Q1 2020 Earnings Call
We shared how we're pushing.
And doing all that we can to advance people performance and possibilities. I'm pleased to say that our collection of stories is now available online. I'll hope you take the time to go to bed our story. Fire energy and see all the ways. We've used our energy to answer challenges Advanced communities and enrich lives and 29 teams off today. We are reporting that we're off to a strong start in the first fiscal 2020, as you know, our strategy for growth is grounded in our mission and focused on three imperatives organically investing in infrastructure and advancing through innovation.
With their focus, we continued our momentum growth delivering improved financial and operating performance. And the first quarter we posted higher first-quarter net economic learning off of a dollar $33 per share reflecting growth at our Gas Utilities continued solid performance by fire marketing and increased earnings Inspire SEL Pipelines.
Highlighted on our year-end call and physical nights 2019. We sell additional gains and our gas utility operating performance metrics including safety system Integrity Public Service. I was too early in our current fiscal year. I'm pleased to say that our star employees are on track to deliver another strong operating performance this year highlighted by exceptional performance and safety.
Turning to our investment and growth. Our Capital said was $192 in the first quarter reflecting an increase at our Gas Utilities and a decrease for our Midstream operations team. We increase the investment in our gas in our utilities by fifteen million dollars year-over-year with a continued focus on upgrading our pipelines in order to improve safety and reliability a strong quarter considering last fiscal year. Our employees delivered record results. Needless to say these Investments also reduce methane emissions and support organic growth any business initiative. We invested $29 and a half million dollars and fire STL pipeline. If you bring it into service slightly more than we spent a year ago.
and or capitals
with ten million dollars
The first fiscal year twenty-twenty we used to increase our Capital said Target to $610 including a $20 increase for Gas Utilities. This is Julie investment will drive rate based growth that we now expect to be between seven and eight percent outside our utilities. We plan to invest seventy million dollars including fifty million dollars on fire SQL Pipeline and twenty million dollars on storage and other
In regard to our Midstream operation Lindsay will provide an operational update next quarter, but I'd like to report now that fire SEL pipeline which went into service last November already proven to be a valuable winter asset for the Saint Louis region delivering reliable. Low-cost natural gas off the Lexus direct lateral.
As you know, I announced last November that Scott Smith an energy industry veteran for thirty years of experience joined. Our team is president of firemen stream, and I'm happy to say the Skydome the ground running God is also fully engaged in further developing the long-term strategy for STL Pipeline and storage relative to storage fee and the team are providing a service to our customers and evaluating his first full winner of operational data and results all of this while assessing the capital plan. So more to come relative to storage is God provides us home active and Analysis of the business.
Ian our capital investment in infrastructure, we continue to grow through several ongoing organic initiatives from a capital perspective. We're increasing our spend on a business including for a residential customer but also commercial and Industrial users along with new business development. We are more engaged in Economic Development. We are working closely with key organizations in our communities, bring our expertise of solution to help attract and grow businesses and our Geographic areas, as you know, growing the number of homes and businesses we serve and recovering our investment through regulatory outcomes continues to drive higher margins, the third pillar our of our growth strategy is advancing through Innovation. We're continuing to enhance the quality and efficiency of our service while reducing our costs.
Technology quarter. Our business is playing an important role in our Innovation effort enabling new and better approaches to serving our customers and community.
Now, let me turn now to regulatory matters and share an update on recent developments. I'll start with Missouri. First a new commissioner has joined the Missouri Public Service Commission State wage. Jason holsman was appointed by the governor and confirmed effective January 16th, Mister Holzman replaced Daniel Hall his term expire last quarter. We spend a good time talking about the Missouri court of appeals ruling and our issues cases for 2016 2017 and 2018.
At the time of the ruling we said we were pursue all options regulatory judicial and legislative to defend our position and resolve the issue over the office, uh, council's challenge to Israel January 2nd. We filed the applications with the Missouri Supreme Court to review the appeals court ruling. We're hopeful that the state supreme court take up the case and that we will know their decision one way or the other and the months to come in the meantime our application stays the effectiveness of the appeals court ruling.
Missouri
My pleasure began if 20/20 session in early, January and bills have been filed in both the House and Senate to clarify the language and the issue statue.
Specifically the bills clarify that the purpose of pipeline replacement is to enhance safety and reliability and line with industry standards. And that such replacement is to be dead in the most cost-effective manner possible.
Further the legislation clarified that Israel eligibility should not be tied to the age or condition of the pipe being replaced.
On Monday of this week. We filed for an additional thirteen point four million dollars in interest Revenue to recover new Investments and pipeline upgrades.
We also completed our annual rate-setting filing under the mechanism and new rates were Alabama Utilities were affected December 1st are new rates perspire, Alabama include an office sales incapacity leaves release program. The program is similar to the one we have in Missouri and which 75% of the value creation benefits our customers and the company retains the remaining 20%
you may
Thank you for calling the Alabama commission established incentive for the accelerated replacement of remaining cast iron and bare steel distribution line The Accelerated infrastructure modernization writer or page provides an opportunity to earn a higher Equity return if the target levels of replacement miles is met we exceeded that Target in 2019. So our paper and pencil 20/20 will be ten basis points higher. Well, I turn the call over to see let me say a quick word about our dividend an important part of how we deliver value turned off over. The years has been doing increased dividend. We're proud of our track records seventy-five years of uninterrupted dividend payments including increases for Seventeen years in a row.
This includes a 5.1% increase effective in January of this year to an annualized rate of $2.49 per share. Our board has declared the quarterly dividend of 62 and 1/4 cents per share payable April 2nd the board also declared the quarterly preferred stock dividend, which is payable May 15th 2020 with that. Let me turn the call a used to cover our financial performance an outlet.
Good morning, everyone.
Well, we get started with our results. I have to give a shout out to the Superbowl Champion Kansas City Chiefs. Let's dwell on this picture for just a second. This picture is the power light district in downtown Kansas City during the game on Sunday, and I understand that about a million fans from Chiefs kingdom are gathered downtown right now for the parade and one big celebration have one month.
Now back to business turning to our results for the quarter. We deliver Consolidated net economic earnings of nearly $70 million dollars or $1.33 per share up for 66 million dollars or a 30 per share last year for Gas Utilities posted earnings of $69 million dollars up 4% from last year driven by margin growth
Marketing posted solid results as we continue to get traction from our Geographic expansion of the economic earnings were down 2.2 million dollars compared to last year's strong performance wage and other corporate costs including Midstream posted a 5.4 million dollar improvement over the prior-year results for the Quadra include the Spire STL pipelines contribution wage up 2.3 million dollars from last year including real cash earnings this quarter as opposed to afudc last year.
in addition, we saw a smaller loss than
storage and lower corporate interest costs
as reflected here economic earnings continues to include all those revenues or saying it another way continues to exclude the provision. We booked for Gap purposes related to our guests rulings for this quarter the interest rulings and the interest revenues that are subject to the rulings were two point 1 million dollars bringing the cumulative Revenue provision to 14.6 million dollars this quarter. We also booked an additional expense provision of five hundred thousand dollars representing the potential interest. Do you on cumulative revenues in the event that a rep?
Now, let's look at the business starting with revenues and margins total operating revenues of $567 million dollars were down $35 million dollars due to a decline at the Gas Utilities reflecting off gas costs and lower usage from the milder weather. We've experienced this quarter compared to last year.
Gas marketing revenues grew due to increased volumes that were only partially offset by lower commodity prices.
Overall contribution margin was up five million dollars or 2% gas utility martians or seven million dollars as lower uses was more than offset by a prior year 3.9 month SE give back or charge Inspire, Alabama that did not recur this year.
Additionally, we build higher necklace revenues of two point two million dollars and saw continued modest customer growth. Yes marketing margins as reported were down 7.5 million dollars, but that variance includes 5.9 million dollars of adverse fair value accounting adjustments, excluding that margins declined by one point six million dollars due to the high cost of our expanding Transportation portfolio and narrow margin basis differentials in the market there were largely offset, but not completely offset by higher volumes. I'm looking at our operating expenses and slide 13 utility fuel costs for down thirty-seven million dollars due to lower demand and commodity costs.
O&m expenses were up three and half million dollars due to higher field operations and bad debt expense.
Depreciation and amortization expense was higher consistent with our higher Capital spend profile and other taxes were down due to lower demand.
Yes marketing costs as reported. We're down 1.1 million dollars. However, this variance includes intercompany eliminations of fifteen point seven million dollars, excluding those adjustments marketing's running costs were higher by 14.6 million dollars again, not surprising given our expansion.
Other income was more than double last year's results and reflects investment returns. This quarter compared to the market collapse of 2018. We call that an easy, as well as higher wage from the Spy rest of your pipeline.
And interest expense was up slightly in higher borrowing at the operating companies as holding company that continues to decline.
We continue to grow our cash flow and maintain a strong financial position. First quarter was up 4% from last year to $158 million dollars.
our long-term
20 capitalization remain fairly balanced although down from last quarter as we took advantage of very favorable debt market conditions by issuing long-term debt at our operating companies those authors listed here on the slide and essentially allow us to reduce our overall interest rate risk and average cost of borrowing while matching our long-term investments in utility infrastructure by rest of your pipeline. Once it came into service with long-term financing.
As a result or short-term liquidity improve this part just as we hit the peak of our seasonal working capital needs.
Turning to our guidance as we've highlighted this morning. We're encouraged by our progress so far this year both in moving our businesses forward to serve all of our stakeholders and I'm not hitting our Milestones says we seek Clarity on the Israelis. There's still work to be done on the interest front and as a result will delay issuing or annual earnings per share guidance for 20 28 the picture becomes clear.
We do.
Affirm our annual long-term net economic earnings per share growth target range of 4% to 7% recognizing that the key question from mistress Remains the qualification for disrespect early recovery, not the Prudence of the spend and resulting long-term rate based growth.
Our long-term capital expenditure plans are also unchanged with a Target spend of three billion dollars for the five years through 2023. This includes more than a half million dollars per year for a Gas Utilities where we'll continue to focus on upgrades to our infrastructure and new business.
And is Suzanne just mentioned our capex forecast for 2020 increased to six hundred and ten million dollars reflecting the benefit of mild weather so far. This winter included in that Target is 10 million off the Storage investment during their second fiscal quarter, and we expect stories to achieve positive contribution by the end of the fiscal year.
Our financing plan is largely unchanged and includes the first quarter deck Capital markets activity that just pointed out of the previous slide. We remain committed to a balanced and strong capital structure to support our government investment plans going forward including long-term targets for both f f o death and holding company debt levels shown here on the slide that support our strong credit ratings. So in summer Rock more strong start and we continue to invest for long-term success across our businesses with that. Let me turn it back over the uses am thank you Steve and closing. I'd like to thank all our spare employees for their hard work and Caring Hearts. Thank you for your personal commitment to serving our customers and communities especially during the winter heating season when customers and people count enough to safely and I keep their homes and businesses warm. We're off to a Time start this fiscal year keeping Pace with our plans to invest in and grow our businesses and drive increasing value for our shareholders. Yep.
Your interest and investment Inspire and look forward.
Updating you on our progress and achievements as we continue to move forward now. We're ready to take your questions.
To ask a question. You may press star than one on your touchtone phone. If you're using a speaker phone, please pick up your handset before pressing the keys to withdraw your question, please press start off then to the first question comes from Richard. Ciccarelli from Bank of America, please go ahead.
Hey, good morning. Can you hear me? All right, good to hear just had a quick question on Israel in regards to your earlier comments on the call. Can you justify did you say that your booking the accruals and and net economic earnings currently and and if you don't have to issue a refund, I guess what would that mean to push ups Outlook?
Yeah Richie, this is Steve. Let me let me take a shot at that and then I'm sure the other ones on the call away in yeah, we we feel strongly that we're doing the right thing for a customer and the same thing. We've been doing upgrading our system for the last fifteen years. So you take a look at what we're doing regulatory legislative injudiciously. We're judicially Thursday. We're doing this in order to uh to solve the issue because it's the right program that you're used to seeing across all of your your investing Universe, um, in terms of how we're handling from net economic learning standpoint, we continue to record it as if we were receiving the revenue and therefore learning the margin on that and that that total through the the life of the month is rulings issue is now fourteen point eight million dollars. So when we will continue if you look at underneath the the collections this quarter we collected about 2 million dollars, maybe a little bit more 2.1 million.
dollars on that on the
Layer of interest that were continuing to get collections on so that's really the the revenues that we will continue to collect and we will continue to collect those until there's a final resolution on on the issue and we still got a couple steps to go in terms of the impact on earnings per share. Frankly. The reason why we we have it issued guidance for this year's because we don't know how to think about where it's just going to land again. We're confident we're doing the right thing but should it trade away from us or let's say the with the Supreme Court decides not to take the case cuz that's next step in faith. Then the lower court appellate ruling would be remanded to the Public Service Commission who will then open up a docket and review the ruling from the office and decide whether they need additional evidence and reach a conclusion whether whether the interest in full or in part was legitimate or whether they need to make an adjustment in there for Thursday.
We'll refund. So as you can see there are a number of steps that need yet to happen before we never be at a point where there may be a refund.
Under the abundance of caution this Quadra did accrued interest you on the totality of what we reserve because we think that's the right conservative way to do it from the Gap perspective and that all of them really ignores what's happening on the on the legislative side. And again, we're we're pushing all the buttons across all the different avenues that we have and should we get a change in the legislation that would obviously that's changed the tenor of the evaluation the Public Service Commission in the course would take on the on mistress qualification going forward in elephant. Steve explained it to size a couple of points to put in a respective and he said it this programs been in place for fifteen years and has been reviewed by the commission and it and it's regular courses. The statute was established and it's
It also there's 42 other states that have such programs. So it's not something unique as you all probably know that are on the phone for Missouri and it's really the OPC that is raised this issue. As I said in a opening remarks, even though the commission has approved the replacement and if if Steve wants to talk about it a bit he can't see plenty he can but we followed basically a dent plan which is a distribution Integrity management plan that are there common course in our industry. And so that that plan is set out and it has multiple years that are embedded in Spanish which is why we're able to in a strong way producer Capital One just in you know over multiple years for you and so it really is like Steve said tracking the regulatory legislative and judicial process to put this month so to speak so there's no ambiguity going forward and I think the accounting that we've done and Steve's described as most appropriate and we'll keep moving down the path and all three of these branches will be dead.
Stop at some point.
And the Supreme Court case have they given more like a precise date of when they might potentially make a ruling on whether they're they'll hear the case and then separately on the legislative route. It looks like I'm not hearing that starts tomorrow and in the house, I guess what key dates do we we be monitoring on that front and does the legislation only address future is received or is it prior as well?
All right, Richie you throughout several things there so but I would point out and it's in the presentation, but it wasn't that we unloaded but it's not part of the presentation we went through is there's a lot more detail on all your surface layers and also at timeline that kind of lost through the waterfall of the various decisions. We we don't have a deadline or particular timeline for the Supreme Court that our best guess is that they will make a decision whether to accept the appeals from both us and the the Public Service Commission, um during the next month a month and half so sometime between now and the end of March but that is not a hard deadline. They they make their decisions when they make them. So that's usually the first step in the judicial review process and and depending on what happens there. I think I chatted about what the the various options are on that going forward in terms of the the legends.
And see if you want to get an update on the lake.
Pleasure and thanks for the question. And and so the legislation just to kind of reframe it is basically just to clarify in essence what we just said program has been in place for over fifteen years, but it's it's reinforced that this will address the material issue. That's that's under question as well as really the most efficient way to do these Replacements and and that would address the Plastics issue that we've had ongoing. So so I think this is really not to do anything new. It's just to clarify and put in place on a go-forward basis what we've been operating under for the past fifteen years and that's been heard in both the house and the Senate subcommittees. And then from there we'll hopefully get it moved to the floor but at the status on that and the calendar is still a little influx much as as Steve mentioned with the Supreme Court opportunity to to hear this as well.
Okay, that that's very helpful just in terms of I guess key dates to monitor.
Yeah, and then Richie the last part of the question you had was on how how do we think about that in terms of the various layers of issues that are in question clearly of legislative solution would would solve any questions going forward on the the black and white of the final legislation. I think would also clearly form legislative intent of what the intent of the issue regulations were and we have to believe that that's going to help to resolve any open questions on the current layers of interest that we're collecting including those that are before the Appellate Court. They've already
Okay. Thanks. That's very helpful.
Jump to the back of the cab back of the queue let other people get in.
The next question comes from Sarah from Wells Fargo, please. Go ahead.
Hey, good morning.
Can you just expand on the increase in the rate base growth to 7 to 8 from 6 just furious what's driving that is the capex plan seems to be intact.
Yes, sir. This is Steve Lindsay. Thank you. Good to hear from you. I think it's a couple of things it's the way we've been building the capex plan really across all of our jurisdictions. And if you think we're fairly well-off distributed in terms of infrastructure upgrades. We're also continuing to see strong investment in our organic growth. And that's the new business capital and really we're seeing that in all of our areas and then Thursday in later on to that. We're starting to see some opportunities to expand our service territories and so on the west side of the state even on previous calls, I think we talked about expanding into some areas where we don't currently serve to pick up some Agriculture and poultry customers and then in Alabama, we're looking at some opportunities to expand into some rural, excuse me some rural areas where we don't currently serve as well as some industrial opportunities down in the Gulf. So I think when you add all those pieces up, I think we're pretty comfortable that from a rate base growth perspective. We're going to be able to move into that range.
Great, and then on the SFO to Target the 15 to 16% Where are you currently on that metric? Are you in that range or is that something that is you're targeting?
a few years from now
Yes, sir. This is Steve. We're talking about a few years from now if you look back and and that's an S&P metric. If you look back over the last couple of years we were 14.4% off in 2018 that dropped her just about thirteen. I think 13.1 last year and that was really attributed to the delay and the Spire STL Pipeline and some Investments that we made instead of we expect as we look at our plan going forward and the plan that we're operating against this year that we would get the ffo to debt back up to the level and was in eighteen this year and then clearly start moving off having the spiral steel pipe line come online helps, you know, because you know ffo to debt is about cash earnings not a if it's great when you can get it, but it's not real cash earnings so that that choice the log on end and frankly that wasn't a surprise to us nor was it a surprise to the the rating agencies who we just met with um, and um in January and what time flies when you're dead,
And they were very comfortable with where we are very comfortable with where we're driving the bus so to speak and not surprisingly, you know, we're still squarely at that the ratings we are with a stable Outlook wage.
Got it. And then lastly just on the new issues filing. Are you confident that the PSC is comfortable ruling on new proposals while the legal cases outstanding or or is there a risk that they judge Jeffreys everything and and wait for clarity?
You know Sarah I I won't pretend to know the the view of the Public Service Commission. Although as you know, they mean right alongside us the whole way as we've been going through its rulings issue that that surfaced in November we felt it was important to continue to file his first because we made significant Investments and I would not want to think about how we would be handling this winter other Winters have we not been upgrading the system and making it more resilient? So we're continuing to believe it's the right approach and the Public Service Commission will take our filing and address it in their appropriate way which generally involves a bunch of cars and then some hearings. So I suspect it will go along the normal course, but obviously they haven't yet had time to digest the filing and come forward with their responses cuz we just filed it on Monday. So we need to give them a little bit of time and and we're going through really the exact same process. Yep.
We go through every six months, which is we provide all the information and and I think Steve mentioned earlier in this comment.
This isn't about the presidency of these Investments. This is more about the timing of this. So I think we're going back to the basics of we're doing it for the right reasons, whether it's around safety reliability reduce costs going down even methane emissions. We're doing this for the right reasons and and we're going to hold firm to that and I think the commission has shown over the years to really support the positions that we taken on that.
Great. Thank you.
Thanks, sir.
Do we have another question?
operator
the next question comes from Michael Weinstein from credit Swiss, please go ahead. So it's just to be clear. There aren't any further appeals from the OBC on the newest interest filings just from you know beyond what's already been beyond what they've already filed with the dog sports, right?
This is Steve. If you go to page twenty of the of the presentation again in the appendix for for reference for you, and for the rest of our investors that that show is kind of old are all of the different layers of this respect and and the appeals court has there are two other districts layers than January 19th and July July it off early in the review process. Those will take us and months in order to get to some conclusion. And at this point with the the truck requests for the Supreme Court to consider the initial rulings not we believe that the Appellate Court has stayed any further review of those other of those other cases. I think it's fair to wage assumed that without some without some determination from the Supreme Court or on the legislative side of these.
oh PCS view on interest and and their appeal will continue to to follow so I I I think that's where we stand and
So let me stop there and answer your question. Yeah, so the so the reserves that you're taking only apply to the amounts that were prior to January 2019 and files for that and and and then those are being those reserves are are excluded from economic Runnings, but are still being included in gaap earnings, correct?
That is correct. And again, if you look on slide twenty the the only layer of interest that is subject to the rulings and therefore we are providing the provision for life. Is that June 18th Slayer got it. We're still collecting but we're for Gap purposes. We are sending it off to the side as a regulatory liability. Right and you're not doing that for the month of January and July 2019 filings because of the because the other rule because the Supreme Court case stayed the prior need to reserve the table. Well now there's a number of reasons first and foremost. The appeals court ruling was on very specific filings. And those are the top three on that one slide twenty. They did not apply to any other as far as filings which are in, you know earlier much earlier in in the like you and secondly if as this is dead,
This is a ongoing.
Question with the OPC that's been going on for years and the record that proves essentially and I have to do this without chuckling worn out or deteriorated cash Bears field, um, that that record the we and the Public Service Commission made sure that the record was reinforced as we went through the later filing. So each of those fives would have to stand on their own in terms of Appellate Court review if we get to that point and but they were not part of the initial review or the initial rulings that came out in November I get it I guess so basically they're they're no reserves are being taken because they have you haven't had a ruling from the court yet, but that's exactly right. Yeah. Okay and then on the legislation, I think this is ask before but maybe you just clarify, you know, if once legislation is passed. Let's assume it's past that doesn't necessarily make the court cases moot wage.
He would still need to maybe get in.
Now the ruling from the commission to go back and and reaffirm that you're you know that those revenues are allowed under prioress rulings.
You know Michael, it's a great question. I I think that if you're thinking about it, right, but we'll have to see how the how the discussion in the in the legislation and like your assumption off that one for a while. I mean clearly solved the legislative intent and one of the things that the Public Service Commission even highlighted in Daniel Hall was very clear about this before he turned out and left a commission that the the commission staff and the Commissioners are looking to understand the legislative intent. So it it's our belief that any Administration will answer that question. And therefore in many ways of arm the Public Service Commission to re-evaluate all of their their findings and their their distress approvals today to probably find out that they were appropriate and should continue.
Yeah. Yeah, I think the real point is that this is this is
Wanted to clarify which we really didn't think needed to be clarified the original legislation and so it will be on a go-forward but I think it will provide some valuable context for the way that these are being looked at that we're currently involved with and makes sense and that 7% rate based growth is that's really just for 2020, correct? That's not only new long-term growth rate.
Yeah, you know we you know Michael we generally plan out for five years. We're actually one year. So we got another four years going out. So we believe that our rate base growth has clearly moved to a different level. So I I would say it's clearly for twenty twenty but you know the level of spend that we have if you look at the run-rate spending that utilities has been pretty consistent. We've actually increased it from National view of last year and now going into this year. So I think we feel confident that with the support of of our our field employees and our contractors and a little bit of a break from weather which does impact us at various times of the year that should be able to work in that range, you know with that, you know, we mentioned the infrastructure which we clearly have ten to fifteen years depending on the jurisdiction the new business we've already talked about. We also have other things on the horizon such as Ami which are fix network metering opportunities. We have whatever's going to come out of the transmission rule that came off.
So there's a lot of investment opportunity for quite a quite a long period of time.
right, and the reason that the earnings growth projection is not changing though is
Because of equity dilution expected or is it interests recovery lag, you know with what's driving that yeah. Well we clearly have the interest question which is driving down to give us guidance this year. But you know over the long term will get it. It's maybe more, you know, your steps in rape cases, we clearly and I think you've seen them in and we will finance our investments and long-term capital and a balance basis. So there's clearly Equity dilution going forward and you see that in our forward financing guidance that we have a reasonable level of equity that we would expect to issue every year in order to make sure that we've got good strong investment-grade credit ratings.
Gotcha, and this will be my last question. But I mean, but I'm really trying to get at is if legislation is passed to fix the issue is problem. Does the earnings growth rate improved to a live rep because you know, two more match up with the rate based growth profile. Yeah, let's let's take that question and put it in the parking lot. And once we know what the answer will come back. Okay, I'll stay and I'll stay and Park.
Again, if you have a question, please press * then 1 the next question comes from settlement from stifel, please go ahead. Thank you. So just one more just going back to the legislative front real quick today. You understand you to say that you're already out of committee and headed to the floor.
No, we we've gone we've had in the subcommittee's in both the House and Senate. So ultimately our goal obviously is to get to the floor for those discussions. So no, it's it's not been unless there's something that come up even say that I'm aware of but that would be the next steps is to get it moved. Got it. Okay. So that was then my my misunderstanding then just real quickly just turning taking a look at the Capitol Front and just sort of thinking about wage the non-regulated side of the business. So campus coming down pretty meaningful. I'm sure you guys have a whole host of projects that you sort of consider that you know other potential areas. You may be thinking about can you share some of those and you know, maybe ways we could see capital for on reg increase
Yes, this Steve. You're right.
Especially if you look at the comparison of the non-utility spend in 2019 versus 2020. It's coming down quite a bit and that is by far away. The money factor in there is a Spire STL pipeline, which we still have some investment. You saw some this water and they'll be some other investment as we go through this year to complete that construction doing a couple of the things that we need to get done that weren't required in order to put the pipe in service. But our part of completing the whole project and then also there's some investment in in storage and as well, we we I think we've been very clear that our strategic focus is in the natural gas space and I think we're we're good at looking across the landscape to see where opportunities might be as far as steel pipe line is a great example of identifying something that's in our sweet spot that we do that would allow us to to drive additional Investments.
then there for additional returned to our
Tomar Equity investors and we continue to look at those opportunities like that or are bigger supply Investments. They might be inside the utility across the landscape because clearly as we look out into the future. We see growing demand across our our jurisdictions, which is driven as much by commercial and Industrial loan. Now, it is by residential formation and we want to make sure that we stay ahead of that and that we're going to meet our customers need so that maybe one of the biggest areas where we have an investment opportunity and the only issue I like to add to add Steve just went through is the way the way we look at this utilities are state-regulated with some federal oversight obviously with safety and so forth, but from a storage perspective or applying perspective. There are also regulated. There's a commercial Market aspect to it. Absolutely Regional National spending and so marketing is really our only business as quotes on rep.
Our business is regulated. It's just a question of which jurisdictions and which of the war either the federal or state level for different purposes either ratemaking or
Safety or you know installation of infrastructure those sorts of things.
And then, the last piece of that would be storage and we continue to give you all the forward View for the next quarter as we continue to evaluate what our long-term development plan and if we move forward with that which we would expect to then that would be additional Capital spending. Once we understand what that is and the return Dynamics associated with that that would be another area that will that will be able to speak more. Mm. Okay. Thank you.
Thanks.
Again, if you have a question, please press * then 1 the next question is from Brian Russo from please go ahead. Good morning. These the the o&m expense increase that that you reported in in fiscal first-quarter 20, what trends do we see, you know in a remaining three quarters of my recollection you guys were, you know, kind of guiding or or looking to keep o&m flat year-over-year wage.
Yeah Brian, this is Steve. I think that we
Still stand by our our view of o&m and how we're going to Trend it over time quantity of water. You're going to see variations and clearly you saw the little bit of a bump this quarter which is field operations and that will walk and not move a little bit water tap water depending upon whether because we do do to the extent that our field operations team is not doing construction. And we do a lot of training during the winter months then a lot more that falls in the expense but it tends to even out over the year as does bad debt expense was really the two big drivers that we saw this war.
Understood and the lower usage due to warmer weather. Is there any margin impact there or is that captured in any you know, whether normalization mechanisms you have?
We do have weather normalization across all of our utilities which generally covers the residential side of our business. So we do as most utilities do have some exposure on the commercial and Industrial side. We found out our weather mitigation mechanisms across both Alabama and Missouri function really well for the first quarter of this year, but we did see a little bit of a of a a little bit of gravity on the commercial and Industrial side because we do run that we're at risk of the weather there. But again that generally over over time has traded to our benefit rather than to our our detriment.
okay, and then on
Storage, are you still expecting to to Breakeven beginning in mid fiscal 2020?
Actually, our guidance is that we will be even that contributors by the end of the fiscal year. Okay, so right so it looks like the small loss. We should we should see continued Improvement as as we move through through the year and then just check the Alabama off-system sales agreement. I mean how meaningful is that? You know with the 7525 sharing if you just kind of put it in context, that would be great.
Yeah, I'll take a shout it in. First of all, we're very pleased to be able to have that in place down there. I think what we've shown over the years really on both sides of the state here in Missouri is that it truly doesn't benefit customers and it is 8595 sharing I think as we as we've articulated, I don't know that I would say it's it's meaningful at least early on I think we're going to learn the system but we're going to go into it with the open perspective. This is an opportunity for us to do the right thing for our customers and and then to the degree that we have success there obviously look at other opportunities, perhaps even in Gulf, but I don't think I would look at it as a meaningful opportunity. But again, I think it's a tribute to the commission that they are looking for opportunities for the company to do something to benefit customers and be open to those type of mechanisms as you've seen in some of the other things that are part of the RSC.
Okay, great. And then
STL the remaining 50 mmcf a day that's on contracted right now of capacity any any movement there that you could discuss.
Yeah, that's that's one of the items. I was slightly referencing. I would say earlier but in terms of Scott the new mystery president, and now we've activated the pipeline and Performing very well, by the way, as I mentioned long as they get more comfortable with the operations everything for pressure to measurement to delivery and so forth. Yeah, certainly they're going to be considering other markets and we have had some expressions of interest but we're highly focused on the winter months and deliverability into the Saint Louis region. And again, if you stand in gas control where I have with those guys and they're looking at the flows and what they're giving from fresh terms of pressure and delivery. They're very pleased with how it's performing their lab. They're using it and as we move forward will think about other Market opportunities
Okay. Thanks. My assistant questions were asked and answered. Thank you very much.
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There are no more questions in the queue this concludes our question-and-answer session or like to turn the conference back over to Scott Dudley for any closing remarks.
Okay. Thank you all for joining us. We will be around throughout the day for any follow-ups forward to catching up that bye-bye.
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Dead dead dead.