Q4 2020 SJW Group Earnings Call
[music].
Ladies and gentlemen.
Can you for standing by and welcome to the SJW Group Q4, 2020 earnings Conference call. At this time all participants lines are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one on your telephone please be advised that.
Today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, Mr. Jim Lynch CFO and Treasurer. Thank you. Please go ahead Sir.
Thank you operator, welcome to the fourth quarter of 2020 financial results conference call for SDI.
J W group.
I will be presenting today with Eric Thornburg Chairman of the board President and Chief Executive Officer.
For those who would like to follow along slides accompanying our remarks are available on our website at www Dot SJW group Dot com.
Before we begin today's presentation.
I would like to remind you that this presentation and the related materials posted on our website may contain forward looking statements.
These statements are based on estimates and assumptions made by the company in light of its experience historical trends current conditions and expected future developments as well.
Factors that the company believes are appropriate under the circumstances many.
Many factors could cause the company's actual results and performance to differ materially from those expressed or implied by the forward looking statements.
For a description of some of the factors that could cause actual results to be different from statements in this presentation.
Well as other each of the financial results press release and to our most recent forms 10-K, 10-Q, and 8-K filed with the Securities and Exchange Commission copies of which may be obtained on our website.
All forward looking statements are made as of today and SJW group disclaims any duty to update.
I revise such statements.
You will have an opportunity to ask questions at the end of the presentation.
As a reminder, this webcast is being recorded and an archive of the webcast will be available until April 'twenty six 2021.
You can access the press release and the webcast at our corporate website.
I will now turn the call over to Eric Thornburg.
Thank you Jim welcome everyone and thank you for joining us.
As we reflect on 2020 I'd like to begin by recognizing our nation's essential workers, who are bravely serving us on the front lines. During this extraordinary time.
From the public.
Our employees consisting of police fire emergency response, and health care professionals to our grocery store another critical supply chain workers. They all deserve our recognition and appreciation for their dedicated service.
Our appreciation and recognition also extends to our 700 plus employees.
Safety <unk> and their utility industry peers across the nation, who we consider to be essential as they continue to deliver safe and reliable service.
Our dedicated and passionate water professionals met the challenges of 2020 head on to provide a reliable supply of safe drinking water.
More than 1.6 million people in our local service communities in California, Connecticut, Texas and Maine.
In my 38 years in this profession, it never mattered more.
So while COVID-19 dominated 2020.
It did not dominated our people.
I'm, especially proud of our teams and their commitment to protect the health of their customers communities and coworkers they knew that delivering safe clean drinking water to their customers and communities was essential to public health.
They developed protocols and procedures that protected their co workers so they.
Can safely carry out their essential work.
And they did it by collaborating across our expanded national footprint to support each other and build on our strength for the good of the entire organization.
And it also reminded us of human life is precious and fragile and that there is no higher calling them to say.
Serve others.
We also responded to the needs of customers and communities, who are financially impacted by COVID-19.
Since the beginning of the pandemic, we've worked with customers throughout through our assistance programs to help them keep their accounts current and suspended shut offs for non.
Payment consistent with each state's requirements and.
And we increased our donations to local service organizations from 2020 to help them meet the basic needs of people in the community.
It is clear that our transformative combination with Connecticut water service incorporated in 2019 made for.
We're a stronger SJW group in 2020, which benefited shareholders customers and employees.
Our 2020 corporate sustainability report coast to coast documents, our commitment to environmental social and governance matters.
Is that report was.
Was telling our story the company, who was recognized with prime status by ISS ESG.
Brian status is awarded to companies with an ESG performance above the sector specific price threshold.
Where we were tied for the top ranking among U S utilities, we saw significant.
Events in our environmental and social scores and ranked second among our utility industry peers for our combined environmental and social quality scores.
Our governance quality score was already at the highest level and placed us among the top within our industry.
We're especially.
Proud as a human rights policy adopted by our board in the fourth quarter.
The policy of firms, our conviction and the human rights, our fundamental rights freedoms and standards of treatment to which all people are entitled.
It also reflects our values and commitment to diversity equity and inclusion.
Improved team of employees with the full support of senior leaders and the board serve on our National diversity equity and inclusion Council day high to support and advocate for day initiatives.
We as a company are committed to fostering an environment where employees can bring their true selves.
And feel included welcomed and valued.
We're also determined to be a force for good in the communities, where we live work and serve.
For example in 2020, San Jose water was responsible for $28 $8 million of diverse supplier spend represents.
<unk>, 31% of our addressable spend there and.
And following Connecticut, water's adoption of a supplier diversity plan in early 2020, both Texas and name approved formal plans later in the year that are being implemented in 2021.
We are fully come.
Presenting to our diverse supplier program and we'll continue to share our progress in the years to come.
Other highlights of 2020 include investing more than a $199 million and our water and wastewater systems across our multistate footprint.
Achieving world class customers.
That is faction composite basis across the company.
And another successful year of meeting drinking water and environmental regulations, delivering on our commitment to public health and environmental stewardship.
I will now turn the call over to Jim who will review our financial results after Jim's remarks.
I will address regulatory water supply and other business matters Jim.
Thank you Eric.
Our 'twenty 'twenty operating results reflect our first full year of combined activity with C. T. W. S.
One key attribute of our merger was the diversification we achieved by expanding our geographic.
<unk> footprint into new England.
The strength and importance of our diversification strategy were tested almost immediately by the drier than normal winter, we experienced in our northern California service area severe weather events in our Texas, and New England service areas and COVID-19, and its impact on our customers' operations.
Martin's and construction activities across the United States.
In each case the impact of these events on SJW group's combined operating results were diminished due to our geographic diversification in the case of weather events and diversification of our regulatory and operating platforms in the case of COVID-19.
<unk> diversification, coupled with our strong local operations supported by a national framework enabled us to safely deliver water service to our customers and communities protect our employees and deliver solid results for our shareholders.
Fourth quarter revenue was $135 $7 million or nine.
And $9 million increase over reported fourth quarter of 2019 revenue.
Net income for the quarter was $13 3 million or <unk> 46 per diluted share.
This compares with a net loss of $5 $5 million or <unk> 19 per diluted share for the fourth quarter of 2019.
Sure.
Point in earnings per share for the quarter reflects lower C. T. Ws merger expenses of 36 per share.
Higher customer usage of <unk> 22 per share and lower administrative and general expenses of <unk> 19 per share due to lower integration costs.
These increases were partially offset by an increase in production.
<unk> costs due to higher usage of <unk> 10 per share and a decrease of <unk> <unk> per share due to lower local surface water availability in northern California.
Turning to our comparative analysis for the quarter or $9 $9 million revenue increase was primarily due to increased customer usage of six.
Diluted <unk> and.
And $1 $4 million in cumulative rate increases.
In addition, we recorded a $2 $8 million in customer rate credits in the fourth quarter of 2019 as a result of regulatory commitments, we made in connection with the merger.
No such rate credits reoccur in 2020.
Water production expenses increased $3 to $3 $6 million compared to the fourth quarter of 2019.
The increase included $2 $6 million and higher customer usage and $1 $5 million for the purchase of additional water supply necessary to supplement, California surface water.
Other operating expenses decreased $12 million during the quarter, primarily due to lower merger related expenses of $9 $7 million and lower general and administrative expenses of $5 $1 million due to lower merger related integration costs.
These decreases were partially offset by two.
$5 million and higher depreciation expense.
The effective income tax rate for the fourth quarter was a negative 7% compared to 6% for the fourth quarter of 2019.
The effective tax rate decrease was primarily due to the capitalization of nondeductible merger.
Expenses, which resulted in a decrease of tax benefits in 2019.
No similar tax benefit reduction occurred in 2020.
Turning to our annual results 2020 revenue was $564 5 million or 34% increase over the same period last.
<unk> net.
Net income in 2020 was $61 $5 million or $2 14 per diluted share compared to $23 $4 million or <unk> 82 per diluted share during the same period in 2019.
The change in diluted earnings per share for the year was due to many.
Last name factors noted for the quarter.
<unk> customer usage contributed $2 83 per share and customer usage from our other operations increased 59 per share.
Due to the timing of when the merger transaction closed in 2019, we only recorded a penny per share of earnings.
Of this eight gws in 2019.
As such essentially I'll, let see dws is 'twenty 'twenty customer usage is reflected as an increase as compared to the prior year.
In addition in 2019 nonrecurring merger costs contributed <unk> 48 per share in the WC I may write off in 2000.
From team contributed 2000 or $2 <unk>.
Contributed <unk> 29 per share.
These increases were partially offset by increased production costs of $1 four per share due to higher usage and <unk>.
Net increase in interest on long term debt of 86 per share due primarily to merger related debt.
In 2020 note issuances and a decrease in local surface water availability in northern California, a 58 per share.
Our 2020 increase in revenue was primarily due to a $111 $2 million and increased customer usage of $12 $2 million in cumulative.
Rate increases and $2 $7 million from new customers.
These increases were primarily the result of the addition of gws and higher usage due primarily to drier weather in our service areas.
Water production expenses increased $50 million in 2020.
Decrease was primarily due to $33 $9 million and higher customer water usage from the addition of <unk> and drier weather.
And a $19 million increase due to lower surface water supplies.
This increase was partially offset by $3 $4 million of increase in California cost recovery.
Covered balancing and memorandum accounts.
Other operating expenses increased $33 $9 million in 2020, primarily due to a $23 $7 million increase in depreciation expense.
$14 4 million and higher general and administrative expenses and $10 $8 million.
And higher property and other non income taxes the.
The increases were primarily a result of the inclusion of <unk> operating activities in.
In addition in 2019, we incurred $15 $8 million in merger expenses related to the merger transaction.
Similar expenses were incurred in 2020.
Other income and expense for the year included $13 million of new interest on SJW group's $510 million senior notes, which were issued in October of 2019, and a $50 million senior note issued by SJW group in August of 2020.
As well as $8 million of interest expense on.
Dws financing.
Other expense and income in 2019 included $6 5 million of interest income earned on the proceeds of the company's December 2018 equity offering.
Similar income was earned in 2020.
Turning to our capital expenditure program, we added approximately.
<unk> $65 million in company funded utility plant in the fourth quarter of 2020, bringing total company funded additions to 19, but $199 $3 million.
Our 2020 cash flows from operations decreased approximately $25 $9 million over the same period in 2000.
<unk>.
The decrease was primarily due to the authorized collection of $45 $3 million of balancing and memorandum accounts in 2019.
A decrease in collections of previously billed and accrued receivables of $15 million a decrease in other non current assets and.
19 of $12 $4 million and a $50 million upfront payment, we made to the city of Cupertino in connection with our service concession agreement.
These decreases were partially offset by a $51 $8 million increase in net income adjusted for noncash items.
We continue to monitor customer.
Ability and activity at each of our four operating utilities and specifically the impact COVID-19 is having on our customers' ability to remain current with their accounts.
In our Northern California service area, where we have seen the largest increase in past due accounts, the California public Utilities Commission has authorized water.
Payment is to activate their catastrophic emergency memorandum account or their sema.
The account track savings and costs from COVID-19 related activities as well as uncollectible account balances beyond the authorized bad debt in our most recent general rate case.
SJW C has determined that future.
You till the coverage of the account is probable and recognized a regulatory asset of $2 $3 million in the CMO related to COVID-19 for the year ended December 31 2020.
At the end of 2020, we had $84 $9 million available on our bank lines of credit for short term financing of utility.
Future re plant additions and operating activities.
The average borrowing rate on line of credit advances during 2020 was approximately $1 seven 8%.
With that I will stop and turn the call back over to Eric.
Thank you Jim.
W Group continues to deliver on our core growth strategy.
Utility investing in high quality water systems to provide safe and reliable water service to customers and communities and earning a fair return on those investments.
In the last decade alone more than $1 billion has been invested in the local water systems of the communities that we serve.
It's well documented that our nation's.
Wastewater systems are in need of significant investments.
Utility regulators have historically recognized this need and have enabled regulated water utilities to make such investments and.
In 2021, SJW group subsidiaries plan to invest $239 million in.
Water torture improvements to serve our customers in California, Connecticut, Maine, and Texas over $1 billion as planned across the organization over the next five years.
Accordingly in January San Jose water, and Connecticut water filed general rate cases.
San.
Interest waters JRC application proposes a $435 million capital program.
For the years 2021 through 2023.
Supported by our award winning enterprise asset management plan.
The process is expected to take about 12 months.
Jose New rates are anticipated in January 2022.
California employs a future test year, and thus the level of capital spend as authorized during each general rate case cycle.
Connecticut, and Maine employ a historical test year, where capital investments and expenses.
Ah recovered after they had been incurred and subsequent general rate case filings.
Connecticut Water's Trc is the first it is filed since 2010.
Primary driver of the case is the $266 million in infrastructure investments that have been.
That had been completed and are providing a benefit to customers, but are not yet covered in rates.
The Connecticut public utilities regulatory authority PURA is expected to issue a decision in Q3.
Earlier this year PURA approved a one 1% increase.
This infrastructure surcharges through the water infrastructure and conservation adjustment program core Wicker.
This request covers $8 7 million and qualified infrastructure investments with incremental annual revenue of about $1 million. It will become effective on April.
Increased 2021.
Maine water received approval in December 2024 infrastructure surcharge increases in five divisions for eligible projects through the water infrastructure surcharge program or risk the.
The increases were effective on January 1st.
Rising $3.5 million and critical infrastructure investments and increasing revenues by about $300000.
These various filings include proposed capital investments that over the long term benefit customers communities and shareholders.
To enhance sjw's ability to deliver.
Liver safe high quality and reliable water service, while increasing rate base the earnings engine for the company.
In January 2021, San Jose water, along with the up to three other class a water utilities.
Quest did a one year deferment on their cost of capital filings, which.
Otherwise be due on may 1st of this year.
Postponing the filing for one more year would alleviate administrative processing costs on utilities as well as the commission staff and provide relief for both commission and utility resources already strained by numerous other proceedings and COVID-19.
We will let you know if the commission approves this request.
Turning to water supplies in California, we are seeing less precipitation than normal both locally as well as in the Sierra Nevada, Snowpack California's largest reservoir. Thanks.
Thanks to the work from valley water or hold.
Sell water provider, we do not anticipate any short term supply shortfalls as our groundwater basin remains full and can be leveraged as needed to ensure that we can meet customer customer demands during the upcoming year.
The rainy season typically ends in late March and we will have a complete.
<unk> picture of our supply status when we report Q1 earnings.
At that time, we also plan to issue 2021 guidance.
I'd also like to comment on the very difficult situation in Texas.
The combination of what has been described as a once in a century cold spell Cup.
With an ice storm, a snow storm and rolling blackouts across the state has resulted in a real crisis affecting millions of people.
Our operations located in the fast growing region and between Austin and San Antonio serves 20000 customer connections.
Like our utility.
All the peers, we've suffered significant operating challenges during the crisis.
Two energy disruptions broken water mains and roads that have remained nearly impossible since Sunday.
We are focused on restoring normal service to our customers as rapidly as possible, while protecting the safety of our employees.
If we're able to do that before other water utilities in the region, we will do our best to come to their aid as well.
Looking ahead I remain optimistic about SJW group's future success, COVID-19, and our shared commitment to serving customers communities and each other has brought our four companies together.
Together in a way that we would never have imagined a year ago.
Our geographic workforce and regulatory diversity.
Lengthens, our company and positions us well for 2021 and beyond.
To achieve our goals, we are working diligently to support the growth of our Texas water utility, which has more than tripled.
In size through organic growth and acquisitions since 2006.
Increase our capital investments to deliver safe and reliable service to our local communities and grow the rate base for all of our operating entities and continue to seek acquisition opportunities that create value for our stakeholders.
The prudent management of our business and financial resources continues to be fundamental to.
Our growth and ability to return capital to shareholders.
Demonstrating the company's strong commitment to our shareholders in January 2021, the board authorized a six 3% increase in SJW.
Group's 2021 dividend to $1 36 per share as compared to the total dividends paid in 2020.
We're proud to have continuously paid a dividend for over 77 years and to have increased that annual dividend in each of the last 53 years delivering.
Value to our shareholders.
Lastly, we'd like to extend a warm welcome to commissioner Darcy, how Q2, the California Public Utilities Commission and express our appreciation to outgoing Commissioner Liane Randolph for her service.
We look forward to working with Commissioner house and her colleagues and their staff.
To address the many water related issues facing California's regulated utilities and with that I'd like to turn the call back to the operator for your questions.
Thank you as a reminder, if you'd like to ask a question you will need to press star one on your telephone once again that is star one on your telephone.
If you wish to ask a question.
And your first question comes from the line of Richard Sutherland from J P. Morgan.
Hi, good morning, Thanks for taking my questions today.
Sure Good morning, Richard.
Hey.
Starting off on.
The water supply update.
I'm curious if you could kind of frame levels versus where they were last year or just any other color to think about.
Where we stand now in the rainy season through.
I guess end of March.
<unk>.
Sure.
Sure.
I'll begin that and ask Jim to comment as he sees fit that afterwards, but.
As we said you know the rainy season really ends at the end of March typically in this area. So it's far from over if you were to compare kind of where we are this year to last year. Our reservoir is about 25 million gallons.
Less usable supply in it than it did a year ago. So that's about 10% difference at this point, but again, we've got six more weeks plus to go and we'll be able to provide a much clearer picture of that at the end of March just as a reminder, you know this surface water supply that we own is.
It's about 6% of our of our total water supply availability.
On the positive side of this of course is that our usage is up and you saw that.
A significant impact in the fourth quarter of 2020, and I saw a statistic yesterday, there was quite a quite something.
It showed that over the last 19 months.
This is the third dry a stretch in the San Jose.
In history at about 120 plus years so it's.
A very localized dry spell.
But as I mentioned in my remarks, the groundwater supply here is and really.
Really great shape, and we don't anticipate any near term supply disruptions.
Got it.
And then just following up there.
Think it was 50.
Could be some cents year over year hit quantified on the.
Sort of the production side.
Is there is there a way to.
To unpack that for the usage of or the supply versus what's baked into your rates.
I guess the normal level in rates versus actual in 2020.
Yeah Rich this is Jim So you know interestingly enough 2019, we.
We had over we were able to produce over $5 2 billion gallons out of the watershed.
So it was a significant rain here.
In 2019.
And that followed in 2020 by about 1.2 billion that we were able to produce out of the watershed. So to give you. Some perspective, you know each billion gallons a if we had to replace that is about 4.2 to $4 $3 million from when.
When we actually have to purchase that water.
To replace it and then as Eric mentioned.
We anticipate certainly that between the groundwater basin and in the actual rain that we do receive in the area as well as surface water.
Or we call it imported water that's available from the Santa Clara Valley Water District for Valley water.
With that we will have certainly ample supplies as we move forward.
As it relates to the what's baked into rates per se.
Believe that currently we have about $2 5 billion gallons baked into rates.
And so that's that's kind of the target that.
That we would that we would like to achieve simply because that would make us rate neutral.
Okay. Appreciate the color there and then if I could just ask one more day.
The Connecticut rate case application I'm just curious.
It seemed like from your release you outlined there are number of put.
And thanks to the the rate impacts of that but thinking about the sort of normal residential increase that was.
In your release yesterday is there a way to quantify what that is on a group.
Percentage basis.
I'll take that one Jim.
So that's a 19th.
The increase.
For residential customers.
I think the our typical annual water rate annual rate for Connecticut customers in that six to $700 range.
And again this is the first general rate filing in 10 plus years and.
And so.
When you get that down it's about $10 50 per month.
Our 35 cents a day.
Great. Thanks, Thanks for the color there that's all I have thank you.
Thank you Richard.
Your next question comes from the line of Hassan.
Persona with W. A L.
Hi, good morning, gentlemen, Sandoz dovish stance water asset management.
For the color on Texas.
Love to understand I know, it's early a little bit more details about your plant operations.
Those taxes as you know we have all been reading about a water treatment plants being offline throughout the state.
Love to understand how your.
Water treatment facilities are operating and also any additional costs that you might be incurring for things like backup generators.
And so forth so would love to.
Understand the dynamic a little bit more than I have one follow up please.
Sure. Thanks Hassan nice to talk to you. Thanks for thanks for your interest.
You know what this is really quite a quite a incredible situation in Texas.
You know that it's not uncommon of course.
And so from cold snaps and and even the ice storms, but sort of the combination of all these events in the end.
Frankly lack of any real warning in terms of the power disruptions.
Has really impacted as everybody knows the whole state of Texas, and it seems like water supplies.
Of course, that's in particular had been hit.
At this point.
We have generators that are major facilities and and we have a portable generators. So we can pull out to our boosted systems out around our service area.
We did struggle early with access you know come all counties.
<unk>, which is.
I think one of the top two or three fastest growing counties in the United States.
Boy, They just don't often get ice and snow there and so roads were impassable for a number of days and just getting our generators out to these.
Labour hoods to reconnect to booster stations was impossible.
And we also.
As the power went out and would come back on and then drop out again.
Creates pressure waves out in our system, which results in some main breaks and then of course the cold.
Old whether we've got a lot of customer services frozen as well, so we're making we're making real progress working hard at it but.
Until that weather turns I think it looks like tomorrow it starts to get above freezing on.
On a go forward basis.
The real recovery begins.
So.
Local not an issue of generators, so much but but more in getting access to facilities.
Impassable roads, and you know you need to get fuel out to generators and the likes. So so it's been a real real challenge we have of boiled water notice on in our facilities just out of abundance of caution.
So for our customers.
And we'll release them boil order once we're able to confirm that all the water is of course safe to drink So and that's standard operating procedure and in coordination with Texas.
I'm Gonna environmental regulators.
So a tough situation.
And working hard on it at this point I don't I don't suspect, we'll have material cost impacts on SJW group, but but if that were to change will growth.
Certainly allow.
Adequate notice to investors and our stockholders and the public.
Yeah.
Got it.
What do you.
The one remaining question I have and wanted to get your thoughts.
Thoughts is how should we think about our need for equity in 2021, and the reason I ask is your filing to new rate cases, and I recognize the California.
You have a separate cost of capital versus the rate case, but typically it's an optimum time to align your cap structure.
In line with your regulatory cap structure, and you know I've been noticing your.
Cap structure in your books, you're closer to 60% debt.
And 40% equity you typically you want to be in line like you know, 50% equity 50% debt at the operating companies.
And so I just wanted to get a get a sense given you have two rate cases pending.
Shoot for our.
Expectations should we think about 2021.
As you know.
Your but a year that you may need to.
For equity to realign your operating cash structures more in line with your regulatory cap structures.
Yeah Hassan this is Jim So you know we always take a look at the we start by taking a look at where we are.
From a regulatory cap structures, and you know where we have committed to be with regards to our regulators across all four of the operating utilities and endeavor to maintain as close as possible that that split between debt and equity as it relates to the parent company.
Our approach is really just to optum.
Optimizing the cap structure there.
In consideration of the rate filings and so we'll be taking a look at that but also the fact that you know it's a it's a good time to be heavier on the debt side than the than the equity side. It's also a good time to raise equity. So we'll explore all of the finance.
Financings that are available to us has been moving to the current year.
Consideration of where we stand with our within our regulated operations and then also as you point out are in consideration of any potential overlay of the.
Parent company that regulators may look at as.
As we move forward in those proceedings.
Thank you.
Thank you thanks Hassan.
Your next question comes from the line of Michael Gaugler with Janney Montgomery Scott.
Michael.
Michael you might be on mute I can't I can't hear you.
Good morning Shar.
Hey, good morning.
Sorry about that.
They just won.
Question with what's going on in Texas, right now should.
Should we be anticipating essentially higher cost this quarter as a result of emergency actions.
Yes.
Well.
Like I said to the earlier question, Michael I don't think that.
There'll be material higher.
<unk> cost, but there will be higher it costs, we've got people working on over time fixing leaks and alike.
But yeah, that's our smallest utility 20000.
Connections there about $50 million in rate base. So you know compared to the total.
But here's the advantage from Texas, you know, we can bring our full strength.
<unk> to bear to support our customers in Texas, we're actually helping field customer calls.
Hum.
From our Texas customers in Connecticut, you know our employees there are helping so so we think that you know.
We're doing all week, all we can to serve our customers there and get.
On track, but as I said I don't expect at this point to see material cost increases to the group.
As soon as if that were to change we'll be transparent about that Michael.
Okay.
My my other questions were answered so that's all I have.
Thank you Michael.
Thank you.
Your next question comes from the line of Jonathan Reeder from Wells Fargo.
Hey, good morning, gentlemen.
Hello, how are you all day long.
Good Jonathan how are you.
I will not too bad just trying.
Back in warm not is not as dire situation as taxes are you.
Now, we're a little more I guess equipped for it you could say so that's good at least but.
Curious.
When we look at it what change between early November when you reiterated the dollar 95 to two low five guidance.
At the end of the year that allowed reason come in roughly 10 cents above the top end was that just higher consumption in California due to the dry weather that's been kind of a surprise.
Well, it's a great question you know, it's really due to two things one a week.
Wasn't just California, but it was across our service territories, where we did experience.
Variance a drier weather.
We saw that in Connecticut.
And in the northeast as well as Texas, and California, We we had a longer.
Fall, if you will and were.
Able to experience drier and warmer weather in each of our service areas.
And that was a that was a big part of it.
Another part of it though was actually because of the drier weather in in in Connecticut, We were able to extend the construction.
Season, there essentially.
And we're able to to.
Work on our network.
Work.
Infrastructure, more which provided some benefits relative to some tax deductions that we weren't otherwise anticipating and as you can see in my remarks, we are we.
We had a negative.
Seven cent impact on taxes.
As compared to you know what are significant.
Tax in our tax expense for the same period in the prior year that was due largely to the fact that we were able to extend the construction period. So those were the two items that kind of merge to kind of lead to the results for our fourth quarter.
Okay great.
Jonathan.
Jonathan what I'd, just add that Havent worked in new England for.
Close to <unk>.
Seven years, I don't recall ever seeing us laying pipe in December up there and paving roads and and so the team up there did a fantastic job and as you know with that repair tax adoption there.
Hey, Bill.
The benefit on the income tax side, so so really unusual unusual December.
Yeah.
Okay, Great and then shifting to California, or the cost of capital expense request, where do things stand if there been any developments beyond I guess, the consumer advocate filing.
Filing that statement in opposition of the request I guess from our standpoint seemingly the recent rise in rates you know.
Maybe helps to some degree with your request.
Jonathan there's been not a peep, we have nothing new to add and but we certainly would expect to hear shortly.
With that my first.
First a timeline out in front of US there. So so I'm sure we're going to find out pretty shortly.
Okay, Great Hey, Jonathan Jonathan This is Jim I want to correct. One thing I said I I said seven tenths. It was actually a negative 7% in taxes for the fourth quarter as compared to 6% in 2019, so those percentages not not not.
Pennies.
Okay.
Appreciate that Jim and I think that might have been on that one slide.
And then I guess in terms of the G. R. C. In California is the $100 million of Ami project is that included in the <unk> 435 million Capex from questar.
Where does that am I request and because I was thinking maybe a decision by the end of 'twenty was expected, but I honestly havent tracked it. Unfortunately [laughter] yeah. My my understanding is right now that project is still are we're still kind of discussing that with the advocates in California.
And yet that's not included in the ask for the for the Capex at this point, we're not exactly sure where that.
That project is going to land, we think that a likely it will be an advice letter projects.
Okay, so that could still be outside your budget would you.
Would you say, it's in that 1 billion five year, it's even incremental to that.
I would included in that I think we are anticipating that that isn't that debt that amount.
Okay, and I'm sticking with the DRC level surface water supply.
Your request you know look to establish.
Yeah.
I I believe I'd have to get back to you on that Jonathan I'm not going to speculate but we were looking for a decrease from what was in the prior rate case because of our most recent experience that we've had coming out of that out of the.
The watershed up there.
I just don't know at this point what that decrease was.
We will conduct a getting back to memory serves and I guess, there's always a risk in there. So I think it's around $1 8 billion.
As opposed to the 2.5, but.
That's a proposal and I'm sure there'll be a lot of other puts and takes from that process there.
But we will confirm that and let you know.
Sure, Okay, but yeah, you are I guess.
Hopeful that you can kind of get that are lower given some recent experience okay.
Exactly.
Great and then.
Maybe lean and Eric on your Connecticut experience a little bit.
What's been the early feedback to that rate case filing in particular that request for the 50 basis points or a premium.
It is the case is really just getting started I know the team I spoke with our president there. This past week, Maureen Westbrook and we've just begun to get some interrogatories.
So there really isn't any color I can add to the commentary here.
We feel really good about the case in the the overwhelming weight of the of it being in the capital additions already made in place serving customers and so.
In Connecticut definitely has had a pattern.
Turn of of.
Acquiring small systems and really.
Enhancing their quality of service so.
That.
Puts us in a very good position to make a really good case for the benefits to customers.
Those others in those newly acquired areas. So I'm so optimistic.
<unk> got a long way to go before we get results. It's a 200 day statutory period from filing date. So as mentioned we expect results in Q3.
Okay, and that 50 basis points premium I guess, there is precedent going back to like an aquarium case in like 2017.
Is that right.
Yes, that's correct I don't know if it's 2017, but I do know that the aquarian have benefited from that with purchase of a number of small systems in the state of Connecticut.
Okay.
And then lastly, remind us how non allowed Roe.
Ratio is determined in Connecticut is it based on your actual equity ratio for the sub.
Or is it just more of a point estimate that pure redeems kind of appropriate.
It's based on at the sub level and the last rate case there was.
There was some controversy.
Merci from at least from our perspective in terms of how short term debt was was.
<unk> I recall that.
We had some short term debt there and it was actually looked at as equity as opposed to debt and so we want to make sure we get.
With the capital structure right. There I think in the last case it was the.
The equity levels are right around 45, 7%. So so so so we're going to make a strong case for that.
That needs to be corrected in this case, but.
It's a long process and and.
Work hard.
Hard to get that balanced.
Okay.
I guess when you go through your earnings test. There are it is predicated on what is approved in the rate case. The if you said it was $45 seven or whatever.
And then you know I guess, it's up to you to manage themselves.
You want in respect of that.
Yeah in the years that followed of course, the company's invested.
$266 million and rate and in new rate base, not including all of the pipeline work that's been recovered through through with us. So.
But when they look at your annual earnings there's a.
I think that they use current equity at that time, but that's subject to check.
Yeah, that's what I was kind of remembering back when.
One day would talk about it you were saying that was maybe based on the current so that's that's where I'm kind of just trying to get a get a handle on what was lost the Peru vs.
As you know the requests, which I think was 53% or something like that and where we might land. So okay no.
I appreciate you guys, taking the time and answering my questions very helpful.
Hey, guys. Thanks.
There are no further questions at this time.
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