Q2 2020 Northwest Natural Holding Co Earnings Call
North West not holding company.
Although 2020 earnings conference call.
All participants will be in listen only mode. So do you need assistance, please saying no conflict specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions. Please note that this event is being recorded I would now like to turn the conference over to Nikki Sparley Heather.
So when they Shouldnt go ahead.
Thank you Kate good morning, welcome to our second quarter 2020 earnings call. As a reminder, some other things. We said this morning contain forward looking statements are based on management's assumptions, which may or may not occur. In addition, some of our comments today reference non-GAAP adjusted measures.
Our complete reconciliation of these measures and other cautionary statements referring to the language reconciliation.
That's really.
I have to file our 10-Q later today.
[laughter] teleconference is being recorded and will be available on our website following the call.
We have no do you called are designed for the financial community you weren't investor and have additional question. After the call. Please contact me directly by those three seven to 125 30 news media they contact Melissa more five of three to two zero 24 30.
He came this morning are David Anderson, President and Chief Executive Officer, I break our cards Meyer Senior Vice President and Chief Financial Officer, Deep and break prepared remarks, and then we'll be available along with other members of our executive team to answer your question.
I will turn it over to date.
Good morning, everyone and welcome I Hope you your family's weren't colleagues are say well like all of you. We continue to navigate these unusual times cities within our service territory began reopen in second quarter. Unlike many parts of our country. We began seeing an increasing tobin cases in late July but it is appear.
At the plateau Mike.
Now more than ever we are tapping into our core about carried for each other and communities we serve.
The business perspective, we continue to focus on providing safe and reliable service, while ensuring that health and safety. Our employees. We continue to benefit from a conservative business model say, when you're telling me margins.
The majority of our revenues have recovery mechanism mechanisms in place so weather normalized.
Margins.
We also remain focused on efficient operations.
That combined with the decline in natural gas prices as my the natural gas bills that are about 40% lower today than they work with the 15 years ago, which is very good news for customers.
I'd like to our strategy is to look for growth that's our conservative risk profile. Most recently, that's it's been a new contractual revenue stream from the north mist gas storage expansion and of course, our water and wastewater business.
Our solid strategy allows us to adapt.
Perceive challenges such as the crown the virus, our core values of integrity. So you'll be hearing surface actually environmental stewardship are the foundation and I recognize for all we do.
So he can any continues to be about even more front of our mines and we remain vigilant. During this pandemic regarding the safety of our 1200 employees and of course, the 2.5 million people that we serve.
Our natural gas and water utilities are critical infrastructure. We've continued all essential options to provide reliable service, while following relevant health and safety guidelines, including guidance from Osha M.C.D.C.
We created especially why you don't seem to extra precautions when responding to call, where there's a known or suspected.
In the Bain, appearing in customer assistance, we temporarily stop this connecting customers and charging might be.
Else.
We're also providing financial assistance assistance through a variety of programs, including our corporate <unk> land.
Can you be for me the site our gas assistance program, several state and federal programs and of course, especially employee giving anything.
And Jim we issued a $17 million all credit worthy customers, which was a record amount under that's sharing mechanism.
The same time, we continue to see strong customer grow new construction plus conversions translated into connecting over 13000, new customers. During the last 12 months, which equated to a growth rate of 1.7%.
Why we can't predict.
And then we continue to see mitigating back after smart business.
Our resilient business model the timing of the onset of pandemic.
And our conservative and efficient business operations.
Not only do we care for customers. We also care deeply about our employees and I'm proud of how quickly our employees have adapted.
Adopted rather new safety procedures and embraced working remotely all the while they have maintained the highest service and productivity alot levels.
During this Oh excuse me, we're also reminded of the importance of social justice in our workplace.
As a company with publicly stated the racism in any shape or form it's not tolerated northwest natural and for years, we are actively progressing the anti racism.
What do you agenda, not only internally with our employees, but also founding and supporting wider community diversity Mr., There's gonna median aggressive goals to provide business opportunities might see minority.
On businesses.
Today, our culture is one of the accountability creativity collaboration that was inclusive in sports opportunities for all employees. This work is not easy and there are no sort of got we're focused on continuous improvement and we'll keep offering such an apartment building first weren't force across all levels and our organization.
I didn't equity in pain development opportunities and ensuring inclusion so all voices are heard and respect.
Now turning to the progress we made related to environmental stewardship I'm pleased to share that in July we reached an important milestone here in Oregon Rulemaking was completed on groundbreaking renewable natural gas legislation, what we call Senate Bill 98, which enables us to put renewable natural gas or RMG on our system and take the next step.
Thanks energy transition.
RMG isn't zero carbon resource produce from organic materials like food, agriculture, and forest city waste wastewater or landfill that can be added into the existing natural gas system. All forms of orange year supported in the law, including renewable hydrogen.
A lot enabled us to acquire on a borrower Angie on behalf of worthy customers and goes further than any other law by outlining goals readiness as much as 30% RMG end of the state pipeline system by 2050.
Allows the 5% of utilities revenue requirements be used to cover the incremental costs R&D.
Certainly that equates to about $30 million, mainly for northwest natural.
Yes utilities are also allowed to rate base interconnections movie gas system and could include R&D salvesen break they added the lowest cost option for customers.
We're pleased to take this signet significant step forward with a supported the legislator legislation work governor and regulators.
Before I turn it over to crank I'd like you mentioned one last item that we made progress on recently last week northwest natural and all parties in the Oregon General rate case filed a comprehensive stipulation with public utility Commission or.
The filing includes a 45.8 million dollar increase in revenue requirement compared to work was 71.4 million dollar.
Now.
The stipulation is based on the previously settled capital components, including a capital structure, a 50 50 debt and equity and a return on equity of 9.4% in a cost of capital just under 7%. In addition, the stipulation reflect average rate base of approximately 1.4 or $5 billion.
Northwest Natural's filing a subject I hope you see approval and recruit new rates are expected to take back November 1st this year.
Ultimate time that our revised purchase gas adjustment or P.J.
This European this year's PJ forecasted production to customers, Bill, which offset the majority of this base rate increase we sell along.
We commend the commissioners and parties for their ability to continue work Unfortunately under less than ideal conditions, so that Frank I'll turn it over to you or the quite easily <unk> second quarter in your they all right. Thank you David Good morning, everyone I'll begin with a summary of our second quarter year to date financials, and then discuss the key metrics internationally.
Asian, Cobot, 19, our business and guidance for to be.
Ill describe earnings drivers on an after tax basis, using the statutory tax rate of 26.5% our effective tax rate for the quarter was 24.6% as a result of the return of excess deferred income taxes to our Oregon customers.
Also note that earnings per share comparison were impacted by the issuance of 1.4 million shares in June of 2019, as we raised equity to fund investments.
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For the quarter, we reported a net loss from continuing operations, a $5.1 million for 17 cents per share compared to net income of $2.1 billion or seven cents per share for the same period in 2019.
The decline in earnings from quarter reflects two key drivers first the second quarter results reflect the financial impacts of Cobot 19 on margin one and interest expense.
We estimate the total impact could go in 19 to be about proximate to be approximately $4 million for 12 cents per share most of which is the second quarter.
We have recorded a deferral for a portion of these costs. We can offsetting reserve until we have more clarity with regulators as to the Recoverability of these costs second last year's second quarter results benefited from the reversal of in earnings chest reserved for environmental remediation expenses that we booked in the first quarter, what's an 11 cents per share.
Looking at gas distribution segment utility margin decreased $1 million higher customer rates in Washington customer growth and revenues from the North Mist expansion project contributed $2.9 million, which was more than offset by 3.2 million dollar increase environmental remediation expense due to the reserve release.
Our year.
Oh that impacts on margin are estimated to be $1.5 million, including a $700000 decline in revenues from lower late charges and just disconnection piece as we temporarily and voluntarily suspended these charges in March. In addition, we experienced slightly lower usage from industrial and commercial use customers that are not.
[noise] utility going and increased $2.8 million in the quarter as we create higher contract or service cost related binding Peter safety as well as moving expenses as we transition to a new headquarters in Operation Center. In addition compensation cost increase related to additional I teach step and higher wages under the new five.
Your Union contract finally, I would have increased $200000 due to high reserved for bad debt related to cope.
Depreciation expense in general taxes increased $2 million related to our continued investment in our system, including the north mist gas storage facility, which was placed into rates in may 2019.
Interest expense increased $1.1 billion related to several financings undertaken in March to increase cash on hand at the precautionary measure during a significant mark period of significant market volatility amid the early stages the pandemic.
For the first six months to 2020, we reported net income from continuing operations $43.1 billion or dollar 41 per share compared to net income of $45.5 million dollar 56 per share the same period in 2019.
Last year's results included a regulatory disallowance of 23 cents per share related to an Oregon Commission order, excluding that disallowance on an adjusted non-GAAP basis earnings per share from continuing operations was $1.79 for 2019.
The 38 cents per share decline is largely due to year over year growth in expenses and the effects of carbon.
He.
In the gas distribution segment utility margin increased $100000 higher customer rates in Washington customer growth and revenues from the North Mist expansion project contributed an additional $10.1 million. This was partially offset by lower entitlement gel beads related to pipeline constraints in 2019 and why.
The weather in 2020, compared to 2019, which collectively reduced margin by $4.9 million.
Remain $5.2 million decline in utility margin is a result in the March 2019, Oregon work related to tax reform and pension expense.
Except for the first quarter pension disallowance. This quarter has no impact on net income that's offsetting adjustments were recognized through expenses net of taxes. So I'll describe in a moment.
Utility owned and other expenses declined $6.9 million during the first six months of 2020.
This decrease is the result of accounting entries associated with the 2019, Oregon order, which resulted in $14 million additional expense in the first quarter 2019 as discussed previously.
This was offset by a 5.8 million dollar increase in underlying all of them related to the cost drivers I described quarterly results.
Over the last several years, we have invested in our gas system at historically high levels and we placed north mist gas facility into serves as a result depreciation expense increased 4.9 smelters.
Finally, 2019 utility segment tax expense included 5.9 billion dollar benefit related to implementing the March quarter with no significant resource, resulting effect on net income.
Net income from our other businesses declined $1.5 million from lower asset management revenues due to less favorable market conditions.
Now regarding national in Mexico that 19, while our business model is resilient in the initial timing is that that occurred after northwest Natural's pizza heating season, we are experiencing some financial impacts related to the pass.
Through June 30 is we have an estimated $4 million, a combined incremental costs and lower revenues based on our experienced to date and expectations for future. We closely monitor the following items first we continue to track commercial customer losses.
Result of business is closing their doors and to date have not seen significant to change or near term implications on customer growth, but it is still very early in the economic contraction.
Second we are also monitoring the Boston safety revenue potential bad debt expense, we doubled our reserve for bad debts from 800000 in June 2019 to 1.6 billion at June 2020.
Third we have experienced some decline in industrial that large commercial customer usage, but had not seen a substantial reductions.
As discussed we took several steps to improve our liquidity position by increasing cash on hand, as a result, we had over $470 million cash.
Word.
Conditions have improved we reduce that $237 million, while there isn't incremental interest costs associated with these financings and believe it is relatively inexpensive it's your insurance given the volatility in the market.
We've applied for regulatory deferrals to recover certain of these costs and are working closely with our regulators to reach agreement on the Titan about costs. It will be eligible for recovery. In addition, we are taking actions to ensure to ensure we are operating effectively and efficiently and these savings also moderate impact.
In summary, second quarter results are coming in about where we expected them to be and we continue to monitor this evolving situation as we approach the next teams.
Today, we reaffirmed guidance for continuing operations in the range $2.25 to $2.45 per share and guide towards the lower ended the range due to the potential applications.
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Guidance also assumes continued customer growth average weather conditions and no significant changes in prevailing regulatory policies mechanisms for outdoor significant boss legislation or regulations.
Finally, this guidance excludes any gain related to the sales Gill ranch in associated operating results. These items are reported in discontinued operations.
We continue to monitor the impact to the.
On our capital programs at this time, we do not expect a material change in our capital expenditure range of 240 $280 million, we're anticipating some lower expenditures related to customer acquisition due to the economic downturn, but the majority of our Capex is maintenance in nature and some large projects that have already begun.
With that I'll turn the call back over to David for his concluding.
Thanks, Brian.
While we continue to focus on day to day operations were also advancing key long term objectives.
I mentioned earlier, we strive to provide stable earnings while adding new earnings streams with similar risk and cash flow profile as our regulated gas utility we believe the regulated water utility sector fit this profile and aligns with our core capabilities. Furthermore, the investment potential as promised the water industry is highly fragmented and in many cases.
These utilities have not been able to adequately you've gotten their infrastructure.
To that end.
2017, we began building our water utility business and I'm very proud of the progress we made today.
Oh.
With regulatory policies mechanisms excuse me.
We've seen some decline in activity lately due to travel restrictions related to kobin. So far in 2020, we closed several transactions, including some Acadia in Washington State and our first water utility in Texas.
In addition, we continue to execute on our tuck in strategy and around our existing systems. Just a few days ago. We closed our first municipal transaction in Idaho, acquiring water and waste water utilities near our all water system and I know all and find another agreements to acquire a small bar system in the region.
Cumulatively cumulatively, we have invested $110 million in that space.
On the water utilities continue performing well them into pandemic, we leveraged our natural gas expertise Apollo best practices regarding health and safety guidance for coal that provide centralized resources and planning as well as provide a harder stronger balance sheet the ability of our water utilities to work together along with our gas utility during this crisis further validates.
Our rollout strategy.
In closing our company has weathered many things my last 162 years and I'm confident in our ability to handle the challenges that yeah.
I stand behind our commitments customers to provide safe reliable service and I believe our regulated business strategy and resilience of his team so with that wraps up our prepared remarks, and we'd be happy to take any questions from analysts that are they if there's any view.
We will now begin the question and answers question to ask a question. Please.
And one of you touched on.
If you use in a speaker please pick up your handset flip that syndicate.
A question Chris Star then too.
This time, we'll pause momentarily to assemble a roster.
Our first question is from AG.
The growth.
Some you'll be yes go ahead.
Good morning.
My first question is really on.
A lot.
Before you talked about.
This year the old.
However, a lot of your peers into Q Cod calls travel training for its.
<unk> expenses to kind of offset the impact from call, but where are you able to see any cost reduction due to those items.
Good morning August Sprague most of our benefit our efficiencies that we are targeting will actually pull through the second half of that year.
The the July through December timeframe.
We have certainly some operational efficiencies that we're targeting we're also review we start with a pretty efficient model to start with but there are some operational efficiencies that we are putting in place. We also are reducing our marketing expenses significantly for the year, we've reduced essentially frozen our hiring practices.
But these are really more take effect you know in June but they are really going to track out through the rest of the here. So you'll really see that benefit in the second half not in the first half.
And then.
Impact from carve it up roughly four.
And then an English, but that could you provide more color on.
What Rick recovery you can expect.
Are you in discussions with.
Commissioners like how could you recover those calls going forward.
Yeah, Hi, this is David I'll I'll start and in all of our jurisdictions were in regular communication with.
With the regulators and.
Referral orders have been filed.
And the each jurisdiction is approaching a little bit differently in fact like in our water operations in Texas. The regulators have indicated they want to get back to normal now which means disconnect in late fees being charged obviously fairly small portion of our company.
Washington, Governor Ensley has.
Ordered.
No disconnects or like these through the end of October so there's still conversations going on with the Washington regulators on what that means long term here in Oregon as the voluntary status and we're working closely with you see.
Mission or Thompson with do you see here is taking the lead though.
Trying to work not trying but working with all utilities to orchestrate a half board I think we expect to have some resolution bat process since September.
Hi, Brian.
All the utility please turn the northwest and we've been fairly vocal about it too.
Is that we need to do all we can get back to.
Or lack of a better term normal operations before we get into the winter.
Months obviously.
The impact.
Our secret in the financials for the first and to some degree first and second quarter for us, but it's really imperative that when we get into the winter months that that we have the ability to operate on a more normal basis, and I hope and with both jurisdiction that we will be in that in that position or there will be further guidance on deferral.
Situations or whatever happens federal level, one stimulus programs et cetera.
My last question is really right now we have the legislation place clarifying R&D rules, how do you think about.
Sure.
R&D portfolio are there any cabot's opportunities to invest the collection the R&D facility or maybe the best thing, including equipment together R&D the pipeline quality any color.
Yeah, No no R&D. Thank you for that question, we're really really excited not only but that legislation, but I think the rulemaking that came out in the Oregon do you see.
While the intent legislation and gives us flexibility doesn't help women's here, one and I am kind of lead on the on the R&D processes for US momentum why don't you try to give little bit more color Braga, yes, great. Thank saga answers Justin.
So we have been building out.
Team and capabilities.
Enabling us to execute on our R&D strategy really in parallel with finalizing the rules we are actively engaged and.
Opportunities to invest in specific R&D projects, we have strong set of rules that will enable us to do that we are also out in the market right now with an RFP for procurement entering into.
Long term.
Our Angie gas supply agreements and what we're doing is really evaluating what's the best for our customers over the long term. We believe we'll end up with a mix of some investment opportunities as well as.
Longer term procurement or gas supply agreements that will be approaching it very much through the lens of what's best for our customers.
Thank you for the color. Thanks.
Thank you August I'd say.
Our next question is from Richard.
Well go rally from Bank of America go ahead.
Morning, Richard.
Hey, good morning, I got done.
All right just wanted to follow up on the prior question there.
Just curious if we can provide a little bit more color on quantifying the capex opportunity and loved the timing of spend.
Do you see it sounds like crowding out.
Some of your spending currently in your plant or that potentially all incremental.
Well I'll start here and you're talking about the RG, Richard make sure I understand correctly.
Yes, correct.
Yes, so the number one goal for us as a company is to get as much RMG product on our pipeline decarbonize, our product as much as possible and so that's all number one and whether its outright purchase of the RMG or its quote unquote through rate basing interconnection the rate basis as thing.
That is it's a little bit secondary.
The.
Yes, what has to be done is to make sure that it's done at a price that is the best for customers right. So if a rate base. The methodology is more expensive than a purchasing whether that doesn't make sense nor will the regulators look back through so that's that's part of the process that we've got to go through.
As we look for the good news as we have the opportunity to either invest directly into it or buy and so it's a little bit early at this juncture frankly to be throwing out numbers about that as Justin just said the RFP is out there we've actually been work them space here for a period of time.
And if we can find good investment opportunities well I think I can speak for Frank I think you know absent the cost of these being a very substantial once again they come back to that 30 million dollar revenue requirement level. It should be very doable for us and our capex without parent back on.
And the rest of the company because frankly, the rest of that Capex.
Frank on the team have done a really good job with operations. Its line of sight capital I mean and stuff that has to be done so whether it's some IP systems as we go border just pipe replacement et cetera.
That's pretty well locked in for a period of time here.
All right got it that's very helpful.
Just separately.
I appreciate the color that you guys provided I quoted.
Excellent access and what you're seeing out there.
But just given that.
You among other carriers had then.
Experience.
The code that impacts to the peak winter heating season.
I'm curious how you guys are thinking about cost mitigation efforts.
The sustainability of those into.
Two h. and even at the 20 line as you think about that.
Right.
Yes. This is David again, again, I think it the uncertainty out there is number one where we are and this and this pandemic I mean it does look like this is going to carry on for a period of time I think this is where it comes back to.
And our state and federal level, what our government is going to do stimulus liar, but I think one of the reasons. We're in good shape now.
Absent the timing is you have payroll protection program in place and individuals had money from the federal government, but allow them to so not being able.
Well to make sure. They are basic got utilities work order a pay for too.
It comes down to the regulatory process and how the regulator and all of our jurisdictions is going to look at this as we enter the winter weather season, and as I mentioned, a moment ago in Oregon, and Washington, We're working through data and again I'm hopeful that we're going to come to a good resolution there.
Will allow us to make sure that we can handle customers bills that are having difficulty during that period of time.
So its itself.
There's still more to be done here on this part Richard and I think everybody is looking for more guidance resolution by the time, we get into the winter months, which for US is basically the November timeframe, it's more things started for us.
All right. That's very helpful. And then last one air for me.
Just wonder on your water strategy has had coated potentially impacted some.
Some of these smaller players out there and the capitulate and a more willing seller is and how large they didnt your water strategy, that's like growing and whats the timeline for that.
Yeah. This is Dave again, I'll take that one I.
I will tell you that the properties and employees. We have now part of the northwest natural family I think if you talk them individually, they're very thrilled.
To be part of a company like this and then mr. discovered situations or if they needed.
They need to E or access to capital it's been readily available to them and I think that that word gets out there probably to a lot of these other smaller water utilities that I would suspect you're correct. I think some are probably hurting unfortunately worse than others I will tell you want me on me.
M&A activity front with as much of that dynamic that's out there and of course, we're we're we're here to help any water utility that needs to be helped whether its municipal or private.
The M&A activity has been pretty slow frankly, because you really everybody's doing things remotely traveling and due diligence it's been slow down a little bit. So we'll have to monitor that that carefully but as you saw we still completed some transactions in the best of those and so I'm, hoping as we as we look forward more opportunities will present themselves.
Alright, great. Thanks for all the color that's all my questions [noise].
Thank you.
Again, if you have a question. Please press Star then one.
Next question is from Bruce L. in house.
From.
Sorry go ahead.
William.
Hey, everybody how are you.
Excellent.
Frank can you give us any color on what the moving expenses were maybe I missed that.
Well, yes, I got one says we relocated from our previous facility into our new headquarters in Operation Center. There was a certain amount of Olin and cost that we could not capitalized to relocate the business.
I think then it was about.
$500000, so that's kind of a onetime cost.
Okay great.
Frank with you outlined for the 4 million.
Lot of those are.
Off or avoided revenues that are proportionate.
Season.
You didn't talk much about things like PB costs or whatnot.
Can you give us any kind of sense of the proportionality of.
What is fixed versus what might be proportional if we look into the.
More substantial fourth quarter.
Yeah sure good questions.
I didn't mention PB by about a half a million dollars, what we incurred and you know.
There'll be more of that but I think kind of thats kind of front end loaded.
About 1.7 million, Chris is just interest and we've got some that'll be ongoing because as you know we put on a 364 day facility that we're going to keep in place and it'll just kind of as our cash needs to buy gas in the latter half the year grow it'll just naturally fund that.
So and we also.
Put on a slightly larger first mortgage bonds. It was bigger in it helped it helped put onto cash it was a little bit extra interest there. So they just a bit more interest in the back half the year, but that 1.7 million of incremental interest is really again front end loaded.
There are no late uncollectible fees.
That will.
We have about 2.7 billion a year in our great start late fees and recall reconnection, and so that kind of caps out and.
At this point, we recognized about a million just over a million at that at essentially uncollected. So theres, maybe another billion to go on that across the balance of the year.
And then what do we get into is what happens with usage and customer losses and that increase in the back half of the year. So the way I'm looking at it is the first half of the year. We had this 4 million after tax 5 million a pre tax.
Cost of Cobot, I don't think Thats unreasonable for the second half a year, but more of that will be usage and less of that will be interest and Owen app now bad debt cost is like usage. It could you know we have to keep an eye on that one right now we've got a really rigorous process in place to look at our customers and work with our customers.
Keep them from going delinquent, but it's a bit unknown because the economy is outside of our control, but we're doing all weekend, but that's how I'm looking at it it's kind of split between first and second half, but the better the second half is more volume based.
David.
You talked about the construct for our Angie.
Curious.
Locally there is obviously is a lot of environmental insurance.
Well what is what is the tradeoff what is the.
Thought process.
Or again about cost versus the carbon benefit with Orange County, Orange is going to be a smaller economy of scale than delivery of just natural gas.
How does that dynamic work.
The Commission's mine and the legislators intent.
To have that trade off of.
You know equivalent costs to natural gas versus the benefit of Decarbonizing.
Yes, and I'll start the the legislation liked about pretty clearly right and you know glass less than we did have a cap and trade build it didn't path of would've been a price and carbon out there, but the legislation is what really put forth to the commission that they then it would be okay. At this juncture.
To have higher cost be passed on to customers for our energy. There was there was not really this contemplation of cost of carbon in association with it but that was that's what that's what the ruling is so we really don't have.
Yes, I understand your question right, Chris that's really not really kind of part of the process. We can go out there and find RMG, which there's a lot out there, which I might have kansas detail a little bit about some of the opportunities there or just in one of the to you.
That will just go through the rule, making process and that will be will be put into rights I hope I'm I'm answering your question a little unclear to me, but can you want to them or just an add anything of that.
Hi, good morning, Karen.
What is the things that legislation dead flat constantly hi protection for customer not like.
Renewable portfolio standard on the electric side and that's why he that 5% Kathy revenue requirement annually and so we think that's starting to become Latin R&D and then over time and away that can be.
Customer standpoint, and again very similar to the our yes on the electric side.
I am.
I don't know Jackson.
And then.
I had a number of early Eddie.
The bargain Department and energy conducted a study on the technical potential and renewable natural Oregon.
I think came out.
Nearly 50 million cubic feet.
Well, let Tom residential and in our eight.
Just werent going alone and as you may know that legislation constantly again like on the electric side that won't be able to hear RMG sort of nationwide.
Right now, but that are you looking at.
Area opportunity.
There was also at study that led.
Funded by the American Gap Foundation, and many utilities across the country. This year.
Technical potential on renewable natural gas nationwide and again that technical potential look can be nearly 90% of all the current gap three plant nationwide now.
Study clearly technical potential not necessarily economic potential, but our traditional very early in the development current <unk> now that study done even contemplate.
Hi, Optionality in renewable hydrogen, which I think will come later and we're certainly looking at.
We don't married again about the prospects.
Stepping into R&D in a way that protects customer and then rate.
But certainly that five to 10 spell that out there.
Okay. That's good color, David I was absurd to sitting here thinking about.
Renewables initially or Q.
They have definitions of cost versus benefit.
But sometimes that can get contentious and the regulatory process Im just one I was just wondering whether.
Felt that there's enough clarity that that will become an issue with the are in June.
Yes. This is Justin so one of the things we're working through and we always do with our regulators we were Barry.
Robust methodology for how we calculate.
The the cost and really be avoided costs.
And our gas procurement in our other resource decisions and that's in our IR piece. So one of the things that.
As has been going on in parallel with the RMG rulemaking is more clarity with our.
Okay do you see staff around exactly how we quantify.
Our LNG and look at our resource options over time and so it's important I think in addition, everything Kim just mentioned as we have the that 5% of our revenue requirement there were allowed to invest in our Angie.
Which is really just the beginning of our overall de carbonization of our product that is.
Over and above the avoided cost calculated to our customers for.
For.
Gas procurement, so depending on the type of RMG that it is.
And depending on where it's located it will have a certain benefit that will be netted from that cost. So.
I don't know more confusing then then.
We have illuminating but.
There's a fairly robust process that we go through with our stakeholders to.
To analyze the cost of our Angie.
That's been 98 legislation is fairly robust somewhat and allows us to do.
Okay that helps.
Also as far as bad debt goes in and any deferral ruling aside.
Were you, suggesting that you're worried a little bit that.
Sort of as Congress Dilly Dallying with the employment.
Benefit and as this pandemic gets protracted that your little bit concern it bad debt.
Goes up later in the year into next year.
Yes.
I think there's there's uncertainty right I think that's what I'm I'm trying to point out I mean, I think if you look at some of the macro issues. That's one of the reasons. Our bad debt is so low to begin with right now I mean, I think we were focused on talking about the increases, but if you. If you look historically, where we're at night remember gas prices are down 40% actually.
More than 40% build down 40%.
So we're actually in a really good starting point, but Chris I do I do think whether it's a utility or any other company out there the longer this move for us and the electric utility business in this region the winter months or a very important.
Important time period as build or higher.
And so I would like make sure that we have clarity in place on all these factors whether it's the late fees the bad et cetera, frankly want to add on yeah, Chris just want to add because there is uncertainty about how long the moratorium on disconnects would go it makes it just harder to know.
Yeah. So.
Yes.
Obviously, the bill can continue to accrue for months and until we have that ability now of course, we will work with our customers very actively to keep them from Boeing delinquent, but that that more department place. It just as an uncertainty that wouldn't have been there in prior years.
Yes.
Great appreciate it.
Thanks.
All right you to Chris Thank you.
This concludes our question and answer session I would now like.
Since back over to David Anderson for closing remarks.
Well everybody Kate Thank you very much everybody. Thank you for joining us This Friday morning or afternoon, if you're on the East Coast. If you have further questions. Please reach out the Nikki Sparley director of Investor Relations and she'll be happy to.
To try to answer those questions. So that case, well conclude the call. Thanks everybody.
The conference has now concluded. Thank you for attending todays presentation you may now disconnect.