Q4 2020 Xcel Energy Inc Earnings Call
[music].
Good day ladies.
And gentlemen, and welcome to Act sales Energy's year end 2020 earnings Conference call. Today's conference is being recorded questions will be taken from invest invested <unk>.
Excuse me questions will be taken from institutional investors reporters can conduct contact media relations with inquiries and individual investors and others can reach out to Investor relations. At this time I would like to turn the conference over to Paul Johnson, Vice President of Investor Relations. Please go ahead.
Good morning, and welcome to XL Energy 2020 year and conference call. Joining me today are Ben folk Chairman and Chief Executive Officer, Bob Frenzel, President and Chief Operating Officer, Brian Van Abel Executive Vice President and Chief Financial Officer, and Amanda Rome, Executive Vice President and General Counsel.
And this morning, when we review our 2020 results and share of recent business and regulatory developments.
Slides that accompany today's call are available on our website.
As a reminder of some of the comments during today's call may contain forward looking information and the significant factors that could cause results to differ from those anticipated are described on our earnings release and our SEC filings.
Today, we will discuss certain metrics that are non-GAAP measures include the ongoing earnings and electric and natural gas margins information on the comparable GAAP measures and reconciliations.
<unk> are included in the earnings release.
I'm going to go off script per section, which cycle of the dangerous but in December Utah.
The utility dive of recognized and focus utility executive of the year for us environmental leadership bandwidth the architect of our steel for fuel strategy Excel. He's also of the one that drove us to be the first utility declare that we have an objective of 100% carbon free by 2050. This is a well deserved and overdo it.
Ward and with that I'll turn it over to Ben.
All of the lessons.
Yeah.
And that old, saying never got off the phone and never get all [laughter] I'm not quite sure of that means but I'll just take it and that's on the process now.
Anyway, Okay.
Alright, so I'm not going to go off script, and I'm going to thank everybody and welcome each of our call.
Last year was certainly a challenge in the year, but I'm pleased came through delivering on our financial and operational objectives, while mitigating the impacts of Covid and helping our communities.
Overall 2020 was truly a stellar year, we executed on our business continuity plans as we kept employees and customers safe, while providing reliable customer service.
And we're helping the jumpstart the economy through our capital investment programs, which create jobs and investment and our communities and.
And we stepped up our commitment to charitable giving to support those and need including donating the gain of almost $20 million from our sale of the Mankato facility.
We had a long and impressive list of accomplishments from 2020, let me share of few of them.
And we delivered EPS of $2 79, and 2020, which is the 16th consecutive year of meeting or exceeding our earnings guidance.
We raised our annual dividend by <unk> 10 per share, which is the 17th straight year, we've increased our dividend and.
And we achieve the total shareholder return of just over seven 8%.
Which was the second highest T S or for our peer group are on.
On EM declined almost 1% as we took actions to mitigate the impacts of Covid.
The Minnesota Commission approved our wind Repowering proposal and I request you acquire the Mauer wind farm.
And finally, we resolved multiple rate cases on the pandemic.
Now turning to our investment plans and.
And the Minnesota Commission recently approved our 650 megawatt wind Repowering and proposal was 750 million of rate base investment.
The wind portfolio is projected to provide customer savings of more than $160 million over the life of the assets it'll create jobs jumpstart the economy and reduce carbon.
In addition, we're also proposing to acquire a repowering of 120 megawatt wind farm PPA buyout.
About $210 million.
Now this project was initially submitted as part of the Minnesota relief and recovery of RFP, but the Repowering didn't result in customer savings. However, we worked with the party on the terms and the project is now expected to provide customer savings over the life of the asset and so we'll move forward with it.
We also plan to file on Minnesota Solar proposal later in the quarter. This project consists of 460 megawatts of solar facilities near high retiring sugarcoat coal plant, which takes advantage of existing transmission.
We fine tuned our projections and now expect and estimated investment of $550 million. This lower cost provides more benefits of our customers.
We have requested a commission decision on both projects and the third quarter and are confident the commission will see the consumer debt.
As part of our strategy to lead the clean energy transition. We're also working to electrify the transport sector and <unk>.
And 'twenty, we announced the goal to enable one 5 million of electric vehicles, and our service territory by 2030.
We have programs and filings underway in various states and our transportation electrification plan and Colorado, which just recently approved.
And we continue to achieve important milestones and our nation, leading wind expansion program with the completion of six projects from 2020 of.
And these projects represent nearly 500 megawatts of capacity and were completed under budget and.
In addition, we have approximately 800 megawatts of wind projects under construction.
Excuse me, which are expected to be completed in 2021.
We're excited to continue the clean energy transition, which will result in significant customer savings and carbon reductions.
We also had a strong year operationally for example are naked with the team continues to make great strides and transforming performance, while reducing cost the fleet achieved the capacity factor of over 96% and 2020.
Even with the refueling outage during COVID-19.
We have one of the top performing nuclear fleets and the country as rated by the NRC and income.
And in addition to strong performance, we have continued to lower our cost structure with O&M cost declining by more than 5% and 2020 and this is the sixth straight year of declining O&M costs and our nuclear operations. So on.
I'm extremely proud of the effort and the results of our nuclear employees and their leadership and our industry.
Beyond our strong financial and operational performance I'm also very proud of our ESG leadership.
And 2020, we estimate that we reduced carbon emissions by about 50% from 2005 levels and.
We remain on track to achieve and 80% carbon reduction by 2030.
We announced our plans to convert the Harrington coal plant in Texas to natural gas by the end of 2024.
Working with our co owners, we announced the proposed early retirement of the Craig and Hayden and coal plants and Colorado.
We will address the remaining coal plants, and Colorado and our resource plan filing at the end of March.
We're also making significant strides to improve ESG compliance transparency and disclosure as we issued our tcf and the risk assessment or natural gas reported on plans to reduce greenhouse gases and our LDC and our green bond impact reported.
We earned another perfect score on the human rights campaign's corporate equality index and remain among the best places to work for LGBTQ equality.
All of this adds up to and outstanding ESG record, which is integrated into our strategy and increasingly important to investors.
So I'm really pleased with our accomplishments and looking forward I'm excited about the opportunities we have in 'twenty and 'twenty, one and beyond.
With that I'll turn it over to Brian.
Thanks, Ben and good morning, everyone.
We had another strong year booking $2 79 per share for 2020, compared with $2 64 per share last year.
The most significant earnings drivers for the year include the following higher electric margins increased earnings by 32 sales per share primarily driven by rises and rate outcomes.
Higher and if you do see increased earnings by <unk> per share due to large projects under construction include the air wind generation.
Lower O&M expenses increased earnings by <unk> <unk> per share driven by our cost management efforts.
And finally, a lower effective tax rate increased earnings by 22 per share.
As a reminder, production tax credits lower of the ETR. However, ptc's of flowed back to customers through lower electric margins are largely earnings neutral.
Offsetting these positive drivers were increased depreciation and interest expense, which reduced earnings by <unk> 36.
<unk> per share reflecting of our capital investment program.
Other taxes, primarily property taxes reduced earnings by $6 per share and finally other items combined to reduce earnings by <unk> <unk> per share.
Turning to turning the sales as expected Covid had an adverse impact as weather and the leap year adjusted electric sales declined by about 3%.
For 'twenty and 'twenty, one we don't anticipate of full shutdown and the the economy like we experienced last spring and instead, we expect a slower recovery lingering impacts throughout the year.
As a result, we anticipate modest weather adjusted sales growth of approximately 1% off of a depressed 2020 sales levels.
As a reminder, we have of sales true up mechanism for all electric classes, and Minnesota and decoupling from the electric residential and non demand small C&I classes and Colorado. This covers about 45% of our total of retail electric sales.
Shifting to expenses, we showed the strong cost management by reducing O&M, nearly 1% to mitigate the adverse and adverse COVID-19 impacts.
We expect the O&M expenses to be relatively flat in 'twenty and 'twenty, one, reflecting the incremental costs for our new wind farms offset by a decline and base O&M.
Next let me provide a quick regulatory update.
In December the Minnesota Commission approved our 'twenty 'twenty, one sales proposal as an alternative to our filed rate case.
We view this or the constructive outcome that will allow us to focus on the Minnesota resource planning and other policy initiatives and 2021.
And January we filed a new Mexico rate case seeking of rate increase of approximately $88 million on a net rate increase of $48 million after reflecting the fuel savings and ptc's from the Sagamore wind farm.
The net increase was driven by investment in transmission and distribution due to the significant growth and new Mexico since the last case.
The request and based on the ROE of 10, 35% and equity ratio of 54, 7% and retail rate base of $1 9 billion and the historic test year.
It also includes changes in depreciation to reflect the planned for early retirement of our coal plants.
The decision and nimble and put the implementation of final rates as anticipated in the fourth quarter of this year.
We also plan to file of Texas rate case later in the quarter both cases.
Required as a part of the approval of our wind projects of Sps.
And.
In November 'twenty, and 'twenty, we filed the request and North Dakota of seeking and electric rate increase of approximately $22 million.
This is our first rate case, and North Dakota, and eight years the.
The questions based on the ROE of 10, 2% and equity ratio of $52 five per cent of rate base of $677 million and the forecast test year.
And interim rates were implemented in January and the decision is expected later this year.
And in February we will file of transmission expansion plan and Colorado to increase capacity to enable the addition of renewables to the system.
We will also file of the resource planning and Colorado at the end of March. It will include proposed plans for the remaining coal plants and the state as well as additional renewal of resources as you work to reduce carbon emissions at least 80% by 2030.
The transmission expansion of the resource plan and we'll provide transparency into our long term opportunities and will likely lead the robust capital investment and the second half of the decade.
We expect the decisions on both of the transmission expansion and the resource play and by early 2022.
As Ben mentioned, the Minnesota Commission approved our wind Repowering proposal as a result, we're moving these wind projects into our base capital forecast, which reflects rate base growth of six 6%.
We also have potential incremental capex of approximately $210 million for the PPA buyout and $550 million for the circle solar facility.
If approved rate base growth would be six 9%.
Accordingly, we have updated our capital tables on our financing plans of detailed in our earnings release.
We anticipate that the incremental capital if approved by the Minnesota Commission will be financed with approximately 50% equity and 50% debt.
This incremental equity will allow us to fund the accretive capital investments, which will benefit our customers, while maintaining our solid credit metrics and favorable access to the capital markets.
And with that I'll wrap up with a quick summary.
We continue to provide reliable service to our customers, while ensuring the safety and wellbeing of our employees and communities.
We effectively mitigated COVID-19 impacts and delivered earnings within our original guidance range for the 16th consecutive year and.
We increased our dividend for the 17th consecutive year.
We continue to execute on our steel for fuel strategy by adding nearly 500 megawatts of owned wind and 2020.
And the Minnesota Commission approved our wind Repowering proposal and the acquisition of the MRO and farm, both of which will provide significant benefits to our customers.
The Colorado Commission approved our transportation electrification plan.
We enhanced our ESG disclosures and made further progress of this coal exposure and deliver on our carbon reduction goals.
The resolve multiple regulatory proceedings, we have reaffirmed our 2021 the earnings guidance of $2 90 per share to $3 per share and finally, we remain confident we can deliver long term earnings and dividend growth within our five to seven sort of objective range.
With that that concludes our remarks and operator, we'll now take questions.
Ladies and gentlemen, if you would like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure the mute function on your phone is turned off to let your signaled the reach of our equipment.
And please press star one to ask a question of Apache for a moment to low airplane and opportunity of the signal for questions.
We'll take our first question from Jeremy Jeremy Tonet with J P. Morgan. Please go ahead.
Hi, good morning.
And Jeremy.
Just wanted to start off with.
What you can say about what type of capital opportunities are you seeing associated with the Colorado ERP and I was just wondering if you could frame the magnitude of what incremental spend might look like versus your current plan.
So Jeremy and good morning so.
And two parts to the two that is really the Colorado transmission expansion plan.
And if you if you've heard of autos talk before about the transmission and we see a lot of opportunities.
The two really this is needed to enable our energy transition, but we need to enable several gigawatts of renewables and if you think about that it's enabling low cost universal scale solar and wind to bring it to our load centers and Denver, So what you'll see out of that and now I can't give you specifics.
In terms of the overall capital investment, we will file that and the next month or so but the significant investment opportunity on the transmissions transmission side, it's really of transmission backbone.
To deliver that for our customers as part of the ERP ERP.
On the Colorado Resource plan I think.
More details to come on that but look at our Minnesota resource plan is a good proxy where we have several of gigawatts of renewables and our preferred plans through 2030. So it will look and feel a lot like that we're looking at what we're doing with our coal plants and adding a lot of renewables and help us achieve that 80% plant and so we're excited about.
And it excited for all of that transparency and to the back half of this decade.
And more details to come.
That's helpful. Thank you.
I was just wondering if you might be able to comment on how the PPA buyout opportunity set as a fault of the past at year or so during the pandemic and do you expect any market changes going forward here.
No I think it's it has evolved a little bit and and you see we just announced one here generic will provide more details and officially announced that in the next month or so as we file it.
We're excited to continue to execute on it and we delivered mall of the malware of PPA buyout. This year with the commission and this one I know we continue to have conversations with our counterparties.
I think there's another opportunity of UC potential tax credits the extensions.
In Washington that you get some repo and further repowering opportunities, but it is something that we continually.
We continually look at and work on all of our Counterparties the Enel.
Other good data points of watches that are erp's, often drive rfps, where we can have ppas bid into us PPA buyout opportunities. So that's a really good opportunity longer term. So while we're excited about it we've delivered if you look and we've delivered on the PPA buyout opportunity was counting this one day, we just announced it's over $500 million.
Of PPA buyouts, and Thats, excluding Mankato, and we delivered Moller long road this new one cap coal and Nancy from Belmont and so.
A good long term opportunity as we continue to look at harvesting.
Yeah, and I think just.
Whether it's the ppas and whether it's transmission spend whether it's renewables.
You should feel very confident that we've got a long runway of capital investment and that's with the really.
And I'm really excited about and of course, you know we've been focused on renewable and that actually save customers' money too so that the clean.
Clean energy transition can be driven by economics, which of course, then sets up the the electrification of other sectors like transport and so.
I think we've got great organic growth and front of us Jeremy.
Got it that's very helpful. Thanks, and one last one if I could sneak in here and just wondering.
What do you guys see as the risks and opportunities with the potential acceleration of municipal carbon free electricity coal to 2040 here and and also thinking about on a national level.
Biting his title plans for 2035, there and just wondering if you had any thoughts you could share. Thanks.
And the first of all of them pretty pleased the excel and the whole industry now is really on volume of worth of cheating on net.
Zero of goals and for us.
It's we think we can do a zero carbon not net zero carbon by 2050 with and important interim goal of 80% by 2030, but.
If you heard me talk before I will tell you that that last 20% is going to take.
Technologies to become commercially viable because.
Jeremy I think it's incredibly important that this transition is based on economics. So that you do have the opportunities to electrify and other sectors with economics and buying and you get a lot of bipartisan support when economics can drive the decisions.
So could.
Could we go faster than our goal of 2015, well, it's possible I mean, but I think that would mean that those technologies that we referred to whether it's the next generation nuclear and whether it's the development of hydrogen whether it's carbon capture working economically whether it's.
Long term storage they have to they have to come into the mine much sooner than I, and then I think they will but.
And you've heard me say before I never bet against the technology.
And so more to come on that.
Got it I appreciate the thoughts there and thats it from me. Thanks.
We will take our next question from Julien Dumoulin Smith with Bank of America. Please go ahead.
Hey, good morning team and thanks for the time.
So just wanted to follow up on Colorado, and and latest thought process on the timing for a rate case there.
In conjunction with the question I was curious about the shift in your 'twenty. One guide on on O&M is that driven in part by a thought process on Colorado rate case pending or I also noticed there's a little bit of a shift on the.
The revenue there as well, but he gets it speaks of the 'twenty one shift on O&M as well as the the latest on Colorado and timing there as well as the demand.
Hey, Julien, it's Bob good morning, and.
And thanks for the question with regard to the case I'll cover that and I'll turn it back over to Brian to talk a little bit about your question on the O&M.
So in Colorado, obviously, we've been talking about our case there are we filed two riders and the summer of last year, obviously, we watch what happened with the age of Ryder and still prosecuting the wildfire writer, but theres a number of other factors that go into evaluation of our case in Colorado and were.
And to watch those obviously the pace of economic recovery and Colorado is very important we're seeing very strong growth there, but as Brian indicated our sales forecast still expects of slow recovery with some lingering impacts so sales of the key driver and obviously our efforts around the O&M and and efficiencies that we can.
Gain and that business will probably dictate.
When and how we filed the case in Colorado.
Likely in the second half outcome at the earliest.
And it's largely associated with capital investment and in the distribution business and and enabling technologies for us to continue to deliver a great customer experience out there so more to come from us, but it's probably at least the second half decision for us and.
Good morning, Julien on your on.
And on your O&M question first just wanted to say really proud of the employees and the work that was done in 'twenty and 'twenty just a great effort in terms of the mitigation work.
And that everyone did and this company about 'twenty and 'twenty one of its combination of things. One is we're continuing to drive sustainable cost transformation and to our 'twenty and 'twenty actuals came in a little bit higher than we thought in Q3, two due to a couple of discrete items. So.
But expect us to continue to drive O&M transformation and now what you don't see and our flat guidance is we're adding about $50 million of wind O&M in 2021, So we're offsetting that to keep our overall overall O&M flat with our cost transformation efforts. So excited about what we accomplished in 'twenty and 'twenty and what we expect to accomplish in 2000.
And beyond.
Excellent Thanks, Dave and Bob coming back to you of real quickly if I can.
In terms of when he said the there to quote you a number of other factors here that go into it.
I think if I'm hearing you right the perhaps the most decisive one is obviously the sales and economic growth are there other material drivers of that debt that will come into it it sounds like you've been waiting to see the trajectory of this post COVID-19 year on.
And on sales, but I, just want and I don't want to sort of mischaracterized debt.
And I look we still have our wildfire rider proposal in front of of the ALJ right. Now we went through hearings a week or two ago and and felt like we made a really good showing there I mean this is a significant investment to mitigate a big state policy desire in terms of mitigating wildfires.
So we'd ask for a rider the.
The intervenors came back proposing deferrals and we're deferring on.
Links and return profiles of those so obviously, arguing a decent outcome and the wildfire.
Ryder is one of the factors that would go into our decision, making but not certainly not exclusive.
And probably right if the spot.
And it's sales it's O&M.
And then it would be regulatory decisions all of that would factor into of the kind of review and determined whether or not we need to file or not.
Right, Yeah understood and if you've.
Got the deferral of that would that be adequate and it sounds like there's more than just a binary decision on the on the the wildfire here.
And if you'd have to just look at how the you know the Devil is always and the details on those things so that along with the the other drivers that I mentioned sales and O&M that'd be all of the factors that we've looked at.
Totally appreciate it alright, guys. Thank you very much all of the best if you too.
Thanks Sheila.
We'll take our next question from and Soo Kim with Goldman Sachs. Please go ahead.
Good morning, Thank you.
Brian on the.
And by the Capex plan can you just.
I guess growth through which of the items are.
In the place based plan versus the incremental I know the debt.
The proposed the powering and the one PPA buyout as with the incremental amount of the based on our investments and the head between coal and conversion and the investments that fell off of our protection of the all of those is that embedded and the baseline of without the incremental.
Yeah no those are the ones that you mentioned are basically and the base plan and it's a relatively small investment and the Harrington and.
And the conversion of Harrington from coal to natural gas and you have.
Of our wildfire wildfire investments.
Our base plan.
You're right.
And then we have the solar opportunity and the P. P about opportunity and the incremental plant and hope the and expect to get visibility into loans by the end of this year. So we can provide color in the hope of ever Arabias growth trajectory of <unk>.
The 7% that we execute on those.
Got it.
And then just going back to Jeremy's question on the present items planned to and <unk>.
She of the carbon X pollution free inspire sector and the USD 35 and.
And setting aside from a moment the probability of I think.
Packing of federal or state policy of switches, but do you think.
Look at your fleet, the underappreciated value of your Renee and coal plants or other fulfill thoughtful appeal of units.
How do you see that do you see that as potentially achievable given the current regulatory and.
The price framework for any of those or what items do you think of it.
And the on both and two to achieve that.
Well you know.
The the accelerated depreciation is.
Certainly and factor, but as I said.
And with the prior question, it's far more a question of are the technologies, rather ready and economically viable.
Because you know.
Getting the 80% is not easy, but we know we can do it with existing technology and I know I can do it in a way that preserves and affordability and reliability, but.
And just to.
Moving completely away from fossil and would require.
And incredible emergence and acceleration of technologies and I think are still.
On a ways away.
So.
I mean again, it's technology can emerge, but 2035 site tomorrow and the utility land as far as technologies and goes so.
I think theres going to be I mean, I think there's going to be an element of pragmatism net debt.
Baked into those.
And.
I've always said you know, we'll move as fast as the speed of technology and that's what we'll do but honestly I think its a I'd say.
The very much of a stretch goal based upon the way I see the horizon in front of us.
So that said got it I mean that said I mean, there's a lot of good things that come with that Goldman and support.
On a percent carbon free and we're aligned with that.
I think under the by the administration and you'll see an acceleration of vs and.
And the acceleration of transmission build.
I think you'll see an acceleration of the R&D and the technologies that we need to achieve those goals, whether it's 2035 2040, and 2050 and I think that that is the key to me and if we can all pull together on that and develop the right frameworks and invest in R&D have the right tax policies I think I think we're gonna do amazing things.
And nobody would have thought that we'd be where we are today as an industry and certainly not and excel energy just five years ago. So.
And I'm excited about what the future possibilities hold.
Got it. Thank you so much for the color.
Got it.
We will take our next question from Stephen Byrd with Morgan Stanley. Please go ahead.
Hey, good morning, and hope you all are doing well.
We are.
Great and just following up on me and you can sense the team and the questions here on the on federal policy, but I wanted to maybe get a little more more specific we may see further legislation that would.
The extend tax credits for wind and solar and potentially create a new tax credit for storage and I'm. Just curious if you saw that kind of let's say that there is a longer term extension could that be material enough for you all to one of both kind of re look at your of Minnesota resource plan could that have a pretty big impact on how you think about the resource mix and Colorado.
Like how impactful could you know longer term extensions for wind and solar and kind of a new tax credits of storage B as you think about your resource mix and the future.
Alright, well first of all I think it's overall it would be of positive so.
And you know and I think there's also discussion about.
Tax credits for.
Nuclear as well, which I am fully supportive of and transmission all of those things are going to enable us to go.
I think even faster.
Because of the affordability equation to it.
Obviously at some point you do saturate, the big grid with renewables regardless of cost.
But.
If renewables continue to fall and price, even and what that would allow you to do is put more renewables on your system, even if even if you have and increase and curtailments because of the economics would pencil out better so.
It's probably of a long winded answer to your question, but.
Hopefully that gives you some insights to it and.
And Steve and I'll just add on.
That.
Depending on how and certainly double and details of it depending on how long debt debt PTC extension is from when you start to see more repowering opportunities come up as the wind farms exited their original 10 year on PTC life and so that's what you saw with the couple of wind farms that we got approved.
And some of the commission and so I think that could present themselves and more opportunity to see how the longer term extension.
But that's a good point, maybe just following up a little bit on this.
And let's let's let's dream here and and let's say that there is going to be longer term extension of these tax credits and new stores that shred. It that'd be transmission nuclear is that enough to sort of trigger a kind of a formal review on your part in terms of the the mix that you've sort of established or is it less and less formal and it was just you.
And to evolve and youre thinking of overtime, but it wouldn't necessarily sort of trigger of.
A reassessment of your broader plans.
Well I mean, I think it would I think it just puts our IRB processes and our proposal is about much more deeply and the money for our customers and.
It makes the economics that much more compelling.
And I definitely can do more and accelerate some of the renewables that we reported to our system within operational limitations.
Steve and I mean, it's you've got it.
Our electricity because of those things becomes even more affordable think about the opportunities to accelerate E and <unk>.
And let.
Expectation of other sectors.
And that that is the would be a tremendous benefit.
That's a fair point, maybe just on Evs and the last question from me and I promise just if we did.
Given the U K.
And here yet.
Thank you hung up on it and I don't think of them is still there.
And even did you go on mute by accident.
That's one of the most popular times in 2020 by the way the other one and could you go on mute.
The other one is and I forgot my masks.
Operator.
Yes, I think I'll go.
The next question, Okay well.
We'll take our next question from Sophie Karp with Keybanc. Please go ahead.
Hi, Good morning Day Hope you can hear me.
And so it's all of it.
Okay.
And so congrats on the midyear and the challenging environment for sure maybe.
And maybe to continue the either the E topics, Greg what are the at the acuity in the evening.
And then I guess.
So you aside from.
And just maybe on the keurig and infrastructure.
Have you done some model and maybe along the lines of it.
The Navy penetration and household penetration levels.
Maybe some of them, placing the due to the distribution systems and you know.
Which is the state and maybe have more need for that day.
And just think about bad debt.
Got it.
On the 91.
Hey, Sophie it's Bob maybe I'll start this and and then I'll kick it over to Brian of potentially.
[noise] muffled, but I think youre asking about whats the investment opportunity if we have a significant penetration of electric vehicles.
Our forecast right now for the next five years has half of $1 billion and and electric vehicle and that includes charging stations and the distribution infrastructure as you mentioned to enable that.
And over the decade debt numbers closer to one and a half to $2 billion.
Similarly, that's all encapsulating into the distribution system.
The one area that we could probably still sharpen our pencil and a little bit as the impacts of fleet and heavy duty vehicles, and how that would impact us those are very discrete and high loads in certain theaters on our system and.
And we probably arent as sophisticated we'd like to be right now on exactly when and where that would happen because it's largely in the hands of of the.
The owners of those vehicles.
So it's possible there's some incremental upside there are distribution feeders are.
Wouldn't say wildly underutilized at this point and so potential capital expansion opportunities on fleets and heavy duty vehicles is probably where any of the upside might come.
I think to Sophie.
And there's a virtuous circle here of the more EV penetration, we get particularly we encourage customers to charge off peak and.
The more all.
All customers benefit and so that tends to give us the you know that.
The tailwind and keeping a product of affordable, which makes more electrification the everything else more possible so that that.
Element of it is super exciting.
Way down the road and Theres a lot of folks I think you know.
The penetration could be and extension of the grid. If you will the use of those batteries and I was kind of encouraged by the CEO of Ford when he spoke to us at an industry event and you.
And he was he he saw that future too because of the past and I've been told that the.
The the car manufacturers were a little worried about using batteries and that matter and now we're a ways away from that but I mean, when you look down the road and you can certainly see of future that.
Incorporate Cds and to the grid.
Got it got it and this is very helpful. Thank you and then just on the from a supply side as you know the in renewable targets and the those become more aggressive and that's.
And possibly we'll see more build out is.
Like you mentioned, we will have additional.
See you on the fiscal incentives.
In the scenario, where maybe you see its true.
And in the email isn't and kind of throwing in there of potential quota retirement and Colorado.
Scenario, where in some of the jurisdictions, Colorado specifically of meeting so that you have.
You'd see a shortage of baseload power likes and.
And the dispatch of BOE capacity, if you will like what they see maybe net and some other regions and in that area right now or do you feel like you have adequate supplies to pay you over to the point, where you can have dispatch ability and the ability to source.
So let me just make sure I got your question because it is the roadmap. What did you did you ask it do you see and a situation where because of EV penetration and other things that we buy.
And that we might have a shortage of of.
Cash flow generation backfill generation and as that.
Yeah, and that's not as much not as much because of evs, but due to its high and maybe wind penetration and the coal retirements.
And the region.
Well I mean, that's what the IRB process and so we're all about I mean, we do take a long term view of that's why I do think the vertically integrated regulated model really works because we can plan for those kinds of contingencies and make sure that we do have adequate reserves and adequate backup.
You know the the the.
The point that we have to get of cost is to the hit an important interim goals, we do need and the upper Midwest to preserve and due to the fleet, that's going very well by the way and we're going to need a little more of the gas backup not necessarily using more gas, but having theyre, having it ready when some of the renewable resources might not be there all in all of its still pencils out the.
The.
Cost beneficial for our customers, but those of the kinds of things we have to discuss and those resource planning processes. So that we have a plan to your point that provides the economic benefits the environmental benefits and of course maintain reliability.
Thank you so much and I will jump back into the queue.
Thank you Sophie.
We will take our final question from Paul Patterson with <unk> Associates. Please go ahead.
Maybe can you hear me.
Hey, Paul we can hear you loud and clear and I say okay.
Okay all of us.
But wanted to just really quickly.
I noticed that the likelihood of some.
And just because of the Microgrid projects I think and you filed for something that I think in December and Wisconsin, and I was just wondering.
What are you seeing or are you seeing any trend and that and <unk>.
The service territories or.
And I realize it's at the pilot and I think it's the only around 170 something million but.
I'm just sort of wondering if there's anything.
The more youre seeing on that and sort of the territories.
And when you take a bunch of Hey, Paul It's Bob look we filed for some of them, we call them community resiliency initiatives and Colorado.
And work those through the process with the commission and we're now got approval and we're gonna start to to build out those initiatives.
Haven't seen a lot of pull and micro grids.
And the rest of the service territories, but obviously something that we're willing to explore with our customers.
Through the process, but it's been pretty quiet other than Colorado.
The micro grids and work through.
I think micro grids have a role and and.
Utilities future and it just.
Yeah.
They don't come without a price tag so the resiliency element of the the you know the.
Those become important things and what we always willing to do and figure out how we can incorporate that into our total of distribution planning process and and I think you'll see more of that and the future but.
And it is not it's not without of course, obviously.
So just the sort of follow up on that because I guess it varies from from one of them territory to territory.
I guess, it's true within your service territory, and so I guess, the economics of simply aren't there in terms of arbitrage and Stoke and terms of offsetting those costs is that how you sort of see and in terms of it being widespread.
Yeah, I think that's fair.