Q1 2020 Earnings Call
Greetings and welcome to the Pinnacle West Capital Corporation, 2021st quarter Earnings Conference call.
At this time, all participants are in listen only mode.
Good question answer session will follow the formal presentation.
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As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Stephanie Leighton director of Investor Relations. Thank you you may begin.
Thank you Christine I would like to thank everyone for participating in this conference call I will review, our first quarter 2020, earning recent developments and operating performance. Our speakers today will be our chairman and CEO, Jeff going there and our CFO to guide.
Jim Hot field, Chief administrative officer, Daniel fracture, H.P.S., as President and COO and Barbara walk with senior Vice President Public policy are also here with us.
First I need to cover a few details with you. That's why we will be using are available on our investor Relations website.
And with our earnings release and really the information.
Slide contain reconciliations of certain non-GAAP financial information today's comments airforce contain forward looking statements based on current expectations and actual results may differ materially from expectation.
First quarter 2020 form 10-Q was filed this morning.
If you refer to that document for forward looking statements cautionary language.
The factors and Mdna section, which identify risks and uncertainties that could cause actual results to differ materially.
Well first.
A replay of this call will be available shortly on our website for the next 30 days.
Also be available by telephone through May 15th.
Now I'll turn the call over to John.
Thank you Stephanie and thank you all for joining us today.
Before I get started let me say I hope everyone is doing well Oh. This is certainly an unexpected way to start a year.
Last several weeks the only refer to me that our company and our people are resilient agile and prepared to handle whatever comes our way.
We recognize the realities of cobot 19 in the challenges that people are facing and we remain committed first and foremost to safely delivering reliable power to Arizona building shareholder value by ensuring customer value.
In March we made the decision to deploy as much of our workforce as possible to work from home enter change our work practices for those central workers needed.
To keep the life on for our customers and to prepare for the Arizona Summer.
The transition from normal course of business to social distancing and revised safety procedures with same lots from our reliability.
Standpoint, and for our customers.
Well our processes have changed our priorities have not.
From a financial perspective, our strike flying a strong balance sheet, good credit rating and sufficient liquidity.
We can and will weather the storm.
We recognize that in order to serve both our customers and our shareholders. It is important to maintain our financial health.
Financial stability is a key driver in our decision, making and it's a central to support our long term goals.
Operationally, there rigor of our preparation and the strength of our team position us well to navigate the challenges presented by Cobot 19.
Our pandemic plan was established tested refined and rehearsed before any of the covert 19 impacts began to hit us.
As I mentioned earlier, we've transitioned as many as employees as possible to working from home I'll note that includes over 140 call Center Associates, who we moved very quickly to seamlessly continue to provide customer service from their homes and that includes the oversight folks as well at incredible job by the I.T. group there.
As well as our field employees, who continue to prepare for our peak summer season.
All necessary summer preparedness work, including vegetation management and planned outages at our power plants have continued.
In an effort to minimize the duration of those outages and the number of people required to be physically present, we prioritize the central work and deferred some discretionary maintenance until later in the year.
I'm pleased to share that we completed the Palo Verde unit to refueling outage earlier this week, ensuring that this key resource will be available to serve customers. This summer.
The refueling outage had a reduced scope to allow the completion at the essential work with 40% less contractors the normal.
In addition, we deferred nonessential transmission and distribution work that would require more than a two hour planned outage to our residential customers. During this time.
We are grateful for their support we've received from so many who helped our employees, they say, including armored outdoor gear or one of our commercial customers and flagstaff.
I'd like to thank the older Tom and ROE, who made the decision to quickly pivot manufacturing operations to pretty fast.
We were able to quickly secure 3000 mass for 80 apps, including expedited quantity of 300 for Palo Verde employees.
At a time when mass we are harder to come by it was really a win win situation, we're able to keep our employees thing and at the same time support our local economy.
Based on what we've seen so far in energy usage and customer load growth.
And we'll talk more about this but we know that circumstances will continue to evolve.
Our resource plans for additional generation remain in place.
We expect to announce the results about standing wind and solar request for proposal in the near future.
Just as in our pre cobot 19 world as we learn more about our customer needs and how we are all recovering from the impacts of our current situation will evaluate our assumptions for future generation resource needs and make any necessary adjustments.
To date, we have not experienced any material supply chain disruptions. Our team is actively monitoring for potential disruptions has conducted a contract review to confirm the adequacy of our summer resource needs.
In addition, they've solicited supplier input to identify market risks associated with 800, plus high volume suppliers, including all of our critical suppliers.
As with many other aspect for operations mitigation plans are in place to minimize any potential supply chain disruptions.
On the regulatory front, there's lot of Corporation Commission has been busy addressing cobot 19 concerns and adjusting their work to accommodate social distancing guidelines.
Not surprisingly as a result, the number a number of their work streams have been delayed.
You may recall, the original rate skates rate case scheduled that staff had what's gonna filed testimony on May twentyth.
At the request to the commission staff that dates been extended to August 3rd and the hearings now scheduled to begin on September thirtyth.
On May step and sets the commission held open meetings discussing our rate comparison tool.
Had a refund over collected demand side management funds and treatment for costs associated with coated 19.
As a result of the discussion the commission voted to returned $36 million the over collected demand side management funds to customers through a onetime no credit in June.
No boats were taken regarding the other matters over I'll note that chairman burns that indicate that he plans to bring the topic of an accounting order for covanta related costs.
Before the commission again at a later date.
Our clean energy commitment received some pollo positive validation in March after the commission held a workshop to discuss clean energy Rals. Following that workshop Chairman Burns Commissioner Kennedy and Commissioner Mark as Peter said, all publicly expressed support for a 100% clean by 2050 standard and obviously, that's aligned with our clean energy commitment and I think that.
The good fine for the future of clean energy in Arizona.
Good future for clean energy in Arizona means robust economic development in our state and an opportunity for financial growth for Pinnacle West.
We've never experienced anything like covert 19, but we've been through many challenging times in our 136 years of service to Arizona.
We don't know today, what the ultimate disruptions or impacts of this pandemic will be but I have no doubt will navigate both through the near term and continue to deliver on our long term goals and with that I'll turn over to test.
Thank you Jeff.
And thank you again, everyone for joining us today I want to add to Jeff's appreciation in recognition of our teams accomplishments under these unusual circumstances I have always been proud of the ABS workforce, but seeing our teams later this pandemic for such tenacity and strength has truly been inspiring I would also like to share appreciation for those in the medical profession.
And other central service providers, making very real sacrifices to help our communities navigate the cover 19 impacts.
Before I discuss some of the unique aspects of our service territory and strengths that will serve us well through this current challenge I want to briefly touch on our first quarter results.
2020 started out strong, earning 27 cents per share compared to 16 cents per share in the first quarter of 19, lower adjusted or whatever and higher pension and OPEB non service costs contributed to the increase in earnings. We also experienced 2.2% customer growth and 0.8% weather normalized sales growth in the first quarter compared to the same period and 29 team.
Excluding the last two weeks of March weather normalized sales for the quarter were within our original 2020 annual guidance range of 1% to 2%.
Well we started the are strong we've also begun to experience impacts, including a reduction in load from the coven 19, social distancing and stay at home guidelines for March 13th the date, when many Arizona schools and business is closed the rightful thirtyth, we've seen an approximate 14% reduction and weather normalized commercial and industrial load compared to.
The same period last year, partially offset by an approximately 7% increase in weather normalized residential load.
The reduction in see an eye load equates to an earnings decrease of around 14 cents per share while the increase in residential usage contributes about four cents per share for net reduction of approximately 10 cents compared to our original expectations for this period.
We cannot predict the ultimate duration or impacts from the social distancing and stayed home guidelines, resulting from Cowen 19 pandemic.
However, we are committed to sharing with you today the information we have scenario sensitivities and mitigating factors.
On April Thirtyth Governor do see extended the stay home stay healthy stay connected order through may 15th with some reopenings prior to that date on may 4th retail establishments, we're committed to reopen will fall in certain restrictions effective today hair salons, my open and on Monday restaurants are permitted to reopen.
Well the process and timing for full reopening is still uncertain. This was a positive step the restarting Arizona economy.
Despite the fact, Arizona has already started reopened if we assume the trend we experienced from March 13th April Thirtyth continues through the ended the second quarter, we would anticipate and that weather normalized sales decrease of approximately 7% compared to the second quarter 2019, and an earnings per share decrease.
Of approximately 20 cents compared to our original second quarter 2020 expectations.
The impact from Cowen 19, or not unique to us, but there are a few differentiating factors I'd like to highlight most notably whether cost management and sales growth.
As most of you know and the hub southwest Desert, our demand is significantly influenced by weather and air conditioning load for this reason our earnings are heavily weighted towards the third quarter historically approximately 56% of our annual earnings comes from Q3, 28% from Q2, and only 6% from the first quarter, while we have already experienced a reduction in load from.
Kogan 19. This reduction is occurred in our milder shoulder season months as we saw last year with weather impact of negative 25 cents per share whether alone can play a significant factor in our annual earnings. This year Phoenix reached triple digit temperatures already in April setting record highs and we've maintained above 100 degrees everyday.
This week with excessive keep mornings already in effect.
Cost management's another key lever for us to mitigate the potential decrease in sales. We will continue our focus on cost management using lean Sigma that we introduced throughout the organization in 2019.
Our commitment to becoming a lean operating company through continuously eliminating unnecessary costs out of the business contributed to our success in meeting earnings expectations. In 2019. The current covert environment is giving our team. Another reason a rally in 2020 as we work hard to realize additional efficiencies. This year, we've already experienced the number of success.
As in the space in addition to natural or whenever reductions from adjustments in our processes and scope of work related to cobot. For example by the end of this year will have deployed 28 bucks across the enterprise as part of our digital transformation program and our fossil fleet. As example, we are now using robotic process automation to complete all work packages the answer.
Technology to automate this process will save employs about 1800 hours per year.
Just five of the Automations planned for the first part of this year are expected to produce an MPV benefit of 1.8 million over the next five years. These examples and our focus on reducing costs will serve us well not just through the near term challenges, but also in achieving our long term goals are providing customers with affordable and reliable service.
While total sales will likely continue to lag during the duration of the stay at home period, we remain confident in the long term growth of our service territory.
According to an Arizona technology councils quarterly impact report, Arizona Tech sector is growing at a rate 40% faster than the U.S. overall Metro Phoenix area showed strong strong job growth through February of 2020, which has consistently been above the national average during February employment and Metro Phoenix increased 3.2% compared to one.
5% for the entire U.S.
Construction employment and Metro Phoenix increased by 5.4%.
And manufacturing employment increased by 2.1%.
The data reflects pre coven 19 conditions, and we expect to see the 2.2 customer growth rate, we experienced in the first quarter to slow in the near term. However, the qualities and fundamentals that I mentioned that have consistently attracted residents to arizona, including a low cost of living attractive weather and robust employment opportunities remain intact.
Correct and likely to continue supporting long term growth after the economy normalizes.
In regard to our future capital investments, we remain committed to the 4.7 billion Capex forecast for the 2020 through 2022 timeframe largely driven by clean energy investments information regarding coven 19, and the potential impact is fluid and changing rapidly. We will continue to assess our capex plans load forecast sales.
Expectation, so and then and other financial data points as more information becomes available we recognize or potential scenarios workover 19 impacts could necessitate changes in the timing or scope of our investment plans. However, as of today, we do not believe the limited load reductions experienced thus far require any alterations to our long term plans.
Similarly, we continue to believe 2020 pedicle West consolidated earnings of $4.75 to $4.95 per share remain achievable, assuming the impacts for co 19 dissipate by the end of the second quarter and customer in sales growth resumes once the economy normalizes additional own him savings are also being assessed by our management team to mitigate the impact.
From lost revenue.
Complete list of key factors and assumptions underlying our 2020 guidance can be found on slides three and four.
Another advantage for Pinnacle West as our financial health, we have a strong balance sheet. They managed credit rating well funded pension sufficient liquidity and no equity needs.
In 2020, we currently have 1.2 billion in revolver capacity with an option increased by another 500 million as a may 1st we have drawn down 310 million on our revolvers. In addition, all remaining pedicle west long term debt maturing in 2020 will occur in November and December NPS is 200 million dollar term loan matures in August.
With all the long term maturities falling late in the year, we have ample flexibility to assess the market conditions and evaluate our options further at year end 2019, our pension was 97% funded with our liability driven investment strategy. Our pension was 96.4% funded as of March 31st 2020, highlighting.
Our resilience to the market volatility.
Last week, we proudly celebrated 136 years of serviced Arizona customers a communities and we've been through plenty of challenges before as Jeff mentioned, we were well prepared for this current challenge we started from a position of financial strength, the seasonality of our jurisdiction and exceptional skills and sophistication of our team.
Give us confidence that we will effectively navigate the near term and continue to work towards our long term commitments.
This concludes our prepared remarks, I'll now turn the call back over to the operator for questions.
Thank you we will now be conducting a question and answer session.
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Thank you. Our first question comes from the line of Michael Weinstein with Credit Suisse. Please proceed with your question.
Hi, good afternoon guys.
Hey, Michael Michael.
So if I understood correctly, it looks like if the trends persist in April it's about and that the April trends antibody load reduction or about five cents a month something along those lines going forward that that's that's where you're extra 10 cents of impact common sense.
Extend.
Second quarter.
Well Michael this is Ted it's not that linear wish it was that easy.
Got it remember we got seasonality, we've got a seasonal rates that start here in may. So we've tried to do is just say that if you look at the entire effects of Covance since mid March through the end of April which is what we think the worst other because that's during the fourth stay at home measure and if you just say that that for stay at home measure effect were to continue.
The way through the end of Q2, then you'd likely have a full 20 cents EPS impact and that's the way we've been thinking about it keep in mind.
We're starting to reopen as I mentioned, a retail start earlier. This week salons started today in fact can't wait to go get a haircut myself. After this call and a Monday, we've got restaurants opening.
So certainly there are some resumption and we'd expect to see some positivity from a sales standpoint as a result of this but what we're saying just from a scenario standpoint as if you just saw what we've seen over the last four four weeks continue hard through the end of Q2, then then that's the impact.
[laughter], the offset from higher residential though would increase in the summer months.
Hotter weather and more air conditioning load.
I think that actually.
Right.
Offset from residential it increases.
It's difficult to predict a a good question and certainly on our mines as well I'd say a as possible. The other aspect that we're thinking about as I know our workforce is contemplating the success, we've had a remote work environment.
We would expect that we'll have many employees embrace more flexible work promote work on a go forward basis, because we're seeing the benefits of that and so we think other companies may do the same. Therefore, you may have a long term persistent change and usage for residential customers as a result of more flexible work environment. So lot uncertainties, but I think your points.
Well taken and certainly something we're paying attention to as well.
[laughter], Alex sorry, you covered this before but our regulators [laughter] rate based process.
<unk>.
Hey, Michael you're breaking up on that question I'm, sorry could you say to you.
Okay.
Yes, or regulators consists already covered this.
Okay.
I think we just lots you Michael.
Oh, sorry about that big of rig up your back.
Not sure what back Okay, our regulators can.
Oh, Reagan's just considering into a really recovered.
So the discussion there was a decision made to refund the over collected DSMB balance. So that's going to provide relief for customers with a bill credit in in June.
A discussion of whether an accounting order would be adopted was raised and there's been some letters written by commissioners and some discussion in an open meeting context around deferral mechanisms, which are obviously being discussed in many states many jurisdictions.
There was conversation on that earlier this week at the commission, but no action taken a and as I indicated the chairman indicated that he is going to like we bring it back for further discussion so it hasn't been anything done yet, but they are discussing it.
Okay got it thank you.
Thanks, Michael Thanks, Michael.
Our next question comes from the line of sharper either with Guggenheim. Please proceed with your question.
Hey, guys, Hey, sharp sharp.
Just a couple of regulatory items on just on the rate case in the event sort of their response to this pandemic proves a little bit longer than anticipated I mean, we've already seen some delays here is there any scenario in which the rate case runs into 21 and so.
How does sort of the statutory turnover at the commission effect to gauge how should we sort of thinking about sort of settlement opportunities, especially as we head into the September hearings.
I have to imagine that you guys are little bit more incentivized to settle here.
Maybe just if you could you just top chat top level as we're thinking about the rate case strategize yeah sure sure.
I think right now under the current schedule on if you think about as of September hearing date start and then you start layering on what happens. So you have a month to maybe longer than a month hearing followed by written brief followed by the administrative law judge putting together a recommended opinion in order followed by exceptions.
Followed by an open meeting.
Thank the schedule that we have now does have the case moving into 2021 and so the question that is where in 2021 and what happens over the rest of the summer how does that pandemic play out what impacts does that have on the can commission ability to process cases.
And again Tucson Electric is ahead of US there is one indicator that you could watch that you could watch where there.
With respect to a settlement. This this was a case the commission had indicated they wanted to do through a fully litigated rate case.
Obviously, there's a lot of uncertainty that's come up now with a pandemic and.
Is there an opportunity to do that you know that's something that we are open to I think there's been a little bit of signaling that that might be more palatable and that was a six nine months ago.
It's still too early to say because as you probably know what generally happens as those discussions really start after you see staffing intervenor testimony. So you kind of got the boundaries staked out.
And so we wouldn't expect to see much developments on that front until after testimony gets filed a and little early to say, whether that's going to be something the commission is going to want to do but but it's something that we would certainly entertain.
Got it so just basically watch the up the August four with the staff intervenor coming out.
Hearings that that are now in September so sometime between August and September should be a signal and whether you guys skin foreman stipulation are now yeah, I think that's probably fair.
Okay Perfect and then just one last question on the IR P.
Is there sort of any updates. It's it's do you expect any delays there around the cool that situation or we will be still on we still shooting for June.
We're still shooting for June again things are well fluid right now in terms of what.
What's affecting the workload.
We're still anticipating a filing Jim.
Terrific. Thanks, guys. Congrats on these results yeah extra ashar.
Our next question comes from the line of Julien Dumoulin Smith with Bank of America. Please proceed with your question.
Hey, good morning team. Thank.
You are doing well yeah billion so perhaps.
Good thanks very much appreciate it.
So I suppose I could break that down a little bit here. When you look at the net impact thus far it seems like it's probably weighted towards commercial versus the consolidated number yet.
About here on 10 times.
Industrial.
If I could take than it's been further than you think about commercial reconciling sort of against the full year and your expectations on guidance that's.
What kind of injector thinking about here.
It would probably your arms pockets.
Please turn to reconcile holding guidance, obviously, you can very constructive but that's in time.
Great and commercial here and you talked about.
What it would have sort of embedded in your mind.
Julien It's a fair question.
But really it's too difficult to get specific on how we're thinking about those two levers. If this were more similar to the great recession, where you just had a net decrease in all customer classes it'd be a bit easier to tie the GDP and try to assume some level of resumption, but in this case, reducing inverse trends where residential is up Sina is down it's unclear.
Here, what the resumption will business resumption will do to see an ice slowly.
Improving and then what residential does so you know for US what we thought was most fair is just simply play out the current environment, all the way through Q2, and and be able to share the well businesses. Our reopening let's just assume that that you saw no improvement.
Here's what the EPS impact would be and then more importantly focus on our levers and this management team is very focused on our levers to a fight Arden do everything we can to make sure that we mitigate the impact.
Well, let's talk about mitigating it back and you don't mind, you all have talked a little bit here about it.
Did you got 13 million here at the midpoint of got it right here, but.
How do you think about the opportunity to pull more leverage here, especially against your guidance with the one that 2% normalized sales though.
Yes, so certainly cost management at the top of that list as I mentioned, a and specific to cost management gave you. Some examples of our lean initiatives, but.
We also think about it through the lens of restricting hiring or consulting costs reduced employee expenses.
Differing certain not a central work activities are of course, we also anticipate some fundamental growth drivers. So as we stated before we don't have a data center.
Build out baked into our forecast because a that remained relatively uncertain at the beginning of the here in terms of timing and volume, but we're seeing data centers continue with their progression. In fact, two large data centers that have been under construct for while our transitioning in the next two weeks from construction power to full service usage.
And that's certainly a driver for us well, we don't count on whether in full year guidance or whether it is certainly helping us so far and then finally as you saw from Q1, we've got some non operational drivers relative to in Q1 pension OPEB that will annualize throughout the remaining three quarters. So as an example.
Those are some levers and from a cost management standpoint, we've identified a what we need to do based on the assumptions that we shared with you today and of course will continue evaluate additional opportunities says more information becomes apparent throughout the remainder of the quarter.
Got it actually and then sorry, if I could just first on the further you John in your 20 guidance you have book club retail customer growth two percentage point.
Other more retail sales volumes.
Tom can you talk about how you achieve.
And again.
I would it take too much on the skills I know you're talking about possibly if it would just to give it back there just further how do you think about a light is getting here are you thinking about today I know it's early.
I'll put it taking let's say that $30 million that right.
Oh that they've been kind of taking the ratcheting down that initial sales numbers and thinking about the net of that 13 that the new broke the we're talking about a year.
Thank you.
Yes, you're right in terms of the guidance range for customer growth sales growth keep in mind for Q1, as we stated we saw a weather normalized sales growth 0.8%.
I'll tell ya prior to affected cobot, we saw 1% to 2% weather normalized sales growth and in fact, the first couple of weeks on March it actually jumped up to 2% to 3% weather normalized.
But the way I would look at it is we believe fundamentals in our service territory still remained strong for growth.
It.
Wouldn't wouldn't be able to predict whether they returned to the original guidance levels, but we certainly expect that there's going to be help from growth in the balance of the year when the economy normalizes to be able to offset some element of the covenant bags and and Julien just qualitatively. When you look out also beyond 2020, I mean, the state's very focused on looking at how to pivot.
The economic development strategy and that's been something that we've been very involved with is helping to recruit commercial customers and helping to recruit.
Additional high load factor consumers into the service territory and I think as you begin to look at some of the potential changes on supply chain wanting to bring supply chain closer to.
Closer to home a potential patterns of people, who are looking to move from higher population density areas. There's a lot of good I think long term focus that a the economic development folks here both at the state level and within some of the large companies are really working to try to capitalize on so obviously that could affect 2020.
But when you look at some of the long term patterns I think it's going to still be consistent with what we've seen which is that we'll see both the customer growth and then we can get the higher load factor a manufacturing industrial customers and we'll see we'll see.
Sales growth as well.
Yes understood. Thank you all very much suicide best of luck it everything yeah. Thanks, Julien Thanks Julien.
Our next question comes from the line of Paul Patterson with Glenrock Associates. Please proceed with your question.
Hey, Good morning, guys, Hey, Paul Morgan.
So well just a.
Well up on the regulatory stuff, which is.
Numerous I guess not not that easy for me to follow.
There is this I think some sort of proposal associated with the rate freeze.
And.
I was wondering.
I was I assume that's a deferral is that correct I mean, if there was some sort of rate freeze that was.
In acted that wasn't clear to me, whether or not there is sort of like it's a it's a deferral.
Other words, they be for future collection, after cobot or something like that my understanding the correct.
I think all that spit out really on that right now in AWS Barber to clarify if she wants has been a conversation about what are different things that could be done. So there isn't a rate freeze in place right now as you've noted typically when that's done you would put a deferral mechanism in place in.
Move doing that but that's only benefit conceptual level right now and it hasn't really got it that much detail at Barbara Yeah, polystyrene Lockwood daily sound discussion.
Generally didn't really get any traction.
Okay meeting and it was discussed.
Basically in conjunction with any sorry.
Jeff mentioned earlier, there's been some conversation around.
[noise] refund.
$6 million.
Yes.
Fund.
On allocating dollars and that really.
Customers.
Okay, Great and then on the.
On the sort of the general rate case, and sort of this I guess to serve continuing review of the most economical plan and customer adoption and what have you.
Is it safe to say that.
That probably there's not going to be a lot of action before the rate case at this point in time in other words the.
It would seem to me that that due to the fact that you've got a rate case going on that would be sort of.
We're if anything would be would probably be done in terms of resolving that is is that.
Is that the appropriate way of thinking about it.
I think.
What's what's happening right now on the most economical plan as we've put into place a bill comparison.
Tool that appears now on every customers bill that identifies a whether they're on the most economical plan and if not what they would save both on a month and then on an annual basis from that plan. So we intend is to provide as customers as much information as we can about whether they are on the most economical plan or not.
We have some experience in this area, having had demand and time use rates for like 40 years and in many cases, we know customers for whatever reason don't choose to be on the most economical plan.
They choose to be on a plan that they want to be on.
And so there's been discussion about how do we make sure we're educating and trying to encourage customers to move to that most economical plan and we've been briefing The commission monthly.
Progress there that's likely to be discussed in the rate case.
But that's that's really the connection between the most economical rate discussion and the ongoing rate case that does that help yes. It does it mean I I followed your your compliance filing recently in insulin. So the discussion around I guess all I was wondering is it seemed I mean.
I guess it wasn't that much adoption I guess or that much change in in people on the on the most economical plant. So this is wondering if it was to be address though we would make sense to me that and I'm just wondering if a being logical here that the the commission probably not going to take action in terms of trying to change that regulatorily if they do make.
An effort it would probably have done a rate case that that would happen does that make sense. Yeah. I think that's I think that you would change in terms of a rate design change or anything that would have to happen in a rate case I mean, the conversation of whether you would.
Default people to their most economical plan, which is something Sacramento did for example, that's not something we had proposed we want to give customers of choice here, but those are likely to be discussed in the rate case.
I'd just add to that.
When we're defining most economic plan that could mean that if one plans a dollar more savings than another it's more economical and so oftentimes with the information that we're sharing our customers on the bottom of the bill They may look at it and see the difference during their current plan and the most economic so de minimis not worth are going through a change and yet they're still classified as potentially not.
And on their most economic plan so.
It's difficult to read too much into the proportion of customers that are not.
Okay fair enough. Thanks, so much I appreciate it.
Hang in there yeah. Thanks, Paul.
Our next question comes from the line of Charles Fishman with Morningstar. Please proceed with your question Hi on tax rate notice the.
Power failure, but my memory serves nearly 14%.
13% for this year Oh.
Is your guidance for this year and that Didnt change yet there was some benefit in the care is that correct is that not us impact the effective tax rate or is just something youve elected not to change at this point the.
After only the first quarter.
No. There's no a recent change that a impact our guidance for what you said correct, 14% effective tax rate.
Okay, and then it sounds like on your discussion the Capex for 2020, you did delay some projects, but do you anticipate catching up on that because you didn't change your capex guidance for 2020.
No plans change Capex and there's been no material projects that have been changed we may have shifted some not a central work activities are certainly were work with homebuilders et cetera to the extent that their timing or volume changes, but we've got other opportunities on the list that the organization would love to to be able to get a head start on that could fill in that.
Yes, so we're sticking with our current Capex plans for the year.
Okay last question, the cobot 19 extra expense due to that.
You said the commission elected not to vote on it at the last meeting when do you anticipate the being voted on.
It's just oh for further discussion right now so there isn't a timeline. It's just something that was raised they didnt voted out on the last discussion I can't tell you, where they're going to voted out on the on an ex discussion, but it's still in that there is still talking about it.
Okay. That's all I had thanks, thanks, Thanks, Josh.
Thank you.
We have reached the end of the question and answer session I would now like to turn the floor back over to management for closing comments.
Thank you for joining us today this concludes our call.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
[noise].