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PG&E (NYSE:PCG)

Q1 2014 Earnings Call

May 01, 2014 11:00 am ET

Executives

Sara A. Cherry - Vice President of Investor Relations

Anthony F. Earley - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

Christopher P. Johns - Former President and Director

Kent M. Harvey - Chief Financial Officer and Senior Vice President

Thomas E. Bottorff - Senior Vice President of Regulatory Affairs

Hyun Park - Senior Vice President and General Counsel

Analysts

Steven I. Fleishman - Wolfe Research, LLC

Daniel L. Eggers - Crédit Suisse AG, Research Division

Michael Weinstein

James D. von Riesemann - CRT Capital Group LLC, Research Division

Anthony C. Crowdell - Jefferies LLC, Research Division

Kit Konolige - BGC Partners, Inc., Research Division

Rajeev Lalwani - Morgan Stanley, Research Division

Travis Miller - Morningstar Inc., Research Division

Michael J. Lapides - Goldman Sachs Group Inc., Research Division

Operator

Good morning, and welcome to the PG&E First Quarter 2014 Earnings Conference Call. [Operator Instructions] At this time, I would like to introduce your hostess, Sara Cherry with PG&E. Thank you, and enjoy your conference. You may proceed, Ms. Cherry.

Sara A. Cherry

Thank you, Lynn. Good morning, everyone, and thanks for joining us. Before you hear from Tony Earley, Chris Johns and Kent Harvey, I'll remind you that our discussion will include forward-looking statements about our outlook for future financial results based on assumptions, forecasts, expectations and information currently available to management.

Some of the important factors that could affect the company's actual financial results are described on the second page of today's slide deck. We also encourage you to review the Form 10-Q that will be filed with the SEC later today, and the discussion of risk factors that appears there and in the 2013 annual report. And with that, I'll hand it over to Tony.

Anthony F. Earley

Thanks, Sara, and good morning, everyone. I'll start off our remarks today and then turn it over to Chris and Kent. I'm going to cover our focus as a company. Chris will discuss the current status of our operations and regulatory and legal matters; and then Kent will conclude with the financial results of the quarter. Let me start with Slide 3.

Since my first day at PG&E, it's been clear to me that everyone here is united around our shared mission to operate a leading utility that delivers safe, reliable and affordable electric and gas service to our customers. Our 3 objectives continue to be resolving the gas issues, positioning the company for long-term success and partnering effectively with others to move the company forward.

So on the gas regulatory front, we continue to await action by the California Public Utilities Commission law judges in the pending gas investigations. But we have not waited to make significant improvements to the safety and reliability of our gas pipeline system. As I've said before, it's vital that the Commission's final decision recognize that we compensated the victims through the civil proceeding and that we made substantial improvements in safety at a very significant cost to our shareholders.

Next resolving the gas rate case. Well, the General Rate Case will allow us to continue the important work we've already begun. We'll be able to upgrade our gas and electric systems and generating assets and continue to grow. As you know, we don't control the schedule, but we expect to receive a proposed decision soon, and we'll look to the Commission to reach a reasonable and timely final decision.

In our gas transmission business, we filed a Gas Transmission and Storage Rate Case for 2015. And finally, the U.S. Attorney's indictment of the company under the federal Pipeline Safety Act was a development that we shared in detail earlier this quarter. We just do not believe any employees intentionally violated the federal pipeline safety regulations. And we believe that even where the mistakes were made, employees were acting in good faith.

Turning to operations, in 2014 we continued to see strong progress. As a company, we've been focusing on steps to ensure the safety of our customers. And one area where I'm pleased to see great progress in the first quarter was in the reduction of third-party damages to our gas and electric lines as a result of unsafe digging practices.

With respect to future success, our integrated planning process is now in its third cycle with plans for driving continuous improvement throughout the organization. As we look forward, we continue to focus on superior execution of the work outlined in our rate cases and earning our authorized return this year with the exception of the gas pipeline business. And next year, our objective is still to earn our authorized return for the entire enterprise. So with that, let me turn it over to Chris.

Christopher P. Johns

Thanks, Tony, and good morning, everyone. I'll begin my remarks with an update on our operations and then touch on regulatory developments.

Starting with gas operations, since 2011 we've successfully strength-tested over 675 miles of pipe, replaced almost 130 miles, retrofitted more than 400 miles to allow for inline inspection and installed nearly 150 automated shutoff valves. This work on the pipeline is the most extensive in the United States, and demonstrates the company's commitment to enhance the safety and integrity of our gas system. And this work has not been limited to the gas transmission business. We've taken lessons learned and applied them throughout our operations. We're finding and fixing issues in all areas of our operations, including our gas distribution system.

In our gas distribution system during the first quarter, one of our crews working on a distribution line upgrade accidentally caused a leak, which caused an explosion at a vacant house in Carmel. Fortunately, nobody was injured. We take this event very seriously. The immediate steps we took included modifying our work procedures and hiring an independent third-party engineering firm to conduct a root cause analysis.

The expert firm released their report last week and concluded that the explosion could have been prevented by proper verification of the distribution line status and configuration prior to working on the line. The report recommends a series of safety actions, which we fully embrace and have already implemented or will begin implementing shortly. We know the lessons learned from Carmel will make our operations even stronger and safer going forward.

In the electric business this quarter, we've now fully integrated about 500 new devices on our lines to isolate outages and reroute power automatically in the event of a failure. We've already seen positive results from this program. Just since January 1, we've avoided nearly 10 million customer outage minutes or almost 100,000 sustained customers’ outages. This is just one example of the work we're doing on our electric system to improve the reliability experienced by our customers.

In our energy supply organization, we've successfully completed another refueling outage at Diablo Canyon. As is true every 5 years, 2014 includes scheduled refueling outages on both units at the plant, with the second outage coming in the fall.

Turning to regulatory matters, I'll spend a few minutes on our 3 pending rate proceedings. The first is our 2014 General Rate Case, where we are awaiting a proposed decision. This rate case integrates a strong risk prioritization process and a focus on safety. The Commission's consultants reviewed our request from a safety perspective. The consultants' reports provided some constructive comments, but also recognized the overall improvements we're making, including our integrated planning process that Tony talked about and risk management assessments as well as safety improvements.

We look to the administrative law judge overseeing the GRC, and ultimately to the Commission, to acknowledge the importance of our plans to improve the safety and reliability of our distribution systems and generation assets. As a reminder, once the CPUC issues a final decision, the revenue requirement change will be retroactive to the first of the year.

The second case was the Gas Transmission Rate Case, which we filed in December. During the quarter, we filed a motion with the Commission to request that the revenue requirement for the Gas Transmission Rate Case be retroactive to January 1, 2015, even though the final decision will come later. We're pleased to have partnered with TURN and ORA to gain support for this important motion in the proceedings. We expect a ruling on the motion in the next 2 months.

Finally, with TO15, our electric transmission rate case, we continue to engage with the other parties for settlement discussions in April, and we'll continue those conversations later this month. With that, I'll turn it over to Kent.

Kent M. Harvey

Thanks, Chris, and good morning. I'll now walk through the results for the first quarter, which are summarized on Slide 5. You can see that earnings from operations were $0.54. GAAP results, reflecting the item impacting comparability for natural gas matters, were $0.49.

The table at the bottom has the natural gas item in pre-tax dollars. And you can see the pipeline-related expenses came in at $40 million for the quarter. Keep in mind that work on the pipeline is seasonal. We plan less work during the winter months, and we do expect it to pick up significantly in future quarters.

Slide 6 shows the quarter-over-quarter comparison for earnings from operations and the main drivers behind the $0.09 difference. About $0.04 of it is due to the fact that without a decision in our pending General Rate Case, we're not recovering the increase in depreciation and interest expense resulting from capital growth over the past year. After the Commission approves the General Rate Case, which will be retroactive to January 1, we'd expect to recover these costs. And for that matter, turn a return on a larger authorized rate base. So this one's essentially a timing issue.

Another $0.03 is due to the increase in shares outstanding, and the rest is due to a number of smaller items, some of which are also just timing. So that's the summary of our first quarter results.

As you know, we are not providing -- we've not provided guidance for earnings from operations for the year, given the pending General Rate Case and the gas investigations at the PUC. However, on our last call, we did provide some key inputs to assist you in developing estimates, such as ranges for CapEx, rate base, unrecovered gas cost and equity issuance. We've not made any revisions to that information since last quarter, and it's included in today's presentation.

On Slide 7, you'll see the estimated range for our item impacting comparability for natural gas matters remains at $350 million to $450 million pre-tax. At the bottom is the reminder that these figures exclude future insurance recoveries, which obviously would net against these costs and exclude any additional fines or penalties resulting from the gas investigations that haven't already been accrued.

Finally, during Q1, we issued a little over $300 million of common stock, and we continue to target between $800 million and $1 billion of issuance for the year. Keep in mind that, that range excludes any additional fines or penalties resulting from the gas investigations, which will be incremental to the range we've provided.

And with that, we'll go ahead and open it up for your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Steve Fleishman with Wolfe Research.

Steven I. Fleishman - Wolfe Research, LLC

Just -- you mentioned that the Carmel independent report was out last week, has there been any reaction to that from other constituent policymakers?

Christopher P. Johns

Steve, this is Chris. We have not heard anything, and we haven't seen any reactions to it. I mean, we've been aggressive about sharing it with the different policymakers and constituencies. So there hasn't been any reactions publicly yet.

Steven I. Fleishman - Wolfe Research, LLC

Okay. And then just the $300 million of stock you've issued so far to date, how much of that -- do you know how much of that came out of your dribble versus your comp programs?

Kent M. Harvey

Yes, I've got the number here, Steve. The majority was out of the dribble. Our internal programs, I think, were in the $80 million range and the remainder was from the dribble.

Steven I. Fleishman - Wolfe Research, LLC

Okay. And the obvious question, just are you getting any indication from anyone on timing of when you'll get an ALJ on the San Bruno issues?

Anthony F. Earley

This is Tony. No, we still believe that as we approach midyear, we should get it. But obviously we don't control that, and we're just waiting. But we continue to focus on moving ahead and getting work done. Because our belief is the more work we get done, the more we close out all of our gas issues, the better off we are.

Operator

Our next question comes from the line of Dan Eggers with Crédit Suisse.

Daniel L. Eggers - Crédit Suisse AG, Research Division

I'm just thinking about timing for this year with the GRC waiting on the PD and then formalization. Can you remind me what the time distance or what would be the normal process once you have the PD to once you have a final order in the GRC, just so we can try and figure out if how much time we have left in this quarter before all the catch-up money goes into the third quarter -- or whenever that shows up?

Thomas E. Bottorff

Yes. This is Tom Bottorff. I'm responsible for regulatory affairs. So what we expect once the PD is issued, parties will have 20 days to comment, then there will be another 5 days for reply. So the earliest you can get a final decision is 30 days, roughly, after the PD was issued. But sometimes decisions can change or other issues can come up that cause delay. But the earliest could be 30 days and it could be another month or 2 after that.

Daniel L. Eggers - Crédit Suisse AG, Research Division

Okay. So basically, if we don't have something in the next couple of weeks, then we should assume that it's going to be at best case third quarter pickup from an earnings perspective?

Thomas E. Bottorff

Yes, I think that's reasonable.

Daniel L. Eggers - Crédit Suisse AG, Research Division

Okay. And then on the criminal case, as it stands out right now, there's been more talk of maybe going after some of these past profits rather than the per violation costs. Can you remind us again where your legal position is on that point? And then, is this something do you think there's an opportunity to settle on or resolve or does this have to go through the court process?

Anthony F. Earley

Let me start off and then, Hyun Park, our General Counsel, could go into a little bit more detail. But there has been considerable confusion in the press about these alternative fines following the arraignment last month. So I just want to make it clear that the indictment documents do not include any request for alternative fines. And talking to our lawyers, we strongly believe that the law says that in order to seek alternative fines at this point, the prosecutors would need to go back to the grand jury, file a new superseding indictment that specifically seeks alternative fine. Whether they do that or not, we don't know whether they're going to do that, but none of it changes the underlying reality that fundamentally, it's our belief that the criminal charges against the company just are not merited. Hyun, I don't know whether you want to say any more about the -- procedurally what...

Hyun Park

Yes, Dan, this is Hyun Park, General Counsel. And I guess the point that I want to make is that there are actually pretty high hurdles to seek an alternative fine. So what the government would have to do is, in addition to filing a brand new superseding indictment, we believe that they would have to prove to a jury beyond a reasonable doubt that the criminal conduct occurred and that the specific conduct actually caused the loss or the gain that they're going to base the alternative fine on, and that they have to also prove beyond a reasonable doubt the amount of the loss or gain. They also have to convince the court that the alternative fine would not unduly complicate or prolong the sentencing process. So they have to jump through lot of hoops for that.

Daniel L. Eggers - Crédit Suisse AG, Research Division

Do you see, given that -- given otherwise the comparable -- these smaller dollars relative to anything else you guys have gone through, is there an opportunity here to settle this and just get it off the plate?

Anthony F. Earley

Well, we are always open to settlement on this, and we'll continue to look for opportunities going forward. I think procedurally right now that the time isn't right for that. But as we get through the initial phase of this proceeding, we will look for those opportunities. Because you're right, the dollar figures are not big issues here.

Daniel L. Eggers - Crédit Suisse AG, Research Division

And I guess just one last question, Tony. You focused a lot on trying to improve the operating performance from third and fourth quartile performance up to higher levels. Can you just give us an update where some of those bigger measures stand, and maybe when we should expect to see good comparability for what you guys did last year relative to the industry?

Anthony F. Earley

Sure, I'll start off and Chris can add some things. You're exactly right. I think 2.5 years ago when I got here, I characterized that we were solidly in the third and fourth quartile for a lot of our key metrics. And I'm really pleased to say that we're pushing up. We moved some of the metrics into first quartile. Even some of the more challenging ones are starting to push up to the median, which will push them from third to the second quartile. Chris mentioned electric reliability. We've had a string of -- we're looking at probably the fifth year in a row this year where we will have record performance on the electric side of the business. Nick Stavropoulos and his team have really transformed the gas business from a solid fourth quartile company to one that's got some really positive things going on. And maybe Chris or Nick can comment on some of the progress we've made.

Christopher P. Johns

Yes, Tony. This is Chris. And what I would say is, is that we've focused on a lot of the different areas. We've talked about reliability on the electric side having five-year -- 4 years now and getting into a fifth year of setting new records for us that will get us into the second quartile nationally. In addition on the electric side, we've been able to offset inflation in that organization last year. And we've embedded that into the rate case because of the continuous improvement programs. I think that's really the key. All of the organizations have embedded continuous improvement programs and initiatives within the organization that is helping them drive out cost and be able to do things like start to offset inflation and some of the other pressures that we've had.

Operator

Our next question comes from the line of Michael Weinstein with UBS.

Michael Weinstein

I just wanted to confirm the -- when you're saying that there'll be some recovery once the retroactive nature of the GRC falls in, are you talking about the $0.04 there in the waterfall chart?

Kent M. Harvey

Yes, this is Kent. So what's happened is in the past year, since the first quarter of last year, obviously we've had another year of CapEx and a rate base as [ph] well [ph]. So we have been incurring, in the first quarter, a higher level of depreciation and our interest expense is higher. Once we get the General Rate Case, we expect that it will provide revenues that will cover those costs, as well as the fact that we will have an authorized rate base that will be higher, and we'll be able to earn a return on a higher authorized rate base. So you should see both the $0.04 recovery in a future period as well as just the return component on a higher level of rate base for 2014 as compared to 2013 in the last rate case.

Michael Weinstein

So just to be clear, you're not delaying any capital spending right now? The capital spending is going on, rate base is increasing, it's just not been recognized as such?

Kent M. Harvey

That's correct. And the key thing is that the PUC's decision, we do expect will be retroactive to January 1. So we will get the revenues for -- that we would have otherwise gotten during the first quarter, they will just be booked in a later period. And there's nothing unusual about that retroactivity. That's kind of the standard way.

Michael Weinstein

Right, right. I just wanted to make sure there wasn't a delay in the spending that you'd have to make up, I guess, later on in the year. But it sounds like...

Kent M. Harvey

No, we've mainly been staying on our plan and our plan on the expense side, for the time being, was to stay relatively flat to last year with the expenses, pending the GRC outcomes. And that's the path we've been on.

Operator

Our next question comes from the line of Jim von Riesemann with CRT Capital.

James D. von Riesemann - CRT Capital Group LLC, Research Division

Could you just walk us through the -- I'm not an attorney, so can you just walk us through the process with the indictment and what goes on from here? And maybe the expected timing for this whole process?

Hyun Park

Yes, so this is Hyun Park. So right now, there is a status conference that's scheduled for June 2. And I think the judge will at that point decide on some procedural schedules. There will be discovery. There will be motion. There will be additional status conferences. I think it's hard to predict how long the actual trial will take. It's probably 1 year, 2 years, or it could take longer than that. There was a federal indictment in August of 2009 against a utility, and from indictment to the actual jury verdict, it took approximately 22 months. That's an example that's out there.

James D. von Riesemann - CRT Capital Group LLC, Research Division

Okay. Where is this going to be tried? Is this going to be tried in San Francisco? And if so, do you think you can get a fair trial given all the media coverage of this?

Hyun Park

So we believe the trial will be here in San Francisco, and it's before a U.S. federal district court judge. And we believe that we can get a fair trial. And we'll just have to work through this here in San Francisco.

James D. von Riesemann - CRT Capital Group LLC, Research Division

And then the last question is, aside from the penalties that might be considered, is there anything operationally that a conviction could have on the day-to-day operations of the company?

Hyun Park

Yes. So some of the remedies that are available to a judge in sentencing in the event of a conviction is that the judge could order a monitor -- a court-appointed monitor, and there are other reporting type of remedies that the judge could also order as well.

James D. von Riesemann - CRT Capital Group LLC, Research Division

Nothing would impact your Certificate of Public Convenience and Necessity, is that correct? Or shouldn't impact, I should say?

Hyun Park

I assume you're talking about our ability to operate our business?

James D. von Riesemann - CRT Capital Group LLC, Research Division

Correct.

Hyun Park

Yes -- no.

Operator

Our next question comes from the line of Anthony Crowdell with Jefferies.

Anthony C. Crowdell - Jefferies LLC, Research Division

Most of my questions have been answered. Just one question. When you think of the delays, we thought we'd resolved right now, we're waiting for the ALJ in the San Bruno proceeding, yet the company is still spending capital. Do you think the delay helps you when it comes to their proposed decision or final decision that maybe cooler heads are prevailing and the parties are seeing all the investment the company's making? Or you think this delay's going to have no impact at all on the final decision?

Anthony F. Earley

I hesitate to speculate on the impact, but our view is that the more we improve the system, the better off we are. And I think the commissioners recognize that we have transformed the system and have really taken it to a whole new level. And we're doing some things in the gas business that will be industry-leading -- are industry-leading. And we think that will be helpful when they're considering the appropriate penalty. Because not only have we compensated the victims in the civil cases, but we've remedied a lot of the issues that were raised in the NTSB report and elsewhere.

Operator

Our next question comes from the line of Kit Konolige with BGC.

Kit Konolige - BGC Partners, Inc., Research Division

Just -- most of my questions have been answered, one quick question. I think, Tony, you mentioned that you have support from TURN and ORA on the retroactivity concept for the gas transmission case?

Anthony F. Earley

Yes, that's correct, Kit.

Kit Konolige - BGC Partners, Inc., Research Division

And -- so when should we see a final indication from the Commission that, that would be retroactive? And can you just give us a view of what the timing is for the full case?

Thomas E. Bottorff

Yes, this is Tom Bottorff. With respect to that motion that seeks approval of the settlement between ORA and TURN and our company, that's expected within 1 month or 2. So we should see maybe [indiscernible] within the next month or the month after. The entire case, we do have a schedule that's been issued by the judge and the proceeding, and it calls for a final decision in the first quarter 2015.

Operator

Our next question comes from the line of Stephen Byrd with Morgan Stanley.

Rajeev Lalwani - Morgan Stanley, Research Division

It's actually Rajeev Lalwani. First question was just on the -- as to whether or not there's any interaction between the criminal case and the state-level investigation as it relates to penalties, fines so that there's no kind of double counting? I'll ask maybe that and then a follow-up.

Anthony F. Earley

We don't see any interrelationship. They are independent proceedings.

Rajeev Lalwani - Morgan Stanley, Research Division

Okay. And do you know if there's a dialogue between the 2 or anything like that?

Anthony F. Earley

That we don't know. I mean, I'm sure there have been discussions. We do know that in the course of the U.S. Attorney's investigation, they were looking at a lot of materials that were developed in the PUC case. And I would assume that there have been some discussions, but we really see these as separate proceedings.

Rajeev Lalwani - Morgan Stanley, Research Division

Okay. Understood. Second question was just more on investment potential longer term. I know you've got a 7% to 11% annual rate base forecast, but any thoughts on whether or not you think that can continue longer term? And then, any thoughts on whether or not earnings could follow that closely?

Kent M. Harvey

Rajeev, this is Kent. I think it's fair to assume that the infrastructure investment we're making at a pretty good clip is not going to be done during the next -- this upcoming general rate case period. So we continue to see a lot of opportunity to invest in our existing system, to upgrade it both for reliability and safety.

Anthony F. Earley

And this is Tony. Let me add, I think, from the general standpoint, we're getting a good consensus of thought leaders around California that a, we need to invest in infrastructure -- not only to remedy some of issues we had in gas, but also to take advantage of new technologies. Chris talked about the fabulous performance improvement in our electric business. And a lot of it's been driven by coupling the technology of smart meters with automated switching devices, and we've only just scratched the surface on using the data that we're developing out of those smart meters. And I think there's a lot of excitement of thought leaders around making sure we continue those investments here in California.

Rajeev Lalwani - Morgan Stanley, Research Division

And then, Kent, just to follow up on that. As it relates to just earnings growth, do you generally think your rate base growth and earnings growth would be close, or do you expect a big delta just from equity needs, et cetera?

Kent M. Harvey

Well, we haven't provided equity guidance longer term, but I think we have given you guys the tools to come pretty close to estimating it. And we do anticipate that we'll continue to have equity needs. So that will impact what the EPS profile looks like going forward.

Operator

Our next question comes from the line of Travis Miller with Morningstar.

Travis Miller - Morningstar Inc., Research Division

I wonder if you could characterize the timing and why it's taking so long, I guess, at the FERC, on the transmission case. And how that might back up your next few transmission cases or affect investment?

Thomas E. Bottorff

Hi. This is Tom Bottorff. If you're addressing TO15, our FERC transmission rate case, it's really not off schedule to any significant degree at this point. Settlement discussions are all ongoing. We would expect to file TO16 in July, so we'll see. But I think there's still a good chance TO15 could be settled prior to that.

Christopher P. Johns

This is Chris. I mean I think that's generally in line with our last several years' worth of TO filings.

Travis Miller - Morningstar Inc., Research Division

Okay. And then, would you expect any impact or any further delays based on FERC -- potential FERC rulings in the Northeast case or the MISO case in terms of ROEs?

Christopher P. Johns

No, we would not.

Operator

[Operator Instructions] Our next question comes from the line of Michael Lapides with Goldman Sachs.

Michael J. Lapides - Goldman Sachs Group Inc., Research Division

I just want to make sure I kind of catch up a little bit on some of the rate case dockets, the General Rate Case and GT&S one. Can you talk to us a little bit about what won't be recoverable as a result of both cases? Meaning, what will still be kind of a potential drag on traditional rate base math for you even after you get that GT&S order?

Kent M. Harvey

Well, this is Kent. And let me just take the gas transmission stuff. I think, in that case, we have not requested the rights-of-way work, which you know is a 5-year program, 1 year of which is behind us. But we're in the second year of that program. And our estimates for the full 5 years was roughly $500 million. So those dollars would not be recovered, and those will continue in '14, '15, '16 and '17. And then, I would say the other ones, there are 2 smaller pieces that we decided not to seek recovery of in the gas transmission case. And each one of them is roughly $25 million per year for the 3-year rate cycles. One has to do with certain remedial corrosion work, and the other one has to do with hydrostatic testing of post-61 pipe. And those are really the items that we've not sought recovery in the gas transmission case.

Michael J. Lapides - Goldman Sachs Group Inc., Research Division

And can you help us understand when we think about the combination of your GRC as well as the GT&S cases, what the bridge between the O&M you're requesting and as a result of both cases versus kind of historical levels?

Kent M. Harvey

Well, I guess, the way I would say [ph] it from an earnings perspective, maybe one way you want to think about it is, prior to this year we've been consciously spending about $250 million in excess of what we were recovering in those cases. That's putting aside the gas item impacting comparability. But in our normal operations, about $250 million. And those -- that's essentially the gap from an earnings perspective that we're trying to address in the combination of the 2 rate cases. And obviously the General Rate Case is the bigger piece of that.

Michael J. Lapides - Goldman Sachs Group Inc., Research Division

And finally, can you rehash for us just what's the level of capital spending under PSEP that we won't be recovering in rates going forward?

Kent M. Harvey

I think that's about $500 million that doesn't get recovered.

Michael J. Lapides - Goldman Sachs Group Inc., Research Division

Of future capital spend or spend that's already occurred?

Kent M. Harvey

Some of that is spend that's already occurred, but we've accrued the total amount. And the rest of it will occur this year, because the PSEP program reaches its conclusion at the end of 2014.

Operator

There are currently no additional questions waiting from the phone lines.

Sara A. Cherry

Thanks, Lynn. I think we'll wrap it up. Thanks very much, everyone, for participating, and don't hesitate to call us if you have any follow-up questions. Have a great day.

Operator

Ladies and gentlemen, thank you for attending the PG&E First Quarter 2014 Earnings Call. This now concludes the conference, enjoy the rest of your day.

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