Q2 2020 Earnings Call
Good morning.
Welcome to the Spider second quarter earnings call, all participants will be and let's then only mode should you need assistance. Please signal a conference specialist by pressing the star keep all it by C. browser.
After today's presentation, there will be an opportunity to ask questions to ask a question you may Crestar then one on your telephone keypad to withdraw your question. Please press story then too.
No, let's see that is being recorded I would now like to turn the conference over to Scott Dudley Managing director Investor Relations. Please go ahead.
Oh. Thank you the morning in welcome to our second quarter earnings Golf.
You should our earnings news release. This morning, and you may accessing on our website spire energy dot com under newsroom.
And the slide presentation that accompanies our web cast and he may most downloading either from the web site or from our website under investors and <unk>.
Patients.
Depending on the call today or Suzy instead of what the president of the C.E.L.
Beat My Executive Vice President and Chief operating Officer.
Steve Trashy executive Vice Presidents and C.F.
[noise] before we begin let me cover are safe Harbor statement and use the non gabardines measures.
Today's call, including responses to questions may contain forward looking statements.
In the meeting of the private security for Litigation Reform Act I'm 1995.
Although our forward looking statements are based on reasonable assumptions there are various uncertainties and risk factors that may cause feature performance or results.
Different than those anticipated.
These risks and uncertainties are outlined in our <unk> annual filings with the L.D.C.
In our comments, we will be discussing economic earnings contribution margin adjusted either die and adjusted Longterm capitalization, which are all non gap measures you'd find management when evaluating our performance and results of operations.
Explanations and reconciliation for these measures to their gap counterparts are contained in our news release and the slide presentation.
So with that I will turn to call over two Suzanne.
Thank you Scott and good morning, everyone, joining us for our second quarter.
I liked it again by acknowledging that we're all adjusting to any normal as we focus on staying safe and healthy during the current a virus we're living in a world the video called space time wet cat.
It can come home wearing face masks and washing our hands a lot.
Yeah, we're connecting anyway like you many of us are and our offices and aren't able to see one another face to face.
In fact today is the second time and you're like she mine that Steve Rashly, Steve Lindsay and I've been in the same location.
That's for sure that we're just not seeing and different back then and getting a job that.
It's not easy to stay connected in times like that it's fire connecting with that I should feel like a handshake at the front door.
But without the ability to actually shake someone's hand, we found herself leaning into other expressions of carrying in friendship.
Like how we listen how we check on our elderly neighbours, how we smile and wait for letting strangers.
It's how our crews stop work take off their hat and put their hands, having a heart when you know procession drive by.
These moments of connection and caring and fired a good and all that.
Provide the energy it takes to walk to the time like that.
A time when some communities are impacted more than others, but none no one test.
A time, when we understand how a central our servicemen and how people count on to deliver.
A time when safety has an expanded meetings.
And personal protective equipment in com, an everyday necessity.
But it's fire, it's easier for us to pivot.
We have a very clear mission that guys.
Answer every challenge advance every community and enrich every life do the strength of our energy.
You see we believe we are called to answer the and every challenge that arises.
We know that people rely on our energy every day and that we are an essential service.
We know that we cannot let our customers and communities down and we know that safety is a core value.
Value at the heart of every decision.
It's because of that deeply held belief that we <unk> a broad range of protected status to address the current of ours health crisis, and an economic impact on our customer.
Passionately protecting the health and safety of our employees and community.
We began in early March by activating our instead of support team or the I.S.D.
Cross functional team of 25 leaders from operation and all our shared services.
I asked he has been meeting nearly every morning to discuss challenging solve issues and coordinate action.
<unk> H.R. policy to supply chain access to P.P.E. and impacting employee customers and operation.
By the Middle of March we activated the highest level of our crisis response plan I convening or crisis management team or C.M.T.
I ask Steve Lenzi to leave 15, a fire ants Chief operating officer.
Immediately gather all of our chief officers and business unit presidency quickly make executive decision around broad ranging challenges, Steve we'll talk more about this in a moment.
From my perspective, I like to say that it's been inspiring to watch the I.S.T.M.C.M.T. work.
Together, we bring a collection of expertise to our conversation and the very professional prospective buyers leadership direct tunnel involvement with the American gas Association and our first hand conversations with medical experts yeah. The many hospital boards we serve on.
Together, we are careful to balance the knees are many stakeholders, including you.
We are communicating early on often with all employees and customers.
We are connecting regularly with our board and keeping our governor legislators and regulators informed every step of the way.
Most importantly, the C.M.T. is keenly aware of impact our decisions have on people.
And everything we do our goal is to flatten the curve and how control the spread of current a virus well safely and reliably providing energy for customers in community.
Thank goodness or large operations around Missouri in Alabama areas of the country that have been minimally impacted by the pandemic. In fact, only 11 I've are 3500 employees have tested positive for the current a virus and all but one person is back to work.
So as we work to me the challenge is created by the current of ours remain focus on our strategy to deliver growth in value.
Hi, growing organically investing in infrastructure.
And advancing to innovation.
We continue to takes that's to ensure that we remain strong both financially affirming operations perspective.
Well here more than that from Stevens d., when they discuss our capital spending including investments a new business and infrastructure upgrade as well as are updated Catholic forecast that supports our long term grows outlet.
As reported and our earnings announcement. This morning, our second quarter not economic earnings per share with below last year and R.F.Y. 20 plan.
<unk>, we'll discuss in more detail.
<unk> for driven by lower margin to warmer weather across our footprint margins that we're not fully mitigated by regulatory mechanisms.
However, our results were minimally impacted by the current a virus.
Finally, we'll spend some time updating you on our process as it continue to per se favorable regulatory outcomes across our jurisdiction and the focus on the is risque and filings in Missouri.
With that I'm trying to call over to see if I need to discuss our adult and current of Irish responses in more detail.
Thank you Suzanne I want them again by acknowledging the outstanding efforts or employees during the difficult times brought on by the current virus and the resulting economic shut down.
You're providing great service for our customers, while taking extra care and ensure their health safety and welby as well as your own and helping support our communities and this time of need and we all thank you very much.
Suzanne mentioned, we quickly activated the C.M.T. with 10 primary areas of focus.
I like to take a moment outline is definitely taken to address the <unk> limit its impact on three of those areas are employees customers in communities.
Keeping these stakeholders healthy saved from supported is more than a priority for us at the core value or two we aren't spar.
<unk> employees, we have educated every one unhealthy practices and encourage people to follow the advice to the experts, including the C.D.C. and other public health organizations.
Or guidelines includes staying home when not feeling well frequent handwashing, social distancing and other best practices.
We implemented policies to help employees handled the impact of the krona virus, including taking care of family members or dealing with children being home from School example of this is the implementation of our emergency Lee program.
Burfield workers and technicians, we have taken extra safety precautions to protect them had our customers, we freeze frame to customers promised to ensure that no one of sick or symptomatic before we allow our workers to enter a home or business and we have whip, our employees would personal protective equipment.
Our office base employees, we implemented at work from on policy, starting in March and extending through my.
Along with work from home and social distancing. We've also implemented related policies to eliminate all nonessential travel as well as group meetings and gatherings and across our company, we stepped up the frequency of cleaning sanitizing or work locations.
Currently we're developing worked transition plans include reopening offices and facilities.
For our customers, we're first and foremost focus on making sure that are well served and then they continue to <unk> and if we continue to provide safe and reliable energies they come to rely on regardless, regardless of the situation at hand.
Oh produce customer contact and limit the potential for spreading the illness.
Postpone work that wasn't time critical urgent and to help our customers through what is surely a difficult time financially we work with our regulators to suspend involuntary disconnection than late fees through the end of May also expanding customer bill assistance programs.
The company, we have pledged 500000 dollar matching yeah to augment the contributions made by customers and employees into our dollar held program.
Dozens of customers, they've already signed up to give and their match gifts total more than $300000. So far.
Similarly, we have donated $250000 to local area food pantry and meal programs.
From Alabama to Wyoming, we're helping provide about 650000 meals for families struggling to make ends meet during this time.
We also let an effort with other companies to donate and set up laptops for children and limited income school, so they're able to learn from home.
Just for all of US together, we've been coordinating and staying close communications with various state and local government bodies healthcare organizations and industry groups to ensure that we're doing most good by leveraging our collective energy and resources.
Well, we've been hard at work to address the impacts of the current of ours and sort of our customers well. We've also remain focused on our business objectives centered on grow in our company.
We continue to invest in organic growth in infrastructure upgrades across our utilities are.
For the first half a physical 2020, we invested $53 million in new business, keeping up keeping pace with last year's record levels of investment and new premise Activations as you can see our investment in our utilities is expanding.
You're the date, we've invested $279 million focused on new business and pipeline replacement, that's up $24 million or nearly 10% or the first half of last year.
On the Gastrulate, a business side or spend is actually down year over year, largely reflecting the completion aspire F.D.L. pipeline.
Well the Bull your fiscal 2020, we've increased our plan capital span to $640 million $30 million from our prior forecasted investment.
88% of our 2020 span will be on our gas utilities with two thirds of the increase or about $20 million attributable to utility investment.
We also planned to invest $10 million and the third quarter inspires storage.
Regulatory mechanisms, we have including incentives to accelerate system upgrades in Missouri in Alabama, and real time, right, making Alabama are key timely recovery and support infrastructure modernization earnings growth and better environmental performance to reduce methane emissions.
As you know from our discussion last quarter in Missouri, we've been working through a number of interest case is decided by the Missouri Public Service Commission going back to 2016 that have been challenged and appeal, but he off the public council resulted in adverse appellate court rulings late last year.
And the time of the appeal Court borders we said, we would pursue all avenues legislative judicial and regulatory reserve the ability to continue investing in the safety reliability environmental performance of our pipeline system, while achieving timely recovery.
With the start of the Missouri Legislative session in January we worked to introduce bills in both the house and Senate to clarify the is for a statute as it relates to the eligibility of infrastructure upgrade span for accelerated recovery.
Senate Bill passed early March on May 6th the house past the substitution of the Senate Bill.
Given the differences between the versus pass in each chamber legislation will now go to conference Committee to reconcile the two versions.
Meanwhile, we have continued to file new interest request Codey one early February.
Late last month, we the staff of the Missouri Public Service Commission and the office of Public Council reached a unanimous stipulation in agreement subject in Missouri P.S. The approval that would result in an 11 million dollar annual increase in Israel's revenue.
Regarding the case is subject to the Appeals court ruling either been remanded back to Missouri Public Service Commission for final resolution following the denial of our request from Missouri. Some Supreme Court review in mid March.
The Commission has 120 days or until the middle of July and render a decision, including whether any refund is required.
For anyone who would like more detail on the various interest cases, there's a table in your appendix them, our slide presentation today.
Oh in Alabama, we have been <unk>, new off system sales and capacity release program. The went into effect December 1st. We're also continuing to pursue the benefits of the accelerator infrastructure modernization rider aim or ontrack to achieve the threshold number of miles replace this year in order to qualify for the are we at or in 2021.
We were see this past year.
What's that alternate call over to see rashly for financial review been update.
Good morning, and let me at my wishes for good health and safety to everyone and a huge shout out to all of our first responders health care workers interim team, who continue to serve regularly every day.
Let me cover our quarterly results the financial impact of Corona virus, and an update to our targets for the second half of our fiscal 2020.
Turning to our results for the quarter.
We deliberate consolidated that economic earnings of $144 million down $3.9 million from last year.
Or gas utilities poster drinks with just over $144 million down $2.4 million from last year as a result of warmer weather and losses on investments.
Yes marketing delivered earnings are just over $5 million down just over $1 million from last year as higher volumes from our expansion rough at by less favorable market conditions and higher costs.
And we saw higher earnings from the spy rest y'all pipeline, which entered service last quarter a.
Lower loss from foxfire storage, reflecting the benefits from our operational improvements.
Slightly higher corporate costs.
Looking at our per share results hurt your earnings up $2.75 per share went down 15 cents from last year, reflecting lower earnings as well as the impact of prefer and common stock issued over the last 12 months.
Oh for two additional comments first as Suzanne mentioned, we saw a limited financial impact from the Corona buyers this quarter since it really didn't hit our service territory is in until mid March.
More on the forward impact in a few minutes.
And secondly, as reflected here now economic earnings continues to include all his for his revenues are saying it another way excluding the provision we but forgot purposes for this quarter guess was revenues subject to a provision where $2.2 million, including interest, bringing the cumulative provisioned at March 31 216.
$9 million.
Overall, whether this quarter was warmer than normal by 11% from Missouri and by 26% in Alabama.
Compared to last year's colder weather, we saw margins in Missouri declined by $3 million as slightly lower residential volume metric margins were upset by higher <unk> revenues.
Combined with a significant dropping commercial market.
Are southern utility showed margin growth is lower demand was offset by annual rate increases.
Margins were also significantly below our expectations normal weather and mitigation mechanisms that offset that exposure.
Again in our southern service territory is the mechanisms largely workers plan.
In Missouri, However, we saw a 7 million dollar negative impact margins against normal weather.
Consisting of two components.
First W.N.A.R. this new whether normalization to olds introduced in our last rate proceeding and should ensure that we got the right recovery of the residential volume metric charge not over collecting and cold beer, it's not under collecting in warmer ones.
Bottom mechanism did address a portion of her weather deficiencies. This water, we estimate that it wasn't affected by 6% or roughly $5 million.
Secondly, we saw short falling commercial and industrial margins that do not have whether mitigation in Missouri, even for smaller and more whether sensitive customers.
Will impact here was about $2 million.
We clearly have some work to do.
<unk> working with our regulators to improve the effectiveness of our weather mitigation <unk> rape receding and two generating earnings from other sources in the back half of 2022 offset some of this had one.
There were two other key variances this quarter, Oh, and I'm expenses and other expenses as outlined here on the slide 13.
Oh and am expenses as recorded we're down to $12.6 million and although we have a history of cost control. This reduction reflects the benefit of a regulatory deferral of a pension remeasurement charge.
With the offsetting expense recorded in other expenses is shown here <unk>.
Excluding this adjustment are runrate utility going was up $2.9 million or 2.6% due to higher operations unemployed cost.
The remaining on M. expenses represent higher marketing costs due to our business growth Anna cost inspire STL pipeline, which is now in operations.
The other key variances in other expenses with a run rate increase after the adjustment for the peasant pension remeasurement of $6.5 million, reflecting two items.
First.
<unk> pipeline, F.U.D.C., which no longer existence is now in our operating numbers.
And secondly at 3.6 million dollar swing and returns on investment is held to support our nonqualified benefit plans.
Not surprisingly this year, we saw unrealized losses this quarter compared to a much stronger earnings stream in the first quarter of 2019.
I would note that the explanation them all costs variances contribution margins as well as our review over a year to date results are included the appendix to this presentation for your reference.
You know since the health crisis began we've been focused on our liquidity position harking back to our flight, but from the great recession, we move aggressively with the assistance of our bank were drawn or credit facility in mid March as the commercial paper market became on economic.
And late March we secured 150 million dollar term loan to provide additional liquidity and we stand in a strong financial position with total available liquidity at March 31 of $661 million.
And a salad longterm capitalization as well.
In fact, we issued equity early in the water with proceeds of just under $10 million.
As we turn to the current or virus impacts on our operating results better perspective.
Roughly 70% of our earnings and margins are residential.
And the current health crisis near the end of the winter heating season, where we earn a majority of our return.
As a result, we've been relatively insulated so far from the economic downturn.
You are watching closely or commercial and industrial customers, especially the smaller firms who are bearing the brunt of of the current shut down.
And we are tracking the incremental costs at the actions that Stephen Suzanne touched on a few minutes ago.
Now none of us have a crystal ball to predict how this situation will play out.
Based on what we know today, including data and regional economic projections, we've constructed a forecast at T.M. packs based upon the following assumptions.
From an economic standpoint.
Continuation of the downturn through this quarter and then a slow ramp up and activity that will stretch at least through the rest of counter 2020.
From an operational standpoint normal weather or return them up normal collection activities disconnection in late payment fees as well as minimal disruption for construction crews.
Based on these assumptions, we have estimated the following financial impacts.
As a result of our moratorium on fees, we anticipate losing fee revenue of roughly $1.9 million.
We have scene I'm decline in our commercial and industrial margins, reflecting both the temporary shutdowns of large manufacturers anticipated lower demand from our smart commercial accounts.
We estimate that impact to be approximately $2.2 million.
We have not yet seen any appreciable change in our residential margins and we will continue to monitor that closely.
However, we are anticipating a significant increase in bad debts in the coming quarters <unk>.
You estimate or exposure, we went back to our records for the last recession in 2008 in 2009, when we saw bad debt expense as a percentage of revenue increase about 20 basis points over normal levels.
Applying that experience credit card fucking business results.
In an estimated exposure three and a half million dollars.
And of course, we're tracking other direct cost, including the cost of P.P. any enhance facility cleaning employee costs for last time among others.
We are pursuing opportunities to offset these headwins, including identifying those costs that with naturally be lower as a result of stay at home order such as travel.
And we're finding additional operating efficiencies.
Or also working with our regulators and Steve mentioned, both as we have then I've had a deal with the immediate impacts to our customers in our business during the water and now discussing potential regulatory treatment of the increase costs, including bad debts and the cost of responding to the health crisis and helping.
Customers recover.
Stepping back our estimates are based upon a current view of the economic recovery and as you can see we have provided sensitivities on each of these key exposures to gauge the impact under a different set of assumptions.
Looking forward.
We remain on solid ground and are focused on growth Steve mentioned, we've upgrade our capital investment target for the air to $640 million.
In addition, we've updated our five year capital investment target now through 20 $24 billion to $2.8 billion.
That level of investment is driven by utility infrastructure upgrades and should drive rate based growth that between seven and 8% for the forecast period.
In addition, reaffirm our long term that economics per share girls target, 4% to 7%.
And given the current uncertainty surrounding the resolution never Missouri guess recovery will continue to refrain from B.B.S. guidance for fiscal year 2020 at this time.
And finally, our financing plans remain on track with only modest equity needs for the remainder of 2020.
So in summary, we're in solid shape and remain focused on delivering for all of our stakeholders.
That let me turn back over to your Suzanne.
Thank you, Steve and Steve.
And the class today's presentation I think it's important to take them on and take knowledge the strength of our collective energy.
Buyers utilities, and then operating for more than 160 years, Thanks to great leadership, Great partnership and a legacy of hardworking carrying employee we had survived wars, the great depression, whether disasters and the 1918 influenza pandemic.
With the law successful history and that that's a part of our masters our communities in our public policy leader.
Work, our way through the impact and the Corona virus will do it together.
What do it in a way that brings the stain long-term value for shareholders customers and the communities me Sir.
Before we ever for question I like to think fires in place many him or listening to this last cat.
I know how hard you work and I know how much you care about one another our customers and the community that we live and work and.
Made me proud every day and I'm forever Grateful for the way you rally to answer challenges you are leaders. Your Conveners you were helpers you were here right.
You understand that fundamentally energy exists to help people and you give your all to deliver energy safely reliably with all your heart.
City ambassadors an analyst on the call today, we like to thank you for your investment and the trust you place and.
On behalf of our board of directors, our executive team and honestly, we take that trust very seriously, especially during these uncertain time.
We look forward to seeing you again soon either as part of the upcoming virtual 88 financial forums or other virtual conferences and road shows into my head.
Of course, we look forward to the time when we can once again meet face to face.
Until then we wish you, while and trust you will stay safe and healthy now we'll take your question.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad. If you are using a speaker phone. Please pick up your handset before pressing the kids.
To withdraw your question. Please press start then too.
At this time, we will cause momentarily to assemble or roster.
The first question comes from Ritchie said, it's a rally would be evade security. Please go ahead.
Hey, good morning, Oh, Beverlin healthy and safe today cliched, taking my question.
Just had a a couple here on his wrist can you just go over the the difference between the two versions of the the house and Annabel and why a ultimately like that.
That to land a once it gets reconciled and then on the recent settlement.
What the is there a smiling where I guess what change this time around with L.P.C., where you are able to Gardner so a settlement there.
Hey, <unk> and I appreciate you call. It is more on your first question relative to the legislation in terms of the the content of our portion there's really not that much difference between the house instead of bills, what you have or some some things that get attached as as they go through the process and so really we're.
Barely consistent with those bills and again, if you go back to what they're trying to accomplish it's it's really reinforce what the intent of the statue was when it was put in place over 15 years ago, which is around infrastructure upgrades, particularly around bear ceiling cast iron and and to really just kind of codified some of that in terms of the language. So I don't think there's a lot of differences between those two.
Two and that's why when it goes back to the committee for reconciliation there'll be some clean a relative to the things that are attached there are relative to your your second part of the question in terms of the stipulation I think we've just been working collectively and again, we we felt his way all along that that the the pipe that we've been replacing a meets all the requirements relative to wasn't.
Needs to be part of the infrastructure upgrades included in his program even to the fact that we still agree that the plastics that we've been replacing are much more efficient way to upgrade our system, but this primarily focused on the bears do and cast iron ended they meet those criteria, we're providing additional evidence, but I think in terms of the reason that we've got to this is because we continued.
To work together to do strongly support again, the intent of of while we've been replacing those by around so they do liability and efficiency of operating or system. So I think it's I think it's progress. If you will look at it that way and again, even with the cases that are still there will continue to present evidence and hopefully make our case around the pipe that had been replaced in previous years is is the same.
Criteria that we're using going forward.
Guided thinking that that's very helpful. And then just around your your Catholics profile I think you might have been them one at a few companies or raise their spending this year for 2020 [noise].
Just curious <unk>, what's giving you then creates competence at at ski on the the plan this year given the the headwinds <unk> Oh they'd related pressures.
[noise] Richie this is Steve Great question, a couple things first of all I guess the downside the warmer weather that has impacted our margins. It does give us a little bit better I'm working conditions on her capital spending as she says Steve talked about we had a a strong winter season and now we're heading into them the harder.
Our our capitals fan so I think that's point number one and then number two.
Playbook for utilities as we look at how we can bass try to offset both the headlines from whether and also the headwins from Colorado wires that we talked about wrapping up our capital spend is one of those activities. It's clearly something that helps get us back to work, we're doing a with the cooperation and understanding of our leaders.
<unk> State center jurisdictions, and I think it's just helping us to ensure that not only are we doing the right thing by upgrading our infrastructure, but we're also doing it in a way that's going to make us even more resilient as we go.
So I think that it's really just been evolution of all those things hadn't gotten you've seen us ramp up and and ramp down in the past and we think this is an opportunity for us to wrap up a little bit and Richie does is the other Steve Let me follow from an operational perspective, I would like to reinforce that as we and and again, while this path quarter was only really several weeks in terms of the measure.
Period, we never stopped working and and you hear some businesses talk about returned to work we talked about a more the transition and if you think about it from a construction in capital perspective, we we really didn't tiger put off the gas, we obviously changed some of our processes and procedures relative to personal protective equipment and it'd be quite honest with limited going into customers home.
To do service towers, and Changeovers, we'll go back and do that but but again in terms of the infrastructure that we've been working on and will continue to that really didn't slow down and that's a great tribute to our our our frontline employees. The management that's out there that that really.
You know pull together if you think about our three strategic area of the focus one of those innovation and we got innovative in the way. We're continued to think about our were the other part I would just want to reinforce is that our capital for these type programs is fairly evenly distributed across or three major operating areas in terms of the side of Missouri West in Alabama, and so we're not just.
Impacted in one area in terms of ratcheting up or backward <unk> fairly evenly spread even with a new business as well. So if you think about that increase that we saw a year to date of of nearly 10% that are referenced that's pretty evenly spread across all of our operating companies, which I think gives us a a good balance as well.
Yeah. Thank you very much I appreciate it.
Okay.
The next question comes from Michael Weinstein with credit Sweeter. Please go ahead.
Hi, good morning.
I see I was wondering if you guys have a better sense at all <unk>, how whether legislation would preclude the need for a ruling out the Supreme Court or not you know at this point after conferring with your own lawyers.
And maybe outside counsel.
Michael is steep about the Supreme Court opportunity at least for the the ruins. It came out of the appellate court has already passed they they opted not to take the I get the appeals that we end the public service mission, but for it so really the the legislation on that.
Blends he talked about is the best opportunity for a longer term effects. We obviously, a continuing to work with Missouri Public Service Commission the staff the L.P.C. and the other intervenors too not only crispin up the the support for filings up and also to get to a more a unified.
View going forward or what makes sense for our customers and I haven't decided to that insists that with when we started this journey, we pursued a regulatory legislate I mean judicial outcome and so all three of those path. So we're on track with what we strategically set out to begin with.
Oh, what's the July 16th decision that we're waiting on.
Is that.
Okay. So this would be a <unk>. This is on the cases that were remained it back to the commission. So once they go back to the public Service Commission. They in essence have 120 days to make a decision based on those cases that did not go through to the Supreme Court. So then you got several moving parts that are going on here from the legislative perspective, and regulatory but but that.
Is on the cases that were under appeal that had been reminded back to the commission, although they say the decision you're referencing there the decision by the regulators.
<unk> right yeah.
It had been remanded back to the Missouri Commission, Yes, we got it I got it okay and on the guidance for long term garden. The base here is still 2019.
[laughter] Alright, well you know base here [laughter], you know I I chuckle, Mike on an airplane actually I I think they are the answer is if you look at our capital spend program over five years and driving rate basically the seven day per cent. We expect that we should be able to drive that kind of growth that we've talked about.
Long term over the bottom line I tropo, because we're all dealing with an we've spent a lot of time and I know our peers aren't because you've been on those calls a lot of time dealing with the current situation and in the fall is the time as we understand what's happening in in in the current year 2020, we'll find a way to Rebase and make sure everybody understands but right now we're just trying to make sure that.
We and our customers get through this year and we do it in a fashion that we feel good about so that when we had 2021 it beyond we're hitting at it full steam with our customers coming along right. Yeah that would be my understanding I I mean, I think a lotta people are trying to look through 2020 as have normal year. So that's just wanted to see what has definitely going to be an abnormal year.
[laughter], Yeah, I think a lotta people would like to look through this year alright. Thank you very much gods and stay safe and healthy.
Thanks.
Oh, well do you have any question. Please press Star then one.
The next question comes from Brian roots, though.
Siddhanti. Please go ahead.
Hi, good morning.
<unk>.
It just curious on the whether normalization mechanism in.
The Missouri that was quote unquote ineffective, what you know structurally what made it ineffective and what would you need to do it.
And so far is.
You know for the discussions with regulators and we're during your next break case.
To fix it or in it for B.
Perfect.
Alright, well good morning, or this is the ones who thanks for the question then I I wish I knew all the answers to that because it's a very complex formula I think the one thing I would say is is we have something in place now that we didn't have before which is positive. It did help but it didn't completely address the the the differences between a weather.
Easily and and the volumes and the revenue. So so I think there's a couple of thesis do at one is and I think us even mention it first of all it does not even include the small commercial class and some of those others that are really whether sensitive and looking behave a lot like residential glass I think that's one opportunity that if you look at other whether normalization mechanisms in the country. They do it.
Clued that so so that's clearly an opportunity. The other is that it's it's not linear and what I mean by that is everyday isn't the same every week isn't the same as you go through this month. So you could have some outcomes and show results of degree days that didn't really translate to the way gas flowed from my customers perspective, So I think there's opportunity as we move forward and and again, it's it's.
<unk>, it's not forbid we recognize that and we think we'll be able to make a pretty strong presentation as to where the deficiencies are because again. The program is intended to mitigate risk as as Steve indicated if it's too cold we shouldn't benefit if it's too warm we shouldn't be harmed is really to try to heighten that banned in in what we would look to do going forward is to tighten the band even close.
And what it is now.
Got it and and <unk> remind me but percent of the overall bill there's a fix charge.
You know and and that that roughly depends on you know the the the type of your that you're having but it could be 25%, 20% to 25% I think based on a residential customer and again that that has variability obviously based on the type of winter that you have because that's where most of the Volumetrics east comes out.
Okay, Great and just.
The Supreme Court denial of your request for rehearing remind remind me how how many millions of dollars of revenues his dad and when my dad impact net economic earnings is it after a decision so a little part of July.
Or you know from a legal perspective.
<unk>.
No more clarity as to <unk>, the <unk> curry or <unk> of those costs, you know I'm curious to win a provision might be taken it can SNET economic earnings.
Yeah, Brian This is Steve rap sheet, there's a there's a detailed chart and the appendix to our presentation that you can take a look at which really outlines the various layers <unk>. The total for vision that is the total of all the collections that are included in the rural.
Things that were that are part of the appellate Court decision and then the Supreme Court's decision not taken on or $16.9 million and that that we continue to collect God knows and we're collecting <unk> 2 million and change every quarter, so up until the time that the Missouri probably.
Service Commission makes a final determination, we will continue to collect does collect those funds I would point out there are various components of that that 16.9 million part of it has to do with the conclusion whether.
Passed on her bare steel is worn out exterior it and another component them out instead of plastic that are replaced along with longer lines of that the cast iron or bears deal and the public service Commission is going to have to weigh in based upon the romagne from the appellate court on each one of those at when they reached their decision and that's that July 15th.
<unk> day, there that we've been talking about and the commission will not only decide on the on how to handle each of those individual interest determinations, but it will also have determine whether or not.
Oh determine whether or not the amounts will be responded to the extent they determine there's a refined or if that a mouse will be used in some other fashion and the commission has full right to be able to decide how they want to handle that so I guess, that's at that point once we have to terminate.
From the public Service Commission, then I think we're we're obviously obligated to take a look at our net economic earnings calculation in to the extent that those revenues are now not going to be earn revenues or earnings and then we would adjust our that economics measure at that point. It just to keep it in perspective of the 16 nine a little.
Or $4 million, a bad x. or current year vast majority of it was the initial provision that we booked at for the last.
Okay got it understood and then just on the equity.
If I heard you correctly, you issue 10 million of equity.
The fiscal second quarter and that satisfy your needs for the entire here.
No I mean, if you go to our our guidance page you can see that we have we have a guided range of back when he $50 million to $100 million I Miss our total need for the year. So in the first quarter, we knock out roughly 10 doing it at that at the low and and you had the beauty of where we stand is we we do have at work.
And ongoing discussions with R. rating agencies, we we do have some leveraging some cushion in our our credit metrics, which are the ones that everybody's always looking at so we do believe that we will be in the equity markets way. This year as long as the market's continue to a rebound in an orderly fashion, but.
It's not anything we'd have to do but I think our preference is in order to maintain strong credit metrics and a balance capital structure that it would be appropriate for us to get in the range of the equity that we'd guided in our long term guys.
Okay and then the the February stipulation for on 11.1 million revenues <unk> is that what you filed for.
Oh Boy, we filed for <unk>. The reason why I'm struggling Brian is that we filed for a lot of different numbers, because we've filed for a mountain that had not been awarded for plastics in prior filings.
I I think the best number to think about in terms of what was our net expectation in terms of what we were going to get out of the filing it was probably nah I don't have it off my head. It was in the high 11 sort of low 12 million dollar range and there's always some difference between what we expect and what we actually got because <unk>.
Filings generally include 45 to 60 days worth of forecasting capitols fans and so that always gets true up in a rape case and and and that is clearly what happened and Miss and this finally for instance, I'm sorry.
Yeah, and Windows to Missouri legislature and this year.
Well, you know who we're we're kind of.
Riding the playbook as we go right now.
There's probably at least another couple of weeks obsession I know that again. This is this is not a special session. This was just to start up again and we were we're very pleased to be included as part of the legislation as being considered but we we came out or or as as we talked about we're out of both chambers and now we're going reconciliation so.
Oh, So we view that ours is moving forward it at a pace at a at least we're we're please so far.
Okay. Thank you much.
Right.
The next question comes from <unk>.
With.
Please go ahead.
Thank you good morning, Lot's been asked and answered so just a few follow up some clarification with a good.
Just following up on that last question so.
We'll get a legislative response, one way or another but.
But he ended the mark.
If that's successful then can you does that have any impact on sort of the July.
Outcome in your opinion.
Well I would say that it doesn't directly because it is a a looking for but I think it would it does is give some hopefully guidance to the commission that that what we've been again operating under the assumption, though for over 15 years has been validated it has been cleaned up if you will in this legislation again, we think.
That everything we've been doing from this point forward from when the program went into place has has met those requirements I think this reinforces that so hopefully the commission's perspective, they can use that as as as as part of their decision making in that the the the infrastructure that we've been upgrading does meet these requirements.
And I'm <unk> I'm sure everyone on the fence aware of it it's not it's not unusual for a house to produce it now and then the Senate sent over to the other chamber that in this case is that they pretty much fry. It the same way, but not exactly the same way to then the committees or created that that's neat that it goes to conference or that they can settled as that's different.
So that's that's not unusual at all in the legislative process.
Right.
I mean, you said your bills notes attached or it doesn't include other things that would be controversial per se. So if it could get to the governor's desk.
I think he's in clean caught I wouldn't call. It controversial band like a lot of bill yeah, they're they're written and one chamber for specific need and then it goes to the other chamber and the other chamber as other elements, which is what happened in the sense and so that's when they two committees come together in conference and I quote clean the bill to.
That's where we are and again that's not uncommon.
<unk>.
I I think you referenced a additional.
Investment in store in storage for 10 million how much more is to go there.
Yeah, It's time and this is Steve we're still in the process of figuring out what our long term development plan is obviously given some other things with them focused on you know we're clearly.
I'm very pleased with the operational performance of the stories field. This winter and you saw that in the improved operating results and we we haven't got come up with the the longer range plan, but what our commitment to to our investors and for you. All is that will continue to review along for the journey in so as we think about the amount that we are going to spend between.
Now in the next call that's the $10 million that we increased in our in our capital spent target for this year.
Okay, and then just kind of going back the effectiveness of the weather medication. I know you guys that there are ways to improve that does it well then you have to wait really <unk>.
Until you go through your next Ratecase in order to be improved or.
Be improved before that.
That would be a yeah. So so your your your question basically out of answered as though it. It is a part of the overall rate rate structure in so that would be part of our next Refiling Ya.
Which I I would say again, that's not unusual that he requirements of <unk> revenue requirement and rate design and it's very rare for commissions to take up either rate design or revenue requirement outside of a a rate case. It does occur that it you know, it's very rare and I I mean, just had on I got 11.
Floor here, it's it's not unusual I therefore, he's medication mechanisms to be in places a starting point because they are complex and there are different classes the customers any of them and then if classes people use energy in different ways, either all heating or summer.
You're around and that's where it's a thing so there are a bit complex. So I like even you mentioned I was glad to see the commission work with us and start and will continue to refine as we all.
I'll cases over time.
Alright, I appreciate it they carry much.
Thank you.
We can look you have a question. Please pets star then one.
The next question comes from Richard Sunderland with J.P. Morgan. Please go ahead.
Oh good morning, just just one for me today, thanks for taking the time the.
Tailpipe why in additional capacity.
If I Miss earlier politics, but any update 'em discussions around contracting that and I would imagine there been so impacts from Covitz, maybe expectations at this point if any.
Yeah. Thank you for the question Yeah, we'll continue to look for opportunities, but right now first of all want to confirm that it did go into service and served decided to stay very well as we went through the winter will continue to operate that five one in the way. It was designed to do and and access gas from the north they used to bring to this.
For our customers here again as as as opportunities emerge, but I think a lot of those opportunities that probably been [laughter] and then put on a standstill right now as we're going through some of these challenges, but those opportunities are out there will continue to pursue those with the additional capacity.
So just just to follow group think be the opportunities as you see them with those potentially be.
As soon as say 2021, or this more of a a long dated opportunity to.
Put additional contracts in place and then I guess eventually I'd compression.
<unk> Yeah <unk> Yeah. Good question, we've shared with you in the past the absolutely can add compression to the pipeline and and again I want to check yeah, Steve comment from an operation on perspective that the pipeline his farm very well this past winter, even I mean, it's against the backdrop of how warm.
That we were able to exercise that pipe pretty well and it from pressure and plays and so forth. It operated again very well on there is additional capacity and we can add compression and there is a market and I suspect Santa battle.
And on how the natural gas and and industry play that everytime, there's been a lot going on in our industry as far as well and lock in to supply sources and those kinds of things they will well sort that everytime that the the pipeline operationally and there's the market sitting behind it so well, we'll see how that plays though.
Takes pretty update.
<unk>.
Again, if you have a question. Please pets start then one.
[noise] [noise] at this person there are no further question. So that's.
Conclude our question and answer session.
I would like to turn the conference back over to Scott that for any closing remarks.
Well. Thank you all for joining us I know, it's a busy earnings day, we're going to be around throughout the rest of the day and we'll look forward to catching up with many of you then.
Thanks to be six.
The conference is now concluded thank you for attending today's presentation <unk>.