp.: Good morning, Jonathan.

There's a lot going on today and I think I heard most of what you said, Geisha, at the beginning. But I think you said you felt that – you were encouraged by the governor's proposal on IC but it wasn't sufficient. I'm not sure if you meant you need to see other things as well or were you commenting on the specifics of that proposal? Geisha J. Williams - PG&E Corp.: Yeah. So I think that the governor's proposal is constructive but as I said earlier we do believe it's insufficient. We think it's just one of many things that need to be considered in a more comprehensive set of reforms relating to inverse condemnation, relating to the wildfire reforms that are needed in the state of California. So, it's an important input, I think, to the Conference Committee, but it's – I think a lot more work is necessary.

What kind of things that it doesn't do would you like to see and my reading of it was that it looks like you would still have a lot of uncertainty, if the court don't decide until sort of some long time after an event, what your liability for it might be? I'm just curious what you're – what are the elements of what you'd like to see that are not there... Geisha J. Williams - PG&E Corp.: Yes, we've always been really pretty clear about our expectations, our – what we want to see accomplished in the legislature this year, and it's threefold. It's strict liability reform under Inverse Condemnation permanently. It's addressing the 2017 wildfire costs in the most cost effective manner possible. And it's also having clarity around reasonableness standards and really the whole cost recovery perspective from a CPUC proceeding basis. So, when I say that it's insufficient, it doesn't go far enough. And looking at inverse condemnation and the impact that it has on utilities like PG&E and the State of California.

Okay. Fair enough. And then, can I also ask on the – do you have any insight into the CPUC investigative timeline and when we might see those reports start to emerge and I guess within that, do you know if they have seen the reports into the fires with the violations and what would – I think they've said publicly that they expect to come out reasonably promptly after Cal Fire, but we've not seen anything yet? Geisha J. Williams - PG&E Corp.: Right, Jonathan, to answer the question directly, no. we really don't have any insights as to the timing of SED or more broadly the CPUC investigations on any of these fires. We're hoping that it's prompt. But, again, we have no insight as to what their thinking will be in terms of timing.

Okay. And then, could I – Jason, I apologize for this. But I felt that it was moving quick. And then, you said that your insurance cost is now $300 million higher than what's in rates. And the overall package you're expecting to cost you $350 million annually. Did I hear that right? Jason P. Wells - PG&E Corp.: That's correct, Jonathan.

And then, there was – some of that you're despairing assuming recovery under the WEMA, but some you are not. Could you just resay that part. Jason P. Wells - PG&E Corp.: Yeah. About $80 million of the amount that is in excess of what we're currently collecting in rates would be deferred as a regulatory asset in WEMA. The rest would fall to the bottom line. Although, I do want to emphasize, as I mentioned, that we will seek full recovery for those costs.

The difference between $300 million and $80 million falls to the bottom line , that's on an annual basis. So you're also saying you expect it to be a positive earnings driver year-over-year. So is the difference then cost saving or something else or how do we reconcile that? Jason P. Wells - PG&E Corp.: Yes. So while we didn't provide you per share guidance for 2018, when we set our financial plan for the year, we did anticipate higher insurance costs.

Okay. Jason P. Wells - PG&E Corp.: And when we set that plan, we set it with the objective of earning our authorized return on equity. The WEMA regulatory asset that we recognized for insurance cost this quarter is incremental to that.

Okay. So said another way, you had assumed that your insurance – the amount by which insurance cost would impact your numbers this year would be more than $220 million, effectively. Jason P. Wells - PG&E Corp.: I think that's fair.

Okay. Thank you.

Thank you. Our next question comes from the line of Steve Fleishman of Wolfe Research. Please proceed.

Yeah. Good morning. I had a lot of the same questions. So, I apologize. These will be clarifications. So, the – on the insurance, the $350 million annually, is that a 2018 annualized number? So... Jason P. Wells - PG&E Corp.: Yeah. That'll be the cost from August 1 of 2018 through July 31 of 2019.

Okay. So, you weren't absorbing in your plan all $350 million in 2018. It would have been, I guess, by 2019? Jason P. Wells - PG&E Corp.: That's correct.

In theory? Okay. Okay. So in theory, that would be a 2019 pressure that you'll be absorbing or recovering by then. Got it. Okay. And then on the – Geisha, I apologize going back to the governor's plan being insufficient comment. Obviously, one way it's insufficient versus what you've stated is it does specifically doesn't address the 2017 fires. But could you just clarify outside of that issue, how that plan is insufficient? With maybe a little more detail? Geisha J. Williams - PG&E Corp.: Yeah. So, it's – it really doesn't address the third item that we typically have called for, which is having, in essence, pre-prudency review. Having an opportunity to look at clarifications around what constitutes being in compliance, what constitutes being a prudent manager, I think that's important. As we've seen from the San Diego Gas & Electric WEMA refusal I guess or, not accepting the rehearing, it's a big issue for us. And when you consider the fact that we're in this new normal, the fact that we have more wildfires it seems every year, very severe wildfires, we've got to look at this whole issue of wildfire reform, inverse condemnation reform, liability reform more broadly, more comprehensively. So that's why I believe that it's insufficient.

Okay. Great. And then one last question, I'm sure you heard the Cal Fire comments on Tubbs yesterday, I don't know if you have any color from your standpoint on those comments. And just how – if the Tubbs Fire report is not out by the end of the legislative session, what does that mean for getting legislation done? Geisha J. Williams - PG&E Corp.: Well let me first talk about that. I mean, clearly, the Tubbs Fire is so significant, so devastating, but I believe that, and what we've been talking about at the legislature is that the reform that we're seeking is so much more than just Tubbs. It's so much more than just 2017. It's so much more than just PG&E. We find ourselves in this climate-driven extreme weather, facing wildfire after wildfire. The numbers that we're seeing already in California and in the Western United States are staggering. So this is going to be a perennial issue. And our focus in addressing legislation is about we've got to come up with new solutions, new legislation that deals with this new normal. So while – I don't know what the impact would be of Tubbs being delayed one way or the other. But I think the time for action is now as we're dealing with wildfire after wildfire today. And having clarity about what utility liability is going to be in the future is going to be so important to our ability to raise capital, to our ability to be a financial utility, to our ability to execute on our plan to achieve California's clean energy goal.

Great. Thank you. Go ahead. John R. Simon - PG&E Corp.: It's John Simon. Just on another part of your question, we really don't have insight into the timing beyond what Cal Fire has said publicly. I did want to emphasize though that ultimately the question of the cause of the fires and PG&E's role if any in them is going to end up being an issue in the litigation. So, whenever Cal Fire says what its determination is, it's going to be their finding but it's not going to be dispositive of PG&E's liability. And we do expect the plaintiff's lawyers who have filed suits in San Francisco to pursue theories, whatever Cal Fire says. They've asserted two theories, the inverse theory that we've talked about before and negligence as well.

Thank you.

Thank you. Our next question comes from the line of Greg Gordon of Evercore ISI. Please proceed.

Hi. How are you? Sorry to beat a dead horse on this question on the governor's proposed language in the legislation. But my first question is as it pertains to his willingness to support guidance to the courts that would establish a proportionality standard, does that in and of itself eliminate strict liability if it were passed as written on a going forward basis? Steven E. Malnight - PG&E Corp.: Hi. Greg, this is Steve Malnight. I think as Geisha said, the governor's proposal clearly weighs in on some elements. You mentioned the elements he weighed in on, inverse reform; I think we're still fully vetting the specifics of that proposal. But I would just again highlight, as Geisha said, it is an input to the process that the Conference Committee is undergoing. They had their first hearing yesterday. I expect them to look at the governor's proposal along with proposals from many other parties. And I think we have to see what emerges from that process to really assess its impact on the issues that Geisha mentioned that California is facing.

Okay. I get that you don't want to answer that question specifically. But from a direction and perspective in a philosophical direction, even if it's not worded exactly the way you would like, does it show that there is a way to move away from a strict liability standard that doesn't fundamentally have to go through a constitutional elimination of inverse? Steven E. Malnight - PG&E Corp.: Look, I'll say this, Greg. I think that the – as we've asserted, reforming inverse does not require a constitutional amendment. It can be done by the legislature. I think we heard that in the hearing yesterday from multiple parties who testified in the hearing. And I think the governor's proposal puts forward a methodology to accomplish that as well. So, I think the issue of reforming inverse, as we've said, is something the legislature can take on and needs to take on in order to really address the challenges that California faces.

Appreciate that one. One other question, Jason, I know you also didn't want to opine as to just some sort of specific financing path. Should you wind up having to have significant liabilities for the fires, but ultimately if you're compelled to take charges associated with the payment of fire claims that are unrecoverable, should we assume that in the end, that they'd be finance – that you'd need to replenish those write-downs with equity? That there may be multiple financing paths over time, that allow you to bridge that. But in the end, write-downs associated with those theoretical costs, should they be incurred, would they have to be financed with equity? Jason P. Wells - PG&E Corp.: Yeah. Greg, thanks for the question. I do think that you summed it up there, in the end, ultimately the equity needs will need to be financed with some form of equity. But there could be multiple paths on an interim basis before issuing that incremental equity to fill our equity ratio at the utility.

Thank you, sir. Take care.

Thank you. Our next question comes from the line of Praful Mehta of Citigroup. Please proceed.

Thanks so much. Hi, guys. Just following up on that question, if there is, let's say, securitization with AB 33 that goes through, you have a bridge, at least for some time, until you have a decision on what happens around prudency reviews at CPUC. But if you win some of these court battles around the Supreme Court, California Supreme Court, which kind of have a view around whether maybe you're liable under inverse, would that result in no equity need? Or could that be the upside case where securitization almost bridges to a solution on the court side? Jason P. Wells - PG&E Corp.: Praful, I think you're highlighting the complexity of the situation why it's hard to commit exactly to a path. There's – we're pushing forward on reform at the legislative level. We're challenging inverse in the court system. There are a lot of different paths that can take. And so, what we can commit to in the near term is that if we fall below the equity – minimum equity ratio at the utility because of a non-cash charge, we are committed to filing a capital structure waiver at the Commission to mitigate financing needs so that we can fully pursue resolution under those multiple paths.

Understood. But securitization at least in the near term is a bridge to some other legal solution. Is that a fair way to think of that? Jason P. Wells - PG&E Corp.: It's possibly. I mean AB 33 as currently constructed would provide a mechanism to pay claims. Essentially today, it would give the Commission the opportunity to disallow cost down the road which if disallowed would require a different form of financing at that point.

Yeah. Got you. Fair enough. And then secondly, on the Senate Bill 901 and all the language on what the governor supporting as well, it seems like Senate Bill 901 actually has language in it right now as it's drafted right now that kind of addresses IC at least to some extent. Is that something that you would see as a potential path forward in terms of what you could see final shape around addressing IC or how are you kind of thinking about with all these bills floating around, how do you kind of see that progressing given we're coming down to crunch time at this time? Steven E. Malnight - PG&E Corp.: Hi. Thanks. This is Steve Malnight again. So, just to kind of clarify the process. So Senate Bill 901 was amended really just to set sort of a scope of work that the Conference Committee would take on. It really, as of now, is a bit of a shell and was moved into the Conference Committee for their action. So, what we would expect to see is that as that the Conference Committee debate solutions and puts them forward in legislative language, they would be amended into 901, and then the Committee would consider 901 in total and pass it back to both chambers for a vote. So I think what you see in 901 today is really not what it will be in the end. It's really just – it's a shell with some clarification of the scope that the Committee intends to take on.

Got you. But so I guess within the next few weeks, by the end of August, we're expecting that to kind of take shape in terms of addressing IC in 901 or do you expect another bill like 1088 or something else? Steven E. Malnight - PG&E Corp.: No. I think the current expectation is that the Conference Committee will likely be the primary source of potential solutions. That's what it was formed to do. They will be debating that and putting it in 901. As you mentioned, the session ends at the end of August. So as Geisha said, the next month is really critical. But the Committee was formed really to do this work and we're looking forward to working with them through the month to hopefully see the solutions emerge in 901. Geisha J. Williams - PG&E Corp.: I mean, obviously, we're really pleased that there's a Conference Committee where there is laser-like focus I think in terms of looking at inverse, looking at wildfire preparedness and response more broadly. I think it's the right approach to tackle such a complex issue as what we're dealing with here in California.

Got you. Thanks, Geisha. Thanks, Jason, thanks.

Thank you. Our next question comes from the line of Julien Dumoulin-Smith of Bank of America Merrill Lynch. Please proceed.

Hey. Good morning, everyone. Geisha J. Williams - PG&E Corp.: Good morning. Jason P. Wells - PG&E Corp.: Good morning, Julien.

Hey. So perhaps just to clarify Praful's last set of questions there. Just with respect to the shell of 901 and obviously you've got the AB 33 bill out there. I mean how do you think about this being sort of multiple parallel bills addressing various avenues and should we expect that to be the case or as the Committee continues here would you expect that different parts of the various proposals to kind of come together and a kind of a singular 901 bill to carry, the day just to clarify the last question? Geisha J. Williams - PG&E Corp.: Well, we are advocating strongly that some level of looking at 2017, the AB 33 bill as it currently stands, we would love to see that moved into the Conference Committee. So, as they're looking at comprehensive reform they're looking not just at prospective but also looking at 2017 because it was just so, so substantial. If however AB 33 doesn't move into the Conference Committee, there's still an approach for more of a traditional legislative process in California. But I would have to say it's harder. It's more complicated. So, again our focus is on making the work of the Conference Committee as comprehensive as possible to deal with this very complex set of issues, while at the same time working in parallel to continue to advance the good work of AB 33.

Got it. And while we're on the subject of AB 33, just to kind of understand, obviously, we want to look at retroactive and provide a framework. How do you think about the notion of prudency down the road and a refund scenario under that AB 33 legislation if you can kind of comment around that? Geisha J. Williams - PG&E Corp.: Well, the current way that AB 33 is sort of set up, it's explicit about two things. First, the Commission must approve that the initial advice filing, it has to ensure lower cost for customers. And second, it provides for a reasonable review for all the wildfire costs incurred. So that if the CPUC determines that we did not act justly or prudently, then those – there will be disallowances and those disallowances will be shareholder-funded.

Got it. All right. Excellent. And then maybe this is turning back to the more financial side of the house. Can you talk a little bit more about financing avenues? I know you alluded to it a little bit earlier in the questions, but sort of cumulatively potential cash outflows to fund some of these, let's call them one-time type efforts here, how do you think about capital raising efforts and sort of preemptively putting in place financing vehicles to any extent? I mean, obviously, you're, to a certain extent, doing that with these CAT bonds and in a certain context but more broadly, if you will. Jason P. Wells - PG&E Corp.: Yeah. Thanks, Julien. This is Jason. Obviously, liquidity is clearly a focus for us. The $2.5 billion dollars of debt that we raised at the utility late in 2017 was intended to largely address our ongoing financing needs for 2018 and 2019, to give us the flexibility to work through the complexities that we've outlined. As we've said, uncertainty with respect to legislative reform, the uncertainty with respect to the timing of the judicial challenges of inverse condemnation, create a challenging environment for incremental financing. That's why – I'll come back to our commitment at least early on if our non-cash – if we fall below the minimum equity ratio from a non-cash charge we will file a capital structure waiver. If that is denied, ultimately, we will look at other tools and we will seek to balance the balance sheet health of the company, but as well protect the interest of both our customers and shareholders. And I think just given all of the uncertainty it's hard to be any more specific than that at this time.

Got it. So it seems like that you wouldn't necessarily be seeking to put much more preemptively in place beyond the specific liquidity and debt that you put in place last year. Jason P. Wells - PG&E Corp.: We have a few short-term debt maturity floating rate notes that we'll have to address. But as I mentioned, the debt offering at the Utility late in the fourth quarter largely met our debt financing needs for 2018 and 2019.

Got it. All right. I'll leave it there. Thank you all very much. Best of luck. Geisha J. Williams - PG&E Corp.: Thank you. Jason P. Wells - PG&E Corp.: Thank you.

Thank you. Our next question comes from the line of Michael Lapides of Goldman Sachs. Please proceed. Michael Lapides - Goldman Sachs & Co. LLC: Hey, guys. And this may be a John Simon question, but I'm just curious. How do you balance the litigation paths that are outstanding and as you show in your slides may take some time, a year or two or so versus the claims that are coming in and the process and timeline for either settling or paying out claims, especially claims that are more inverse condemnation claims and not necessarily negligence claims? And there are obviously two suits outstanding challenging inverse condemnation, how do you balance that? And how do you think about just the cadence of things? John R. Simon - PG&E Corp.: Let me take a run at it, Michael, and others here will jump in if I've sort of missed the spirit of the question. You're right to note we've got many trains running down many paths. Just timing-wise, our appeals on inverse condemnation are going to work their way through. The appeals we have right now are discretionary. If the courts accept them, then we have them pending in two different places, then you're looking at a timeline of nine months to a year and a half to deal with those. The litigation that's filed on the fires under the theories negligence and inverse, they're very early, early stages. We don't even have a case management conference yet, but that's coming up in a month. There's no trial date set, discovery is early. So, that's going to run its course over years. It's early. And then you look at settling claims. If we were to do that, it's really early to talk about that now and here's why. We don't…

Thank you. Our next question comes from the line of Christopher Turnure of JPMorgan. Please proceed.

Good morning. I just have a clarification on the last question on the court process. Is it fair that basically if you are granted your request at the Supreme Court in the Butte case that it really will not have an immediate impact on the Butte case or the Nor-Cal case at the lower court? John R. Simon - PG&E Corp.: I think – Christopher, it's John. I think it will take some time, if the Supreme Court hears the appeal, then there'll be a process to brief the appeal, to argue the appeal and then for the court ultimately to decide the appeal one way or the other. So that will take some time. I can't predict the exact amount of time. The impact won't be immediate. It will be once the appeal's thoroughly reviewed, heard and argued and all the rest. So, it could be 6 months to 18 months, some sort of timeframe like that. It's really hard to predict.

Okay. And as you said during that time, though lower court proceedings continue basically unaffected. John R. Simon - PG&E Corp.: That's right. That's my understanding.

Okay. And then one other question on the Cal Fire testimony from yesterday, I'm wondering if in all your experience with Cal Fire investigations, Butte, other fires, et cetera, how frequently you've been aware of equipment being sent to third parties for review? John R. Simon - PG&E Corp.: Yeah. Really I can't comment on that because I don't know one way or the other what Cal Fire may choose to do when it's doing its work to investigate a fire. Geisha J. Williams - PG&E Corp.: We don't have a lot of visibility to the inner workings of Cal Fire's investigative process. So, we don't know if this is highly unusual or something that they do more regularly. Really, there's no transparency on that.

Okay. Got it. But you haven't typically seen that in the past? Geisha J. Williams - PG&E Corp.: Not that I'm aware of.

Okay. That's helpful. Thank you, guys.

Thank you. Our next question comes from line of Paul Patterson of Glenrock Associates. Please proceed.

Good morning. How are you doing? Jason P. Wells - PG&E Corp.: Good morning. Geisha J. Williams - PG&E Corp.: Good morning.

So, I appreciate your comments, all of which make a lot of logical sense. And I guess what my question sort of is from listening to the meeting, it was sort of highlighted during the public comments which were basically a lot of lobbyists it seemed to me. Was this substantial opposition from the insurance industry and municipalities regarding inverse condemnation. It seems like there's been this sort of ecosystem that's kind of developed there. And I'm just wondering whether or not when you look at the legislative calendar and everything else, whether or not it's possible to focus on recovery of cost, the prudency stuff that you're asking about. The wildfire mitigation being recovered and then perhaps leaving inverse condemnation to the side, in an effort to get something through that addresses sort of the immediate financial issues that you guys are going to be confronting, as opposed to what appears to be what might be some significant opposition that starts to develop from powerful insurance and other industries. Basically trying to perhaps derail the process. Do you follow what I'm saying? In other words, if there's some way of sort of addressing sort of some issues immediately, as opposed to just it maybe too big a lift. To address what – I agree with you, what really should be addressed. But maybe sort of just difficult in the current calendar environment that you got. Steven E. Malnight - PG&E Corp.: Yeah. Hi, Paul. This is Steve Malnight. And I had just a couple of comments on that. I think – first of all, it is very apparent, that these issues are significant and meaningful to many groups and constituencies across California. That's completely consistent with what we've been saying, that these – the reforms that are needed, the…

Okay. Okay. Thank you. Chris Foster - PG&E Corp.: Thanks, Paul. And, Leesa, thank you for hosting the call today. Everyone, I know we're at time, so I just want to thank everyone for joining us this morning and have a safe day. Thank you.

Thank you. This now concludes the conference. Enjoy the rest of your day.