Q4 2020 Dominion Energy Inc Earnings Call
Welcome to the Dominion energy fourth quarter, 'twenty and 'twenty earnings Conference call. At this time each of your line is in a listen only mode at.
At the conclusion of today's presentation, we will open the floor for questions instructions will be given for the procedure to follow if you would like to ask a question and.
And I'd like to turn the call over to Steven Ridge, Vice President Investor Relations.
Good morning, and thank you for joining today's call.
Earnings materials, including today's prepared remarks may contain forward looking statements and estimates that are subject to various risks and uncertainties.
Please refer to our SEC filings, including our most recent annual reports on form 10-K, and our quarterly reports on form 10-Q for a discussion of factors that may cause results to differ from management's estimates and expectations.
This morning, we will discuss and measures of our company's performance that differ from those recognized by GAAP.
Reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measures, which we can calculate are contained in the earnings release kit.
And I encourage you to visit our Investor Relations website to review webcast slides as well as the earnings release kit.
Joining today's call are Tom Farrell Executive Chairman, Bob Blue, President and Chief Executive Officer.
Jim Chapman Executive Vice President and Chief Financial Officer and <unk>.
Other members of the executive management team I will now turn the call over to Tom.
Thank you, Steve and good morning, everyone.
I want to start by outlining Dominion energy is compelling shareholder return proposition.
We expect to grow our earnings per share by six 5% per year through at least 2025.
And by our updated $32 billion five year capital growth plan.
We offer an attractive dividend yield of approximately 3.5% looks.
Reflecting a target payout ratio of 65% and and <unk>.
Expected long term dividend per share growth rate of 6%.
This resulting 10% total shareholder return proposition.
This combined with an industry, leading ESG profile.
Characterized by what we believe is the largest regulated de carbonization of investment opportunity and the country.
We plan to invest tens of billions of dollars over the next several years to the benefit of the environment.
Our customers our communities and our local economies.
Our strategy is anchored on a pure play state regulated utility operating profile.
And the incentives around five Premier states as shown on slide five.
All share the philosophy.
And a common sense approach to energy policy and regulation.
What's the priority on safety.
Liability.
Affordability and increasingly sustainability.
These states also strive to create environments to promote sensible economic growth.
And I, just like the rising tide lifts all boats.
For instance, three of these state jurisdictions ranked consistently and the top four best state for business as determined by independent analysis carried about carried out by CNBC and by Forbes.
Our state regulated utility model offers investors increased predictability.
And is enhanced by our concentration and these fast growing constructive and business friendly states.
Turning to slide six.
Dominion is a purpose driven company.
And as adopted comprehensive stakeholder approach.
We are driven by the belief that the world's best companies consider the interest not just of investors, but also employees customers and communities and to where.
Wellbeing of the environment.
Our actions are grounded and adherence to our five core values.
And we embrace transparency and stakeholder engagement as hallmarks of responsible corporate citizenship.
And the wellbeing of our over 17000 employees is critical to our long term success.
And there is no measure more important to our company and the safety performance of our employees.
'twenty and 'twenty represented by a wide margin the safest year of operations and the history of our company.
As depicted on slide seven.
This result did not happen overnight.
As you can see it takes years of dedicated effort to drive sustainable improvement.
And I congratulate my colleagues on this significant achievement.
Turning now to our customers and communities.
We believe that it is not enough that would provide energy safely.
We must also provide energy that is affordable.
We are pleased the residential rates at our two electric utilities compare favorably the state national and where applicable Reggie state averages.
Looking forward, we expect our customer and should be very competitive even as we invest heavily to transform our systems carbon footprint.
Bob will address this more comprehensively and his remarks.
With regard to our community initiatives during 'twenty and 'twenty, which are described on slide eight.
First the impact of COVID-19 on our customers who are in 'twenty and 'twenty was obviously significant.
Which is why we voluntarily took immediate action at the onset of the pandemic to suspend service Disconnections.
In doing this we avoided what otherwise would've been disconnection of over 255000 customer accounts.
We also developed extended and flexible payment plans, resulting in over 330000 robots.
And we contributed $18 million toward direct energy assistance for our most vulnerable customers.
And Virginia, we supported special session legislation, which gave customers a fresh start.
And I forgetting over $125 million of customer arrears.
We also agreed to a pause and our South Carolina rate case proceeding ensuring that the results of that case will not impact customers and until late this year.
Second we built on our longstanding legacy of supporting social equity.
By committing $25 million to 11, historically black colleges and universities.
Funding, an additional $10 million for scholarships for underrepresented minority groups, and creating a $5 million social justice fault, but supports community efforts to address the impacts of racism.
This is in addition to the diversity and inclusion initiatives within our company, but Bob will address.
And she can tell we are extremely play out proud of these accomplishments and I. Thank all of my Dominion energy colleagues and contributed to these successes and what was obviously and.
And extraordinarily challenging year.
Turning now to slide nine.
We have rolled forward, our five year capital growth plan to capture the years 'twenty 'twenty one.
Through 'twenty and 'twenty five.
This has resulted in a $10 billion or 43% increase to the plan, we shared with you and the spring of 2019.
As adjusted for the gas transmission and storage sale.
We now project $32 billion of growth capital investment on behalf of our customers.
Over 80% of which reduces or enables emissions reductions.
We plan to invest $17 billion, and zero carbon generation and energy storage, including regulated offshore wind solar and nuclear re licensing.
Another $6 billion and electric grid enhancements, such as electric transmission and grid modernization, which will enable our system to be more resilient to cyber and climate threats and.
And more responsive to increasing intermittent generation.
And we plan to invest $3 billion on the modernization of our LDC networks as well as on renewable natural gas development.
Thereby increasing safety and reliability, while driving emissions down.
Jim and Bob will provide more color on these industry, leading investment programs and a moment.
As meaningful as these near term plans are.
Consider on slide 10.
They compare to the long term scope and duration of our overall de carbonization opportunity.
Our initiatives extend well beyond our five year plan.
We have identified over $70 billion of green investment opportunity between 'twenty and 'twenty and 'twenty 35.
Nearly all of which will qualify for regulated cost of service recovery.
This is as far as we can tell the largest regulated de carbonization investment opportunity and the industry.
And the accelerating electrification of the transportation sector.
Promises to drive growing demand for utility scares and utility scale zero and low carbon generation for many years to come.
Company's long term transformation has multiple beneficiaries.
Our customers, who want more sustainable energy.
Our local communities, which benefit from the economic growth and tax revenue that accompanies investments.
Our employees, who develop the best practices and the transition to a low carbon future.
And the environment via via the emissions reductions, where you illustrate on slide 11.
Through 2019 inclusive of asset divestitures, we have successfully reduced our enterprise wide C O two equivalent emissions by around 55%.
This is great progress, but we have more to do.
About 2035, we expect to improve that reduction to between 70 and 80% versus baseline on our way to net zero by 2050.
As shown on the right side of the slide by 2035.
And we expected approximately 95% of our company owned generation will be either zero or low emitting.
A remarkable transformation from our 2005 dispatch mix.
Before turning it over to Jim I will summarize the actions and advance of 'twenty and 'twenty.
That have positioned dominion to thrive for years to come.
We took care of one another.
And in so doing we achieved an all time safety record.
We took quick action to work with our customers.
To address the impacts of the COVID-19 pandemic.
We announced our ambition to be net zero by 2050.
The Virginia Clean economy Act was adopted by the General Assembly.
Which puts the state on a cutting edge path to de carbonization and positions the state as a hub for the global Green economy transition.
We advanced our strategic strategic positioning.
By selling our gas transmission and storage assets to focus on our premier state regulated utility operations.
We simultaneously initiate it best in class earnings and dividend growth rates.
We reported our 20th consecutive quarter of weather normal results that met or exceeded the midpoint of our quarterly guidance.
And we transition both our CEO and lead director roles.
With that I'll turn it over to Jeff.
Thank you Tom and good morning.
Our fourth quarter, 'twenty and 'twenty operating earnings as shown on slide 14.
We're 81 cents per share.
Which included a one penny hurt from worse than normal weather and our utility service territories.
Both actual and weather normalized results were above the midpoint of our quarterly guidance range.
Full year 2020 operating earnings per share were $3.54.
Above the mid point of our guidance range and included a nine cent hurt from weather.
Weather normalized results of $3 63, we're at the top of our annual guidance range.
Note that our fourth quarter, and 'twenty and 'twenty GAAP and operating earnings together with comparative periods.
Our adjusted to account for discontinued operations, including those associated with the sale of assets to Berkshire Hathaway energy.
And then a summary of such adjustments between operating and reported results is.
As usual included and scheduled two of our earnings release kit.
As shown on slide 15.
This represents our 20th consecutive quarter. So five years now of.
Delivering weather normal results that meet or exceed the midpoint of our quarterly guidance range.
We've highlighted here the fifth the July 5th gas transmission and storage sale announcement on the chart and this was obviously, obviously that had an impact on our original annual guidance.
Which was of course prior to that transaction, but regardless, we believe the historic consistency across our quarterly results it's worth highlighting.
And it's a track record we are absolutely focused on extending.
Turning now to slide to guidance on slide 16.
As usual, we are providing a range for the year.
Which is designed primarily to account for variations from normal weather.
We are initiating 2021 operating EPS guidance of $3 and 70.
The $4 per share.
The midpoint of this range is in line with the indicative guidance midpoint range, we provided in July.
Measured and midpoint to midpoint, we expect approximately 10% growth in 'twenty and 'twenty one.
And so consistent with our July guidance.
Looking longer term, we expect operating EPS to grow off the 'twenty 'twenty one base at around six 5% per year through 'twenty and 'twenty five.
Finally, we expect first quarter 2021 operating earnings per share to be between $1 and $1.15.
Turning to slide 17, we expect our 'twenty 'twenty, one full year dividend to be $2 52.
Reflecting our target payout ratio of approximately approximately 65%.
We're also extending our long range dividend per share growth rate of 6% off that 'twenty, one base through 'twenty and 'twenty five.
Slide 18 provides a breakdown of the five year growth Capex roll forward, which Tom introduced.
For more details on this I would point to the very comprehensive appendix materials, we've really put some effort and providing all the more granular detail, which we expect will be useful for understanding and modeling each part of this growth profile.
But just a few items I'll I'll highlight here.
We are forecasting a total five year rate base CAGR.
Around 9%.
Broken out here by segment and by major driver.
I would note that nearer.
Nearly three quarters of this planned gross capex is eligible for rider recovery.
That nomenclature varies but capital invested underwriters.
Rate adjustment clauses or trackers.
They're called and various jurisdictions allow.
For more timely recovery of prudently incurred investments and costs.
They are filed and true it up at least annually.
And single issue proceedings.
So outside of the more time consuming and less frequent and general base rate proceedings.
And some of our jurisdictions, including Virginia rider.
Rider recovery mechanisms utilize a forward looking or projected test period.
<unk> allows for our construction work in progress all of which.
Minimises traditional regulatory lag.
And then in other cases can prevent utilities from earning at their authorized return levels.
[laughter] rider eligible Capex programs, Gary is a little by state, but prominent examples for US include offshore wind.
Solar energy storage nuclear licensing and electric transmission strategic underground them.
Great transformation rural broadband and gas distribution and infrastructure integrity and modernization spending.
On that theme.
And turning to slide 19.
We illustrate how based investments and.
And Ryder investments are expected to trend and Dan.
And you and energy, Virginia through the five year plan.
You'll note that the Virginia based investment balance is growing at about 6% annually.
Driven primarily by new customer connections and and maintenance spending.
By contrast, the rider investment balance and Virginia.
Which comprises half of Dev's investment base today is expected to grow and nearly 20% annually on average.
Since the Virginia rider investment programs are reviewed and shoot up annually. They are not included and the Triennial review process.
The first of which of course will commence commence next month.
Based on these growth trends and the base investment balance as a percentage of total D E V.
<unk> declined from 37% to 27% by 'twenty and 'twenty five.
It also shrinks dramatically as a percentage of overall Dominion energy.
Yeah.
On slide 20, we refresh our outlook for sources and uses of cash and.
So on average between 'twenty, one and 'twenty three.
We expect to generate annual operating cash flow of our route around $6 $6 billion.
Returned about around $2 $4 billion to our shareholders and the form of dividend.
And invest nearly $8 billion, a year on growth and maintenance capex on behalf of our customers.
Our financing plan assumes we issue around $400 million of equity annually through our existing drip and ATM programs with the residual financing need satisfied by net fixed income issuance.
Again and as shown on slide 21, these are multi year averages.
To be clear in 'twenty and 'twenty, one we don't expect any issuance under our ATM program.
This equity guidance is consistent with our prior guidance for the 'twenty one through 'twenty four period.
We view this level of steady equity issuance under existing programs as prudent.
EPS accretive.
And in the context of our very sizable gross capital spending program appropriate.
To keep our consolidated credit metrics within the guidelines for our strong credit ratings category.
To that point as shown in slide 22.
Our consolidated credit metrics have continued their steady improvement.
As has our pension plans funded status.
We're all very proud of these results.
We continue to target high Triple B range credit ratings for our parent company and.
And single a range ratings for our regulated operating companies.
Before I summarize my remarks, let me spend a minute on O&M.
As demonstrated by our 'twenty and 'twenty results, we're focusing on driving O&M through improved processes.
Innovative use of technology and other best practice cost initiatives to keep normalized O&M flat.
Through the forecast period.
This reflects the successful continuation of our flat normalized O&M efforts, we discussed in more detail and our last Investor day.
So with that I'll summarize.
We reported fourth quarter and full year 2020, operating EPS, which were above the midpoint of our guidance.
<unk>, our track record to five years of meeting or exceeding the quarterly mid point, when and what a normal basis.
We initiated 2021 full year operating EPS guidance and represents a 10% annual increase midpoint to midpoint.
We affirmed six 5% operating EPS growth from 'twenty, one through 'twenty five.
We introduced a $32 billion five year growth Capex plan and drives and approximately 9% rate base growth.
We expect highly disproportionate rider investment spending across our segment.
And our balance sheet and credit profile remained and very good health.
With that and I'll turn it over to Bob.
Thanks, Jim and good morning, everyone.
I'll begin on slide 25, which provides an overview and Virginia clean economy Act of law mandates and renewable energy portfolio standard that over the next 25 years, maybe towards a zero carbon future.
And in order to achieve the Rps milestones law calls on the state's utilities to add significant amounts of wind and solar power generation as well as battery storage ramps up energy efficiency and demand side management programs.
Wires to use a Virginia based renewable energy credits mandates that Virginia joined the regional greenhouse gas initiative and requires the retirement of substantial coal fired generation by 2025, and all fossil fired units by 2046 subject to reliability and energy security considerations.
The largest single investment project to come out of the passage of the D C.
Dominion Energy's initial 2.6 gigawatt offshore wind deployment as described on slide 26.
I'm not going to go through every line item on this slide but will highlight the following first the project, which is the largest of its kind and North America is very much on track. This project will provide a boost to virginia's growing green economy by creating hundreds of jobs hundreds of millions of dollars of economic output and millions of dollars of tax revenue for the state.
And localities and they'll also propel Virginia closer to achieving its goal to become a major hub for the burgeoning offshore wind value change up and down the country East coast.
Second as was contemplated and the BCA, we intend this investment to be 100% regulated and eligible for rider recovery.
Finally, the VCA provides very specific requirements on the presumption of prudency for investment and the project is shown here, which we are confident that we will meet.
On Slide 27, we list the major project milestones and December of last year, we submitted our construction and operations plan to bone Mark.
And we're encouraged by the incremental funding appropriated a bomb late last year with the specific direction to augment the agency's resources to process offshore wind permits as well its bones recent recommencement of processing the vineyard wind application.
As you likely know by now we are the only owner and the United States to have completed and offshore wind boom permitting process successfully.
Our 12 megawatt test project, which recently entered service completed the bone permitting process and 2019, and we're applying lessons learned during that process to our present application.
The other item I'll highlight is on the left hand side and this slide the leases position and shallow water.
Outside of major maritime shipping lanes and away from any other offshore wind lease holds and not in a region that supports a significant commercial fishing industry.
We expect to receive final permits and mid 2023 and complete project construction around the end of 2026.
So we see a calls for another key 0.6 gigawatts of offshore wind by 2036.
Near term focus is on successfully executing on our initial deployment, we look forward to finding ways to support the states additional offshore wind capacity goals the.
And the V. C. A provides that the cost of any offshore wind project will be borne by our customers only and proportionate to our ownership of the project.
While offshore wind may be our largest single renewable energy project the aggregate capacity of solar generation and called for by the BCA is over three times larger and.
In accordance with the law, 65% of the target amount is to be utility and this is not new ground for us or for the commission to do.
We've made for cost of service rider recovery filings for solar projects and Virginia, three representing around 400 megawatts have been approved and the most recent filing is pending approval.
We expect to make additional filings annually as we work toward the over 10 gigawatts of regulated solar capacity called for by the law.
Current solar technology requires around 10 acres for every megawatt of installed capacity.
Rough math suggests therefore that the utility owned target of around 10000 megawatts for fire around 100000 acres of land.
We've been hard at work to secure enough land to support our long range goal and I am pleased to report that and less than a year, we've put 63000 acres under option.
Turning to slide 29.
What started with and eight megawatt facility in Georgia, and 2013 as today become a portfolio of over 2.2, gigawatts representing over $5 billion of investment.
Our early focus was on the development of long term contracted projects, mostly outside of Virginia that allowed us to develop the expertise and competency to undertake the substantial regulated solar build out and Virginia that I. Just described going forward you can see that our emphasis shifts and a very significant majority of our solar capacity and vast.
And that will take place under a regulated cost of service recovery mechanisms and Virginia.
Growth and long term contracted solar is limited and driven by large customer requests for bilateral 100% renewable power supply.
As increasing intermittent generation sources proliferate on our system energy storage will be critical to maintaining reliable service.
And we observed with keen interest. The recent example of the negative consequences that a car for customers and rapid changes and intermittent generation are not accommodated with sufficient storage and or quick start gas fired generation.
Hence the V C. A prudently calls for the development of nearly three gigawatts of energy storage by 2036, 65% of wages to be utility owned and rider eligible.
Admittedly, we're starting small and it comes to developing technologies and this area 16 megawatts of pilot projects across three different sites and three different use case scenarios as shown on the right side of slide 30, let's.
But starting small has its advantages as we saw and both our offshore wind and solar development strategies. We're rapidly developing expertise that will ensure we are providing the maximum value to customers as we fulfill the targets of the V C.
And our estimation and the success of greenhouse gas emissions reduction targets requires the ongoing viability of existing nuclear facilities and.
That's why we filed for a 20 year license extensions for our four Virginia regulated units.
Today. These facilities account for 30% of Virginia's total electric output and around 90% of Virginia zero carbon electricity.
Based on Pjm's carbon intensity rate the ongoing operation of these plants will effectively avoid C. O two emissions of 16 million tons per year.
Key milestones for the re licensing process are shown on slide 31.
We expect to submit for rider cost recovery approval and the second half of this year.
Our near term focus is on the Virginia units, but under the appropriate circumstances life extensions over the long term at our other three units may be advisable.
Successful nuclear life extension is a win for customers and the environment.
The transition to a clean energy future means reduced reliance on coal fired generation.
As Tom showed in 2005 more than half our company's power production was from coal fired generation.
By 2035, we project that to be closer to 5%, perhaps lower at the South Carolina Commission prefers and accelerated de carbonization plan as part of our ERP Refiling.
From an investment base perspective, which is a rough approximation of earnings contribution you can see on slide 32, the diminished role coal fired generation plays and our financial performance driven by facility retirements and non core investment.
And we're mindful that this shift has the potential to be disruptive to employees and communities are being purposeful and our efforts to ameliorate any such negative consequences.
You'll also note that zero carbon generation grows significantly such that by 2025 over 60% of our investment base will consist of electric wires and zero carbon generation.
Turning to slide 33, let me address customer rates with a focus on Virginia.
First between 2008 and 2020, our typical residential customer rate increased on average by less than 1% per year, which is much lower than average annual inflation over that period of closer to 2%.
And based on EIA data, our typical customer rate is 13% lower than the national average and 36% lower than other states like Virginia have joined Reggie and.
And third going forward, we see typical residential rates, increasing by a compound annual growth rate of around two 9% through 2030.
Which is a comprehensive estimate and includes among other factors the impact of the de carbonization investment programs, we've discussed today.
If we move the starting point back to 2008 that rate of increase falls to two 1%, which is lower than projected inflation for 2021.
It's incumbent upon us to deliver energy that is safe reliable and increasingly sustainable and affordable.
Now on Slide 34, let me address the upcoming Triennial review proceeding.
No we've developed detailed slides and the appendix that we believe will be helpful to you on this topic.
First the Triennial review process will commence next month and conclude late this year.
Second and this triennial review will cover four years of performance from 2017 through 'twenty and 'twenty and compares are on return to our allowed return of nine 9% inclusive of a 70 basis point Collyn.
Third and as Jim pointed out the review applies only to the Virginia base portion of our rate base Ryder and investments are outside the scope of the proceeding.
And finally to the extent the commission concludes that available revenues inclusive of adjustments for impairments weather and other factors are greater than customer credit reinvestments and it may order or refund as well as a forward looking revenue reduction of up to $50 million.
So let me point out just two factors that we know will be part of the first review process.
First we've invested nearly $300 million and the on time and on budget completion of the 12 megawatt offshore wind test project. We've indicated we will not seek a revenue increase from customers associated with this project, rather we will apply that investment as needed as a customer credit reinvestment offset.
Second we've provided over $125 million of arrears relief and Virginia to assist customers many of them and that face financial hardship as a result of COVID-19.
Naturally we are focused on the training of review filing next month.
We also get questions from time to time regarding the second try and Youll review, which is expected to conclude and almost four years a few observations there which are shown on slide 35.
First we're and the very early days 43 days I think of that review period. So long.
Honestly, we have quite a ways to go before being and are positioned to file the precise regulatory inputs for that proceeding.
What we do know however is that the structure of the review will be similar to T. One is inc.
And the ability for instance to use customer credit reinvestment offsets, which allow us to invest and projects for the benefit of customers.
Second as Jim described well the robust growth of our asset base at D. E. V is concentrated around rider recoverable investments that are outside the scope of triennial available earnings reviews combined with growth at our other state regulated operating segments. The proportion of the company's earnings and cash flows which are subject to try and Neil.
Earnings tests will naturally diminish over the forecast and beyond.
Third the very nature of our business as a state regulated utility company is working with regulators to deliver beneficial outcomes for both customers and investors. It's something we've been doing for many years, we expect to continue to apply the experience we've gained to upcoming rate proceedings of all varieties, including the triangle reviews <unk>.
Firmly believe that there are a number of paths that converge on a single objective serving customers employees communities the environment and investors.
On top of that we're incredibly excited about what Dominion energy is planning to accomplish well beyond the next to try and you'll reviews, specifically over the next 15 years the investment of upwards of $70 billion of Green capital nearly all of which will grow earnings under regulated rider mechanisms and significantly reduce emissions.
And while maintaining competitive customer rates, we don't believe any other company and the United States offers the duration visibility and scope of regulated de carbonization growth with Dominion energy now offers.
Shifting gears a little on slide 36, we summarized the status of the pending South Carolina General rate case, proceeding, which is presently and a six month pause, which we support it as.
And as part of the pause the commission and ordered the parties to report on a monthly basis on their progress toward reaching a settlement.
We can't report to you. This morning on the status of current negotiations obviously, but.
And we look forward to continuing to engage with parties to the case and hopes of finding a suitable resolution to bring before the commission for approval and the.
Meantime, our commitment to customers is unwavering.
Over the last approximately 15 years, we have reduced average annual customer outage minutes, where safety by 40%.
<unk> made in prior periods, including the years covered by our recent rate case filing are critical to system reliability and the continuation of this trend to the benefit of our customers.
We're committed to me and 100% of our merger commitments, establishing trust with our customers and communities and working toward and increasingly sustainable future for South Carolinians.
And that regard, let me provide and update on our integrated resource plan briefly the commission and asked us to re file the plan and consider among other changes accelerated renewable energy deployment and increased sensitivities to potential carbon pricing.
And the table and the right hand side, you can see how one of the cases, we filed with our original ERP. Paul plan eight is indicative of the potential for accelerated de carbonization, and only slightly higher customer cost as compared to the prior base plan playing.
Play and eight would retire 1300 megawatts of coal fired generation in 2028, and at 300 megawatts of storage and 700 megawatts of new solar.
Which would result in and nearly 60% reduction and C. O two emissions by 2030, and only cost approximately 3% more than the base plan.
We look forward to engaging with all stakeholders on this planning process on slide 38, we provide key elements of our gas distribution segment growth and sustainability strategy.
Our utilities operate and some of the fastest growing areas of the country with annual annual customer growth rates approaching 3% and two of our three largest markets.
These customers simply prefer natural gas service for cooking heating and other residential commercial and industrial applications.
We're also fortunate to operate and jurisdictions, where regulation and fight prioritize the safety and reliability.
Decoupling mechanisms promote the implementation of increased efficiency measures, which helped to reduce customer bills and infrastructure modernization and integrity trackers and allow us to make critical investments and upgrades to both reduce emissions and raise the bar on safe and reliable service when it comes to natural gas distribution location.
Matters.
We know that for natural gas to be relevant and the future. We must continue to focus on increasing the sustainability of our service we've.
We've adopted and ambitious scope, one emissions targets, but that isn't enough. We're now looking at scope three emissions and cutting edge ways, we formalized our support for federal and methane and regulation and we're working towards procurement practices that encourage enhanced disclosures by upstream counterparties on air emissions and methane reduction programs.
Further, we're considering a preference for suppliers and shippers, who adopt and net zero commitment.
For downstream emissions, we plan to increase our annual spend on energy efficiency by 45% over the next five years and to provide our customers with access to a carbon calculator and carbon offsets.
We're also developing plans, which will require a collaboration with policymakers and regulators to increase access to R&D for our customers and ultimately to initiate mandatory RMG blend levels that would act to offset our customers' carbon footprints.
And finally, we're pursuing innovative hydrogen use cases, which we discuss in more detail in the appendix and this includes our participation as a founding member of the low carbon resources initiative, and just surpassed $100 million of funding from over 30 industry numbers.
I'll conclude my remarks by addressing several important topics, we took in 2020 and enhanced our industry, leading ESG profile and cash.
February we announced a goal of net zero carbon and methane emissions by 2050.
Over the summer as the nation and began to reexamine and important points around race, we built upon our existing legacy of social equity by committing $40 million to social justice and equity cost, which.
In October we published our latest sustainability and corporate responsibility report, which conforms with the major best in class reporting standards, including the global reporting initiative, the sustainability accounting standards board and the UN sustainable development goals framework.
And also in October we established a new commitment to increase our total workforce diversity by 1% each year.
During 2020, we got off to a strong start with half of our company's new hires being diverse and in November we announced our formal support for the task force on climate related financial disclosures or Tcf D, making us one of only six utilities to adopt such support.
Looking ahead on slide 40, we have more to do and.
In January as I mentioned, we publicly formalized our support for federal and methane regulations. During the second quarter of this year, we will publish and updated climate report that will reflect Tcf do you recommend and methodologies and throughout 2021 will advance our efforts to address scope three emissions, firstly and our gas distribution businesses.
And as I previously described.
These and other ESG oriented efforts have been recognized by leading third party assessment services as shown on slide 41.
And by each measure our performance exceeds the sector average we've been recognized as part of the leadership and by CDP for our climate and water disclosure.
And as Trendsetters for the third consecutive year by the C. P. A Zealand report on political accountability and transparency.
And as part of the just 100 for the second consecutive year by just capital for our actions to promote increased equity.
I'll conclude the call on slide 42, which you saw and Tom's remarks as well.
We are taking steps today to chart a course that over the next decades, we'll put our company on a remarkable journey to becoming the most sustainable energy company in America.
Our future is bright and we're focused on executing this plan for the benefit of our employees customers and communities the environment.
And our investors with that we're ready to take questions.
Thank you Sir at this time, we will open the floor for questions. If you would like to ask a question. Please press the star key followed by the one.
On your telephone keypad.
That any time, you would like to remove yourself from the question. Thank you. Please press star two.
Again to ask a question. Please press star one now.
Our first question comes from Steve.
Men with Wolfe research.
Okay.
Hi, Thanks, good morning.
So just a first question on the.
Your your growth rate now goes out to 2025, which would inc.
Income tax I guess.
2020 for triennial outcome and it.
Can you talk a little bit about.
How youre kind of including that.
And your assumptions what are you assuming for that.
Yeah, Thanks, Steve priest.
Appreciate the question.
You know, we're as I mentioned earlier, we're only 43 days and two three year period, that's going to be reviewed and we don't even file the case for more than three years or so.
Surprisingly lots of details to come.
Do you think it's important that when we look at a developing our long term growth rate. We look at a variety of planning scenarios, we don't assume a single outcome for the 2020 for triennial or any other major planning assumption.
Far out and our plan.
I will say one theme that is certainly assumed and all of our forecasted outcomes 'twenty and 'twenty four and the other years that Virginia regulation continues to be constructive just you know the way it works.
Over the years, which has provided our customers with solid reliability rates more than 10% below the national average and a greener and greener.
Generation portfolio, and then I think it's also and.
Important to remember as Jim and I talked about earlier that that portion of our base rates.
And at the portion of our earnings come from base rates and Virginia decline as.
As we go through time.
And riders and other mechanisms outside Virginia grow in importance our growth.
Between now and the 'twenty for triangle and then after the 24 triangle.
And is driven by Ryder investments that are outside.
The 24 triennial or any other triangle proceeding.
Okay. So it is it.
Is the punch line and that you kind of feel like you've got.
Ability to deal with a variety of outcomes for that or.
And in the scheme of things or or.
And that's kind of encompassed in there.
And yes, good assumptions.
This is what we do is what we've done over the years as we work with regulators and policymakers.
And on constructive outcomes for customers and and the health of the utility.
And we fully expect that we'll be able to continue that going forward.
Okay.
Okay and then one other question related to that is it did I did notice that it does seem like the base.
Component of the rate base and Virginia.
And the percentages seem lower.
And they had been and from your other recent disclosures could you just explain maybe some of the changes there I guess maybe Jim.
Okay. So good morning, Yeah, Let me, let me take that and and I'm not sure. If everyone has the full deck and program, but for future reference is set out on page 60, and the appendix.
But you're right the total rate base and Virginia.
I have not changed other than the passage of time and the completion of the year.
But what we did do is we refined.
The calculation of the elements of total rate base.
We have been showing the schedule since like 2019, we started this I guess, our last Investor day, where are we at that time and the triennial was very far away. We were trying to make it simple so we lumped some things together.
And now we've refined that.
And the refinement relates to about $4 billion.
Of rate base that previously we had categorized as Virginia base and other.
And the 4 billion and it's really the other.
And we've now reallocated that to other categories, so once and the other.
Those are contracts.
Where we serve various entities in the state and municipalities and state of Virginia itself and federal government entities like that.
We are the contracts reflect different economic construct.
Some of them are just sort of negotiated those are and the other category and our.
New.
Our news line and others track more some of the riders, whether it's transmission rider or legacy a six riders. So we've reallocated to be more precise.
Now, Virginia bases and opportunity based and other it's just Virginia Beach and it brings down that number to about 9 billion.
So I think thats helpful to folks as they you do math and sensitivities to have that more refined division of the various buckets of our total Virginia rate base.
Okay. Thank you very much.
Thanks, Steve.
Thank you. Our next question comes from Dan Ford with UBS.
Hi, good morning, Thanks, very much for the time today.
We will pay down all day.
For Duane.
Thank you.
So this question is for you Bob.
The Virginia legislature.
Several live utility and energy economy related bills still floating around and governor and Northern has asked for a special session can you put all the noise that this creates for investors into perspective for us.
Yes sure.
Yeah, I don't think I can remember our fourth quarter call. We've done where we didn't get a question on the Virginia General Assembly I guess, that's a function of the timing of our fourth quarter call and the and the session. So I'm glad you asked because we would have been disappointed if we didn't if we didn't get one this year.
You know it's been now I guess more than 15 years since I work and the Governor's office and Virginia, but there are a few things about the legislative process that I think are probably still true the first one.
And the legislature doesn't follow a script.
Yeah.
Got it you make a mistake or you make predictions with certainty about the outcome of legislation at your peril.
And I think that is still true.
Second is that built for it to become law have to clear a number of hurdles.
And it's not just one house or the other it's both houses and its committees of both houses and it and an example of that from this year's session that would be the one bill introduced and the Senate.
Related to our regulatory model was defeated and committee on a pretty strong bipartisan vote and.
And then the last thing that is still true about the legislature and Virginia as it moves quickly.
So I don't think we're gonna have to wait a long time this year the timing, it's been a little bit different as you mentioned the Sam.
And.
And when it is constitutionally mandated 30 days and then the governor called a special session, but the process is still moving.
Pretty quickly and so I think those bills that you're referring to.
I'll be resolved relatively soon because that's the way the Virginia General Assembly news, we'll keep an eye on them.
But I think it's important to remember that they've got hurdles they would still have to clear before they could become law.
Yeah.
Okay. Thanks, very much and I guess, one also for Jim.
So Jim Thanks for all the detail on the Capex going forward.
As well as whats rider eligible.
This is not like.
Can you talk a little bit about the impact that the and the Capex mix and the rider eligible projects and will have on cash flow conversion as we go through the next five years.
Yeah. Thanks, Dan Let me do that so as I mentioned almost.
And well over 70% almost three quarters of our capital spending and this five year plan is and rider format.
And Virginia and and elsewhere.
So what that means is we invested capital are.
Theres no regulatory lag.
There is a proportional increase in and.
And operating cash flow from that investment.
So that's quite and assistance and our plan for the sources and uses of cash given the lack of regulatory lag and kind of the proportional advancement of a rider spin and a rider rate base growth and also our operating cash flow.
We think it's quite a nifty feature of this of the structure.
Great. Thanks, very much guys.
Thanks, Dan.
Thank you. Our next question comes from sharp Harissa with Guggenheim partners.
Hey, good morning, guys.
Morningstar, Inc.
Just a just a quick housekeeping and then a quick follow up just maybe starting with the 'twenty one guidance.
Obviously, you highlighted and expectation for 10% or better growth off that 2020 base, but the bottom and then sort of implies about 6% year over year growth. There's a lot of visibility with the plans and so just trying to get a sense on any scenarios outside of weather and that could put you at that lower and and then.
The midpoint of the range is about two and a half cents lower versus prior is that is that South Carolina G. RC delay related can you manage it.
The conservatism built in there.
Yeah.
Yeah, a lot of a lot of parts of that question and there's no abnormal.
So let me. Thank you first of all that last part.
And I have no impact on that guidance range none.
Well, let me walk through the elements of our guide and so we have our long term EPS growth guidance of six 9%, which.
Which is intended to be more precise than our peers as opposed to 200 basis point range and what we do every year as we as we go.
So along that six 9% long term, whether we choose the midpoint.
For our annual guidance.
And around that midpoint.
We have a range.
And every quarter, we mentioned that that range is intended primarily to capture different weather outcomes.
Now going back a few years that range was pretty wide.
And the last five years is 50.
And it was 45 Bucks a day.
But the primary reason for that range.
This year included.
And as to incorporate to accommodate various whether outcome.
The midpoint of the range is 385.
And we're very confident and making that number.
And and continuing our track record.
Meeting or exceeding.
On weather and all the basis like we do.
Talk about for the last five years.
And so theres a range midpoint that midpoint.
Again as I said in my prepared remarks is consistent with the very narrow range of potential mid points do we guided in July.
No no real guys.
South Carolina.
Process.
Got it got it. Thank you for that and then just lastly on the ratings obviously.
You're presenting a really healthy cash flow outlook, you know the business risk profile, and obviously improved 9% utility growth a lot of it is wider treatment single issue rate, making.
15% Epsilon and debt levels any sort of you know and agency. Obviously also has.
Positive outlook metrics seem to point, you're closer to a minus any sense on how the conversations are going with the rating agencies.
Yeah.
Yeah.
Tom.
Let me say it this way I think generally across the street.
The three rating agencies.
And there's a recognition of the senior management focus on credit.
And it's been a part of all of the transactions and financings, we've done and the last and the last few years and there's a recognition of the improvement that we've accomplished.
So we're in a good spot.
Going forward, Okay, I wouldn't speculate on and upgrade.
But what I would expect maybe I am not trying to get ahead of the agencies, but we had hoped for.
It is increased recognition.
The very material improvement and our business risk profile from a credit perspective overall and last years and we're just the dust is barely settled right on our last step of that with the sale of gas transmission and storage, but I would hope that that element would work its way more into the dialogue and even even the thresholds.
<unk> agencies.
Slide to our company.
Terrific all right. That's what I was trying to get at Tim I. Appreciate it. Thank you guys.
And thank you Chuck.
Thank you. Our next question comes from Julien Dumoulin Smith with Bank of America.
Hey, good morning, and thanks for the time and opportunity.
And perhaps a follow up on some of the last questions I got a couple of real quickly if you can.
And I believe you just said a second ago with respect to the six 5% and the increased level of precision and I think Steve brought up earlier, obviously theres a lot baked into that five year outlook and the 25, how do you get yourself, so confident around that six 5%.
Precision that you guys articulate I mean, obviously, it's purposeful and you just said if you can speak to it a little bit more narrowly about the level of confidence you have and these outcomes to drive that number it would be great and then I have a quick quick follow up if you don't mind Paul.
Yes, I think I'd answer it simply this way Julien you know we were confident and July when we announced the six 5% growth rate and nothing has changed since then.
We're still confident.
We've outlined as you've heard today.
And some roll forward of our Capex.
Got a lot of clarity on.
Ryder Recoverability of that Capex and all of that contributes as we sort of develop our assumptions around our long term growth rate.
Maintaining a confidence that we had last summer and that six 5%.
Yeah.
Got it fair enough and and then turning back to South Carolina quickly. If you can obviously I heard what you said about 'twenty. One here how do you think about prospects for settlement timeline. There just given some of the gyrations and then ultimately <unk>.
Capex, obviously, we're paying attention to what's going on with.
Duke and the Carolinas here too how do you think about capex opportunities as well.
Yeah, so on settlement.
We're working through the pause that was ordered by the commission that we agreed to.
And with monthly reports on that.
And we're <unk>.
Always optimistic about our prospects of settling cases, because we think we're very creative and finding ways that we can resolve issues that are beneficial for customers and for the company ultimately.
And there is all the parties to agree to settle and I. It's.
I can't tell you what's in the mind of the Counterparties and I can just tell you that we're working very hard towards that and.
And we have an endpoint that the commission said if you haven't settled we will start the case back up again, so we will get there either with a settlement or will finish the case and it's a strong case.
We were very confident and the case that we filed.
We haven't had a base rate case, and eight years and we've invested substantially in the system and improve the system and we're entitled to return on those and to a return on those investments so.
And we think it's a very strong case hopefully we can satellite if we can't we're very comfortable with our ability to defend the position that we took in that case.
And as to potential future growth I mean, obviously, we need to get through this rate case and we see.
And that's our focus at the moment.
Along with making sure that we maintain our commitments that we made and the merger process. The IRB process. Obviously suggests that going forward. There may be some further investment opportunities and we will certainly take advantage of those but right now what.
We're focused on is getting this first rate case resolved and a constructive manner.
Got it definitely got best of luck talk to you soon.
Thanks.
Thank you. Our next question comes from Michael Weinstein with Credit Suisse.
Hi, guys.
Yeah, Hey.
Hey, Michael.
And I'm wondering if so.
And what extent has additional tax credit extensions and some of the renewable stimulus planning that were you expecting to see from the Democrats and the next few months.
Built into the plan and you know is there is there a potential for upside, especially when I look at like the solar shove it.
And and maybe even and just in terms of customer affordability and you know maybe you can afford to do some more work, maybe and underground Inc, or grid transformation.
Yeah, It's great question, Michael and and you're right. The two for us and a regulated environment that we're talking about.
And the extension of the ITC and.
And various tax credits is.
Customer rate beneficial and doesn't change the.
Investment return, but definitely reduces the rate the customers pay so we'll look at whether there are opportunities we have a pretty aggressive plan as you've seen and the Virginia Clean economy Act last year passed and aggressive plan.
And so we're moving very quickly if there are opportunities to advance we'll take them.
But the main app.
<unk>.
ITC extension, it's gonna be a benefit to customers on rates.
One thing Michael and Jim is when it comes to ITC as do we that we recognize the earnings benefit from outside.
The regulatory context that just to be clear is not really a growth industry for us.
Most of what we do that relates to ITC is and our regulated format, where it benefits our customers as Bob said, but two years ago at Investor Day, We gave some guidance.
Did that ITC recognition and earnings.
Would be somewhere in the up to 15 cents per year range.
And where we've been and it's really below that.
And 18 or nine cents and 19 years 11 cents and 20 were 16, but we still plan to trend within that.
Run rate.
Up to 15% 15 cents per year guidance, so there's not a big impact and that area, it's mostly on the regulated customer benefit benefit side as Bob.
As Bob described.
Yes.
Alright, and just to be clear the I T C.
Doesn't reduce the rate base and any of the projects that youre working on and our regulators.
Yes, that's exactly right.
And my understanding is the strategic under grounding has driven that.
The limited there's a limit to the amount you can invest there by law.
Is there and.
And he talk of perhaps maybe expanding that are considering maybe things might be getting more affordable and the federal tax credits.
Yeah. So that's a legislative and that cap is in legislation that you're referring to it has to do with a percentage of overall rate base.
And there's no legislation pending and Virginia right now on that issue.
So if.
If it were to be extended its unlikely that would happen this year.
Okay, great. Thank you very much.
Yeah.
Thank you. Our next question comes from Jeremy Tonet with J P. Morgan.
Hi, good morning.
Good morning.
Yeah.
Okay.
Hey, James.
We can barely hear you.
Oh, sorry about that is that better.
Yeah, Hey, thanks.
You outlined the de carbonization opportunity through 2035 today, how do you think about customer growth and other investments.
And for that period and given the magnitude of your clean spin here do you expect this to capture an increasing share going forward absent large changes in customer growth.
I'm sorry.
We can talk a little bit about customer growth I mean, we've had a.
Pretty consistent growth and and our electric.
<unk> over the course of the last decade, or so that we would expect to continue on the Virginia side for example.
And 5000, new customers connected a year or so on the gas sides of our business as we mentioned in our prepared remarks strong very strong new customer growth, but I'm not sure I totally followed the second part of the question and I apologize.
Just the relative share of I guess of the Green Capex.
Is.
Just wanted to see if that's going to continue to be a large portion of what you're doing going forward or are there other chunky investments and and the non queenside, we should think about there.
Yes, no. It's a that the outlook is very much and I think it's really reflected on.
The slide that shows that $72 billion opportunity. The bad is all these are all deep carbonization.
Related or enabling investment so that's going to be the absolute lion's share of our investment going out and we would expect that to continue.
Even beyond that.
Long term period, obviously 15 years from now is a long time and this business.
Right.
Great. Thanks, and then.
How much timing and recovery flexibility do you have with CCI ROE eligible capex for the second train on a review period did you plan currently assume kind of baked and recovery of any of the spin are explicitly.
Yeah.
As I mentioned, we have a variety of assumptions not one single assumption related to the 24 triangle, we do have a slide that shows what's eligible.
And the total there and.
Well for.
Take advantage of that as circumstances warrant and it's too early for us to know how much of it.
We would expect to use in 2000 and for triangle. We just know what we're likely to have available you can see that on that slot.
Got it thanks, and one last one if I could.
Virginia legislation and.
And just wanted to see about South Carolina legislation and if securitization came through how would you deal with that.
Yeah, we think securitization makes sense and certain circumstances storm recovery. For example makes a lot of sense. Obviously, we didn't think it made sense with respect to new nuclear so well, we'll see if it passes and if it.
And it passes and a way that would be.
A constructive that's great and we'll just have to wait and see how it goes I know that bill has been introduced a number of times and South Carolina, and the past and it hasn't.
It hasnt been enacted but and circumstances like storm recover and makes a lot of Sam.
Great. Thanks, so much.
Thank you. Our next question comes from <unk> Chopra with Evercore ISI.
Hey, good morning team. Thanks for taking my question.
Laura Jim Good morning, Jim on Slide 20, I'm just curious.
The net.
Cash flow sports news and you can go through 'twenty three.
And the blended coupon and policy.
And my reading much into it or are there differences and the and the in the kind of the company. The composition of cash sources and uses and 24 and 25 as you ramp up your offshore investments.
Yes, you guys and they're going.
The reason we went to just a three year average view here.
Is that over five years, and the numbers get pretty big and maybe a little bit more difficult to bridge from where we are now and where we were in 'twenty.
You're you're probably reading too much into it we have elsewhere of course disclosed our equity financing plan assumes and ended the period and the next line. So you can see that the financing is going to continue what will change is the operating cash flow.
Which will grow on a five year basis, and the investing cash flow, which will grow slightly as it creates a little bit little bit backpack, David and the five year plan.
But nothing more interesting than that and I'd say.
Understood again it okay. So, it's more sort of granularity and conviction and and new year's and and and but no significant changes and the makeup.
All sources and uses.
Bigger numbers.
And that's about it yeah.
Okay, Alright, and then just quickly following up.
Just on slide 10, and maybe Bob this for you or perhaps even though and again.
They're the largest regulated de carbonization plan and love it but.
In terms of.
And when I'm thinking about any legislative support.
You need is it fair to assume that this opportunity and 72 billion sort of.
Is it you can accomplish this with the Virginia Clean Energy Act or do you need further legislative support Duke and act on and some of these young Robert.
And would be.
No. Your assumption is correct. This is this is based upon the Virginia clean economy Act and the grid transformation and Security Act in 2018. So all of this is already legislatively authorized now we obviously have to seek approval from the commission.
For projects and we've demonstrated on solar and.
As I mentioned in earlier remarks, we've had three solar filings approved by the commission and already.
And we've had a.
Our <unk>.
Electric transmission spend and those kinds of things improved consistently over the years, but we don't need additional we're not looking for additional legislative and <unk>.
And <unk> to carry out this 15 year regulated.
Our regulated book.
Excellent. Thank you for the update today and and much appreciate the added disclosures. Thanks, a lot guys.
Thank you.
Thank you. Our next question comes from James and the lacquer with BMO capital markets.
Good morning, and thanks for the time guys.
Good morning.
But just I just wanted to circle back on your comments just on Bill affordability as you implement your capital plan and.
Mike Weinstein and actually raised a good question.
As we saw the extension of the ITC at 30% at the end of the year could you potentially talk to how that's going to how you maybe quantify it or how it's going to impact.
Customer rates and making things more affordable.
And you implement your capital plan.
Yes, I don't think we've quantified that yet so we.
We filed our.
Integrated resource plan.
Earlier, this year and last year, I guess for 'twenty and 'twenty. One the 2020 integrated resource plan. We showed a 10 year look that two 9% that we talked about.
Well I'm confident be updating that.
Certainly have an IRR key update later this year.
And Virginia, and I would expect as part of that will run the numbers on the.
Customer rates, but we don't have we haven't quantified.
Customer rate impacts of that ITC at this point.
Okay, great, but I would assume that.
It would give you a little bit more flexibility and we're looking down the road here.
That is absolutely true.
And a half benefits to customers and and rates and offers us flexibility as we go forward.
Great and just I guess just to stay along that line as you know and I.
No we're looking at a little bit farther out, but like you know maybe you could touch a little bit about you know.
Some of the programs are you know I don't know, if you're ready to quantify it but how youre thinking about controlling costs and create more headroom up to.
Continue to implement.
Capital plan over the next day five to seven years.
Yeah, Let me, let me talk about about that.
And it's Jim.
D. C is one there's one element, which will benefit customers for sure but the other is O&M.
And let me, let me give some kind of high level.
Tom on that we.
And we talk and our last Investor day about flat normalized O&M.
So normalized normalizing for new riders and happens associated required O&M or.
Things like pension benefits, which you discount rates and like make that number go up and down so we normalize for all day.
And then we keep it flat.
And in 2019, we gave an estimate by keeping it flat for.
And for three years across our entire business.
And we were gonna stay versus a 2% escalator like 200 ish million.
Accumulative basis, and we did.
So now still flat and we're rolling that out for the full five year period.
Now we did have some savings and it actually went down a little bit and and 2019, sorry in 2020 from Covid and not all of that is permanent.
But our effort to keep that flat O&M, so negating inflation or wage increases and things like that.
It's not easy.
But it's not through big things like.
Some of our peers have talked about step changes and O&M discovered during Covid, we had some COVID-19 savings for sure, but our approach is a little bit different kind of programmatic is pushing cost savings as part of the system the culture.
So finding ways to use technology and work smarter throughout the business. So we have examples of that that helps us keep that flat O&M, they're tiny and.
In comparison to Dominion.
Electronic time sheets, and electronic signatures and they've got a long list through all tiny but they add up.
And that the kind of thing the small efforts throughout the company every state and relocation that allow us to keep that normalized O&M flat and the reason we do that is to make room and the customer bill and it helps out and customer side.
And potentially also creates room and that bill for the capital spending but also benefits customers. So.
And that's kind of our our other lever we have.
And managing customer Bill is us continuing to manage.
Net flat O&M.
Got it great. Thank.
Thank you very much for the time.
Okay.
Thank you. Our next question comes from Michael Lapides with Goldman Sachs.
Hey, guys. Thank you for taking my question and great slide deck today lots of detail I have a question.
Question, one can you remind us adds up person to rate base or dollar millions and what is.
Coal generation and rate base, both in Virginia, and South Carolina.
Yeah.
We set that out on a whole company basis, Michael on page 32.
And as a percentage of total investment base, which is rate base plus the fixed assets and the PP&E for.
For are smaller and contracted assets business is 7%.
7% of rate base effectively.
And just.
There's just there's five year plan.
Given obviously the spending on other areas that goes to 4% by 2025.
And down from there.
Got it so if I think about it at the Virginia, Pebble and you've done a significant amount of coal retirements and Virginia.
He wanted to retire facilities, even earlier than planned some of the coal facilities there Dan.
That would accrue our accounts as part of the CCR ROE and a 2021 day or 2024 timeframe My day.
And my thinking that that's also and alternatives not just investing new capital that wouldn't necessarily get a cash return, but the write downs of somebody yoga and coal plants might as well.
Yeah, a couple of things there Michael one is obviously, we don't make decisions on fossil retirements based on the timing related to a regulatory proceeding that's.
We make those decisions based on the sustainability of those plants going forward or if there was a change and the law or those kinds of things so.
I think that's an important thing to keep in mind and then the other is that you are sort of conflating two different topics. I think one is this customer credit reinvestment offset which is provided for by statute.
Those are projects that are either grid transformation projects or renewable projects.
Where that capital investment.
And can be applied as the as essentially that customer benefit and and earning sharing mechanism.
And when you calculate what the when the.
Triennial review is done and there are available earnings there was and earning sharing mechanism and then for the customer portion of that it could either be a refund or one of these renewable or pretty transformation project. I think what you were thinking of is if there is if we.
With higher plant early there was a write down.
And then that.
Spence.
And would be treated logically as an expense and the period. If there are available earnings.
The best for customers and that's what longstanding practice has been and Virginia.
And to sort of slightly different things youre talking about there.
Both have some impact on the calculation and the triennial.
But we're obviously a long ways away from.
The second try and you'll hear.
Understood and just coming back to the coal generation question do you think your coal units in both states.
And given how much power prices have come down and given how much capex costs.
Renewables and storage have come down do you think the coal units are currently economic still existing operating coal units and as.
There a dramatic difference between the ones and Virginia, and the ones and South Carolina.
Yeah, I don't know that I'd say, there's a dramatic difference. We obviously look at the economics of those plants regularly and make a determine and make a determination whether they are viable and the future and whether they are properly valued. So we'll do that continue to do that on a regular basis.
Got it. Thank you guys much appreciated and for taking the time.
Thanks, a lot and Michael.
Thank you our final question comes from Stringently energy with Barclays.
Hey, good morning, Dave Thanks, Gary Thanks for taking the question.
Just on and you want episode of debt metrics.
And so you know obviously you havent seen it consistent improvement and two days and that 15% and 2020. If you look at the S&P and Moodys target for high Tech will be.
Guess, S&P that by 15% and Moody's inquiries and 17% and.
So how do you see you and concluded that maybe evolve over the planned period, we could take to stay around the 15% mark or an expense and improving and given the writers.
[laughter] Suzhou and thanks, a lot of good to hear from you.
Yeah the way the way, we think about that is we've hasn't been easy.
To achieve the improvement do we we show and that one and one slide to get to the.
Solidly mid teens level and.
And that's where we expect it to stay.
So I think maybe you were you were suggesting is there is there are and upgrade and the air.
Of course not against net against that.
But we.
What we really hope it comes to pass at some point is again further recognition of the business risk profile improvement.
So I wouldnt expect material changes and.
And the metrics from where we are from what we've achieved and where we landed I think that's been a good spot.
Probably almost day.
But we'd love to have a little bit more headroom.
Does that recognition I mentioned.
And we want that headroom not because we want to blow through it but just because we think it's.
More of the better.
So that's kind of where we are in credit.
Okay. Thank you and edge and appreciate the time, Inc.
Okay. Thanks, a lot.
Thank you. This does conclude this morning's conference call you may now disconnect your lines and enjoy your day.
Yeah.