Q2 2021 ONE Gas Inc Earnings Call
Please standby we're about to begin.
Good day and welcome to the 1 gas second quarter earnings Conference call Today's conference is being recorded.
At this time I'd like to turn the conference over to Mr. Brendan and Lucy. Please go ahead.
Good morning, and thank you for joining us on our second quarter of 2021 earnings Conference call. This call is being webcast live and a replay will be made available later today.
After our prepared remarks, we'll be happy to take your questions.
And remind you that statements made during this call that might include 1 gas expectations or predictions should be considered forward looking statements and are covered by the safe Harbor provisions of the private Securities Litigation Reform Act 1995.
Securities Act of 1933, and the Securities and Exchange Act of 19 and 34 each of the men.
Actual results could differ materially from those projected and any forward looking statements for a discussion of factors that could cause actual results to differ please refer to our SEC filings.
Joining us on the call. This morning are Sid Mcannally, President and Chief Executive Officer, Karen Lahore, and senior Vice President and Chief Financial Officer, and Curtis Dinan, Senior Vice President and Chief operating Officer and.
Now I'll turn the call over to sit for opening remarks.
Thank you Brandon and good morning.
Before discussing our quarterly results I'd like to share of how excited I am to have a new role at 1 gas to congratulate Curtis on his promotion to Chief operating officer and to acknowledge the trust that our board has placed and our leadership team.
1 gas is built on the solid foundation of core values and the commitment to our employees shareholders communities and investors and we will continue our tradition of service to each of the stakeholders.
Additionally, our focused business strategy constructive regulatory environments stable cash flow and and unwavering commitment to safety remains central to our sustainable business model.
Our values, coupled with a well defined strategy have guided this company since inception and will continue to keep us on the right path as we move forward.
Regarding our second quarter, our results are consistent with our plan.
In response to the unique challenges earlier this year related to winter storm Youree and the evolving COVID-19 environment. Our employees have remained focused on execution and dedicated to our strategy among.
Among the positive results that Curtis will cover is the fact that we continue to see robust customer growth and opportunities for investment.
I'd like to turn it over first to care and to provide an overview of our second quarter financial results Karen.
Thanks, Ed and good morning, all.
And with our financial results for the second quarter net income was $31 million or 56 cents per diluted share compared with $25.3 million or <unk> 48 cents per diluted share for the second quarter 2020.
Our results for the quarter reflect an increase and net margin of $11.1 million over the same last year. The primary drivers of which are new rates and customer growth and Texas and Oklahoma.
Operating costs increased $1.2 million compared with the same period last year, due primarily to an increase and outside services and employee related costs.
Offsetting these increases were lower bad debt expense and a decrease and says related to the COVID-19 pandemic.
While we are still experiencing impacts from Covid, 19, and clothing lower fees and ongoing expenses the year over year impacts are moderating.
Specifically of bad debt expense, our year to date extends its $5.5 million.
That compares with $7.6 million through June of last year, and $3.6 million and 2019.
As of course will discuss momentarily we have resumed collections activities throughout our service territory, which is beginning to positively impact our collections and reduce past due balances.
We have not recorded any regulatory outside of associated with the pandemic.
There was no significant change and our capital expenditures quarter over quarter, and we are on track to achieve our capital plans for the year.
Authorized rate base, reflecting our recent regulatory activity is approximately $4 billion as of June the 30th.
Authorized rate base is defined as the rate base reflected and completed the regulatory proceedings, including full rate cases and interim rate filings.
We project debt for 'twenty, and 'twenty, 1 and our average our estimated average rate base, which is defined as authorized rate base plus the additional investments and our system and other changes and the components of our rate base that are not yet reflected and approved regulatory filings will be approximately 4.2 of $3 billion.
With 42 per cent, and Oklahoma, 29%, and Kansas, and 29% and Texas.
Moving on to our financing activity and liquidity in June we increased the capacity of our commercial paper program to $1 billion up from $700 million the.
This action follows the upsizing of our credit facility to $1 billion earlier this year.
We ended the quarter with $209 million of cash and cash equivalents no commercial paper outstanding and no borrowings under our credit facility.
During the second quarter, we generated net proceeds of approximately $15 million from equity issuances under the 250 million dollar at the market equity program, we put in place and 2020, leaving us with $221 million of equity available for issuance.
Regarding winter storm here, we have the FERC just under $2 billion of cost as of June the 30th which are included and regulatory assets on our balance sheet.
Curtis will describe the state of play in each state regarding the process and timeline for recovery of these costs through securitization.
On July the 19th the 1 gas board of directors declared a dividend of 58 cents per share unchanged from the previous quarter.
Lastly, we are reaffirming our 2021 and financial guidance, including net income of $198 million to $210 million earnings per diluted share of $3.68 to $3.92 says and what the capital investments remaining at $540 million.
Now I'll turn it over the courtesy to update you on the latest developments for regulatory and commercial and operations part of it.
Thank you Karen and good morning, everyone.
I'll start with an update on securitization and other regulatory activity.
And all 3 states, where we operate legislation was passed permitting natural gas utilities to pursue securitization to finance the extraordinary expenses incurred during winter storm Yuri.
On July 30, we made securitization filings and all 3 states.
Oklahoma Natural gas filed its compliance report with the Oklahoma Corporation Commission detailing the extent of extraordinary costs incurred and all of the required components necessary for the issuance of the financing order and.
Including a proposed period of 20 years over which these costs will be collected from customers.
The OCC has 180 day used to issue of financing order.
And the OCC approves the financing order the Oklahoma Development Finance authority will have 24 months to complete the process of issuing securitized bonds.
As of June 30, Oklahoma natural gas has deferred approximately $1.32 billion of costs.
Kansas Gas service filed its compliance report with the Kansas Corporation Commission, which includes a proposal to issue of securitized bonds and collect the extraordinary costs incurred over a period of 5.7 or 10 years.
A procedural schedule will be developed to determine the time line for evaluating Kansas gas Service's compliance report.
If the case the C approves the proposed financing plan and Kansas gas service will file an application for a financing order for the issuance of securitized utility tariff bonds.
The K C. C will have 180 days from the date of this filing to issue on order.
If the KC approves the financing order.
And we can begin the process to issue of the securitized bonds.
As of June 30, Kansas gas service has deferred approximately $383 million and cost.
Texas Gas service filed an application with the Railroad Commission of Texas for and order authorizing the amount of extraordinary costs for recovery and other requirements necessary for the issuance of securitized bonds.
The our RC has 150 days to consider the application and an additional 90 days to issue a single financing order for all natural gas utilities participating and securitization.
Which will include a determination of the period over which the costs will be collected from customers.
Upon the issuance of the financing order.
The Texas public financing authority will begin the process to issue securitized bonds.
As of June 30, Texas gas service has deferred approximately $286 million and costs.
We are pleased with the passage of securitization legislation as it represents just 1 example of how our company has been successful and creatively and strategically engaging stakeholders.
Also like the highlight a few other legislative achievements that our government affairs team has been working on across our jurisdictions.
All 3 of our states of now past energy choice legislation, ensuring our current and future customers can choose reliable and affordable natural gas for their homes and businesses.
Oklahoma pass the safety build designed to reduce third party damages by requiring excavators to validate the facilities have been located and marked prior to commencing excavation work.
And finally, Kansas past, the move Overbill, requiring motorists to yield the right of way to stationary public utility vehicles or workers when engaged and work activities.
These recent legislative successes are just a few examples of how 1 gas continues to utilize all available means to strengthen its long term position by improving safety for our employees communities and the environment, providing customers choice to meet their energy needs and keeping natural gas service.
Affordable for our customers.
Now shifting to our other regulatory activity and.
In May the Oklahoma natural gas filed a general rate case, seeking a revenue increase of $28.7 million.
The revenue requirement is based on a requested return on equity of $9.95 per cent applied to a rate base of over $1.7 billion.
The filing also requests of the Contra continuation of the performance based rate change mechanism that was established in 2009.
The filing is based on the allowed return on equity range of 9.4 of 5 per cent to 10.4 of 5%.
And the 9 point 95 per cent midpoint.
The rate case also includes the request to spend $10 million per year on renewable natural gas as part of our gas supply portfolio.
And the cost of which would be recovered through our purchase gas adjustment mechanism as.
And as well as $10 million of annual capital expenditures for renewable natural gas projects that would be included and rate base.
A hearing is scheduled for October 28, and the OCC has 180 days to issue an order.
In June Kansas Gas service completed the transition period and is now operating the natural gas distribution system at the Fort Riley of military base.
And also Kansas gas service expects to make of gas system reliability surcharge filing in August.
For the period covering July 2020 through June 2021.
And February Texas gas service filed for a $10.7 million dollar increase related to its gas reliability infrastructure program.
And the Central Gulf Service area, and new rates became effective in June.
In March we completed grip filings for all customers and the West, Texas service area requesting an increase of $9.7 million.
And July new rates became effective for all customers, except for the city of El Paso.
On June 21, the city of El Paso of proved emotion, which found the grip filing to be on compliance with the statute.
The city, then denied the increase and assessed fees associated with its review of the filing of <unk>.
Texas gas service filed an appeal with the our RC on July 2nd.
The appeal was on the Commission's agenda for today, and we received notification that they have granted our appeal and approved the rate increase new rates are effective immediately.
And April Texas gas service made cost of service adjustment filings for the incorporated cities and the service areas of the Rio Grande Valley, and North, Texas and.
On July the city's agreed to increases of $3.5 million and $1.4 million for the Rio Grande Valley, and North, Texas service areas respectively.
The new rates became effective in August.
Moving on to commercial and operational activities as Kieran mentioned all collection activities were resumed during the quarter, which was a key contributor to reducing bad debt expense.
The primary focus of our customer service teams is to help our customers bring their account balance is current.
These efforts include payment arrangement plans and contacts with social service agencies that offer financial assistance.
The field operations team teams have done a great job of managing the disconnect and reconnect process as well over 50% of disconnected customers have been reconnected.
At the end of July and thanks to the efforts of these teams we've seen a 44 per cent decline and past due balances since March 31.
We continue at or near record pace for new customer connections.
And a lot recently about the growth, we're seeing in Austin, but El Paso, Oklahoma City, and Tulsa continue to experience robust demand for housing and new natural gas services.
We also continued to make progress on a number of initiatives around renewable fuels and.
In addition to the renewable natural gas provisions, we requested and the Oklahoma General rate case that I mentioned earlier collaboration with Vanguard renewables continues to progress we have been working with them on and in depth of market assessment across our territories and will provide updates when appropriate.
And finally, Oklahoma Governor step signed the new bill, creating the hydrogen production transportation and infrastructure structure Task force.
The task force is chaired by Energy Secretary Wagner, and we'll study issues involving the production and distribution of hydrogen, including using existing pipeline infrastructure to transport hydrogen fuel.
1 gas will be an active participant in these studies and the task Force report is due in December.
And now I'll turn it over to Sid for his closing remarks. Thank.
Thank you both.
Each year, the American gas Association collects data on the safety performance of member companies.
Earlier this year, we were notified that 1 gas is and the top quartile of all 3 safety metrics reported by a G E and.
In addition, our employees receive the E G. A safety award for the fourth consecutive year.
On the award given to the company that has the lowest rate of serious injuries compared to our peers.
Congratulations to our employees for this recognition and the outstanding performance.
As I close the day I'd like to thank Pierce Norton for his leadership as our CEO over the past 7 years and for setting of course. It has resulted in a resilient and reliable energy delivery system, while creating value for all of our stakeholders, we wish Paris, and his family well and their future endeavors.
I'd also like to thank Carolyn Curtis and the members of our leadership team they.
And they made our leadership transition and seamless and I look forward to our work together as we build on our solid foundation focused on system modernization pursuing growth and driving innovation.
I'll close by recognizing that our success. This quarter is the result of the skill and dedication of our 3700 employees.
Each 1 and playing an important role and delivering natural gas service safely and reliably every day to our more than $2.2 million customers.
You for living out our core values and serving our customers and communities every day. Thank.
Thank you all for joining us this morning, operator, we're now ready for questions.
Thank you if you would like to ask a question you may signal by pressing star 1 on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. Once again star 1 for questions well take our first question from Gabe Moreen with Mizuho.
Hey, good morning, everyone.
Maybe a quick 1.
Good morning, and sitting here, if I could start off with the kind of what happened and the city of El Paso was that was that some of the unexpected maybe if you could talk about kind of of the which is on the rationale was the city of denying the increase and if that's something you expect I guess going forward.
So gabe grip filings or you know of.
And as it operated U M. It's it's very much a I'm just of the process of following the statute and your file and make the filing.
It's reviewed to see if you're in compliance with the filing and the rates are improved so it was unusual that they did not that they found that the we've complied with the statute, but then denied the increase which was the the basis for our appeal that we made of July 2nd and was granted and approved today. So.
It's not the first time that we've had and appeal and the similar circumstance and the outcome was the same so I don't know that I would call. It necessarily of trend. The last time was several years ago, and certainly hope, it's not a trend but the the.
The appeal process worked effectively and the new rates go into effect today.
And just just to clarify my comments earlier too.
The other cities and the West, Texas service area as well as the unincorporated areas that the R. R. C has jurisdiction over had already approved the new rates are allowed the new rates to go into effect under the statute and so it was a bit of a 1 off I would say.
Thanks, Chris and then maybe if I can switch gears, a little bit to sort of the RMG efforts and I'm just wondering I guess, maybe a multi part question here 1.
1 was the survey with vanguard of sort of low hanging R&D through what that's kind of produced around your systems weather.
And as those projects are kind of ready to go and and should we assume that that 10 million Bucks and Oklahoma annually is kind of what you feel comfortable with I guess from the opportunities set standpoint or is it just hey this is the.
Initially what you want of seek out but there's the potential for something greater here based on I guess, what the Vanguard survey and and I'm kind of canvassing of your system is produced.
Yeah, So Gabe first on the the Vanguard study.
That is still in process of we've seen some preliminary results of it and we're we're encouraged by what we're seeing and what the what the opportunities may be coming out of it you know many of those will be third party dollars that develop those projects and our role and the the transaction will be.
The transporter of the gas through our system because of the the potential location of a lot of those facilities we.
We do also want to continue though to explore and that's why you saw the the 2 items and our O N G rate case, which was never 1 to be able to inject some of them out of RMG into our system and then secondly to have some level of capital dollars that we could invest directly.
And that as an initial step to see how that process might work and what the benefits would be to our system into our customers. So you know.
We're still I would say and spring training and in many ways of around around this process, but we're encouraged by the the progress we continue to make and will make more comments, because we have more information to share.
And of course, if I could just follow up real quick on that and so the idea would be how you can replace some of the investments, but as far as the cost of the orange itself that would basically put through the P. J as well is that right.
Yeah, So you're exactly right on that from a from the capital requests that we've made and then from the the ability to purchase our N G dislike wellhead gas and run that through our cost of gas adjustments.
But then secondly, if it is a.
The transport customer that's just using our system to move the product and we would collect a transport fee for that.
And those gas costs don't get accounted for through our P. G. A those just again there just the of balancing arrangement of transport fee that we collect to provide that service.
Got it.
Thanks, Chris and congrats everyone on the the position.
Physicians.
Thanks Kipp.
As a reminder, star 1 of you would like to ask the question, we'll take our next question from Stephen Byrd with Morgan Stanley.
Hey, good morning.
Good morning, Congrats on the the new positions as well because when the ACA that.
On a great update and wanted to just step back on on R&D, a little bit and and talk more broadly I.
I mean, we're excited about the opportunity for fraud and G broadly, we do sometimes get pushed back.
About the magnitude and also just about the the cost of the environmental benefits relative to your your you know your core business and as you noted you've got really strong legislative and policy and political support for your you know your core product. How you know when we think about longer term potential here how are you.
You sort of respond in terms of you know potential skepticism on on how big this can be and also just on the the cost of RMG broadly.
But those are all fair questions and I I think it's part of the answer depends on what problem you're trying to solve.
And so if you're just thinking of a problem as I'm going to compare the cost of our N G to wellhead gas well, we we see that the wellhead gas is cheaper and it's much more abundant.
And if you're.
The problem and you're trying to solve or the question is more about for them and environmental perspective.
And then that changes the answer because in terms of reducing the impact of emissions and the cost of doing so RMG is a really good answer for that and you don't have to completely displace all of the wellhead gas from our system to get to a point, where you would be on a net zero emissions.
<unk> basis. So there are some added cost to do that and it depends on what the goals are that you're trying to achieve so.
Thank the important thing for us to do is to know how to be able to respond to both of those environments. We obviously already know how to handle wellhead gas but.
As the the focus continues to be around ESG and emissions reductions that is of great path forward for us to be able to do that and that's why we're being so methodical and going through evaluating the sources of our N. G that are available establishing the the tariffs and the gas quality specs that would be.
Necessary to bring that product into our system and the energy connect agreements necessary to do that.
So that we're prepared for where Directionally, we think things are going and the longer term.
And to your to your question about abundance.
1 of the things that we often see our studies that make broad generalizations about supply rather than looking at specific footprints. So I would encourage you.
To look at or will be glad to provide additional information at some point that speaks to the capacity and our territory as Chris points out we wouldn't be pursuing the the robust nature of the review that's underway.
We didn't have caught on is that there was substantial supply to support of our meaningful R&D program.
Well, that's really helpful. The I'd love to follow up and it's a it's a fair point and you need to really look at the specifics for you all and and how this may play out.
And I guess the as a follow up on this just when you look at federal policy support you know, there's a lot of interest and the broader infrastructure.
The infrastructure package not the the more narrow 1 but really the the broader 1 and what that might do when and what do you think in terms of the potential support that debt you might see far and G or other initiatives that could be and that that broader packages and could that be beneficial or is it too early to tell how are you all thinking about that.
Yeah, I would say, it's really pretty early and that process. There's been a lot of ideas that have been thrown out whether it's R. N G. Its hydrogen or at some of the other provisions that you've mentioned and we're continuing to watch that we're continuing to work with our industry partner being led by age.
And reviewing that as well as trying to have some some influence on what may or may not end up and that legislation. So too early to tell but we continue to stay engaged.
To see where that Bill may end up.
Also encouraging to see the conversation around resilience.
That is a part of the the dialogue that is underpinning both of the bills there seems to be a more general recognition and after the events of earlier this year debt our systems play a critical role and providing support to the overall energy system and so resilience, we think will be a theme that will can.
<unk> to go forward and we look forward to be and are part of that conversation.
That's really helpful. That's all I had thank you.
Thank you.
We will take our next question from Cody Clark with Bank of America.
Hey, good morning, everyone and again and congratulations on on the new roles.
Good morning, Jody Thank you.
So kind of sticking with the Capex theme, but you know maybe moving away from R&D and talking more about core Capex and you kind of just mentioned it and your answer to the previous question here, but you know you've talked about the potential for additional investment and reliability and resiliency, but if you could maybe just add a little.
Bit more color on how youre thinking about that is it is it kind of plays into you know the the short of retirement and what are you seeing kind of of the investment.
Look across your system.
Sure, let me speak to that generally and then let Curtis come in with the any specifics that he cares to add.
We continue to have confidence and our system modernization strategy.
And it's allowed us to strategically derisk the system of it also provides environmental benefits as we further tightened and our system and we think it's good capital deployment.
But as you heard and Curtis his remarks, we.
We our growth profile.
Encourages us to think about how we fully capture opportunities both now and in the future.
So a couple of points there structurally we redefined the C O O role so as Curtis came into that role we added the operations vertical to the growth vertical that had been managing previously so that allows us to better coordinate the system safety focus that we've had with the growth opportunities that we are seeing.
And both now and emerging in the future.
The second we've really focused on developing our growth team and.
As we think about growth the opportunity to pick up our talent in the industry, particularly some of them outside the regulated utility space has been meaningful to us and we think that deep debt she's gonna it bodes well for us as we look to the future.
And finally, it's important to remember and this goes back to a previous answer.
And our service territory is unique in many ways, but right now we are seeing significant and migration of residents across the service territory.
We're also seeing a lot of economic activity of both.
The traditional economic activity and new industries coming in to the areas.
And.
Maybe most significantly there is a bias for natural gas service and.
And the activity and our service territory. So we think that Ah is a bright future and holds promise for us as we seek to pursue that opportunity fond.
And finally.
We think there are opportunities for us around ESG and of all your question focuses on capital deployment, there is and ESG element to that capital deployment, that's important and ease of lens that we have added to the analysis that we use going forward. So Karen is leading our ESG efforts and.
We added infrastructure.
To that effort that we think is appropriate for our company and so.
Focused continuity I think is the headline for our capital deployment. We we've had a good theme we've executed on that we will continue to execute on it but we do think there isn't the emerging opportunities that we're excited about and we are supporting courtesy of anything you'd add.
Just maybe to to dig a little deeper into that we've talked in the past that approximately 70% of our capital expenditures go towards system integrity and reliability projects. That's been consistent since a week, we came out as a standalone company and remains consistent today and what our focus continues to be.
So that includes not only replacing older pipe has said was talking about that has a really good environmental story.
Because you reduce leaks on your system and and the the resulting emissions as well as that being a really good safety impact as well, but we also spend dollars on reliability of our system. So connecting our assist our systems 2 additional points of supply.
Helps us lower of the pressures on the system and <unk> and increases the reliability that we have and those were very key themes that we saw the the benefit of during the winter storm This last year.
Where we were able to bring in supply from different points and maintain pressures on our system and have really good performance and reliability for our customers. So just a little additional color on the.
The the question you were asking Cody.
Got it that's helpful and.
And then maybe shifting you know to kind of the credit side and and can you kind of give some color on what the most recent dialogue has been with the rating agencies I mean, they still have you on.
On negative outlook, though recovery of the extraordinary costs seems largely derisked at this point in the Oklahoma and Texas the that'll be issued by the state. So just any thoughts there and he updated thoughts and the and the most recent dialogue.
Sure County, and we.
We had a lot of dialogue during the storm and when the rating agencies took their action and and at that time day indicators that they would be the pace and well obviously, we're on negative outlook.
And it gives us time to work through securitization and.
And again, they indicated that they would they would watch the regulatory process and see how securitization plays out before they make any additional steps.
So not a lot of dialogues since we'll be on the annual visit with them and a few months and we'll go from there.
Got it Okay and then just 1 last 1 for me and it's on the Oklahoma rate case. So I'm just wondering what the feedback has been so far from parties, especially as it's your.
The first rate case, and the state and you know is there any chance that you can you can settle there.
Well just a couple of things 1 it's actually our second rate case and spend we did about a year and a half after spin did the first 1 and the PBR filings that we've been doing the last 5 years of Ben.
And the result of or the outcome following that rate case the.
And the current rate case, the responsive testimony is due and the early part of September and so that's really when we'll get the first read of where are the.
And the commission staff as well as other intervenors stand on the issues and the rate case. So we'll have a better sense of that once we see their testimony.
Great. That's all I had thanks for taking my questions and congrats again.
Thank you Cody.
As a reminder, star 1 for questions.
And we'll take our next question from Vedula Murti with Hudson Bay capital.
Good morning.
Good morning.
Let's see and talks about the and.
And given the initiatives the filings of course securitization on the.
180 day.
Oh.
The calendars for Oklahoma, and Kansas and the.
The 1 and 50, plus 90 and Texas Huh.
At what point will we will be prudent so called the <unk>.
Conduct of the activities and everything like that the address Tobey within these 180 day processes such that.
We will consider any question as to who.
And so the dollars are quite the full dollars of course, the dollars how should we be thinking about that.
So let me take that by each state separately, so you're correct and Texas that and that 150 day period is 1 of those items are being reviewed similarly, and and Oklahoma. It's during the 180 day period that those costs are getting are being reviewed.
For prudency.
And Kansas just to clarify the first thing that happens is the filing that we made.
And a procedural schedule still has to be established by the commission true.
To evaluate our compliance report so we filed the compliance report and it begins to that process.
But until they review that and approve it and then the hundred and 80 day clock starts at that point so.
There's not a set time line and that first step to review that compliance report.
And we'll have a better sense here over the next few weeks as a.
Procedural schedule gets established.
Given that you know well all of the various constituencies knew that the the 2 filings were coming and these timelines for there.
Can you help us think about what feedback you've gotten from them in terms of you know.
The dressing the dish.
Uh huh.
Or is it more about duration of recovery period is it more about the.
Carry costs weighed on how we're how how and what how old people already been kind of debt.
Interacting with you and anticipation of these columns.
Well you know all of those issues that you just raised are part of the consideration zone and at the end of the day, it's really about the impact to the customer's bill. So the each of the commissions are sensitive to that obviously, everyone would like to have a very short period and and.
And get this behind but it's also in some cases not not as possible to do that because of the impact that it would have on the customer's bill. So the there've been lots of discussions around that the time periods for recovery and as an example of that you saw on our Kansas compliance report that we proposed of 5.7 or.
10 year recovery period.
And that's really based upon what the objective is that the commission would like to see in terms of the the customer bill impact once the the financing moves forward. So everything you just raised her part of the discussions we will have to see of the next several months play out as to where we ended up in each state.
What is it what is it maybe perhaps fair to characterize the okay.
The conversation has been focused more on duration and the you know.
The well the current weight and things of that nature as opposed to the debt.
And so well conduct and the prudence of D of.
The dollar amounts that debt.
And are being discussed here.
No I don't think 1 excludes the other because the the prudency reviews are very important they were very important to us as we reviewed the invoices and reviewed the the contracts and the naseby agreements under which those volumes were delivered to make sure everything was in compliance and now the commissions will go.
Through that same process to make sure that what we paid for the gas was in compliance with those things and just maybe as a reminder, we do have compliance reviews every year. So all of the dollars are much bigger of the process isn't really different from from our normal prudency reviews.
Okay, because it does not appear at least as far as the I'm aware of that anyone has funding.
On the memory question.
You know the.
And the practices or the prudence of how you and your appeal.
Operations during this period.
Is that a is that accurate.
I E.
Well in terms of our commissions that that's why we're doing the compliance report so we're getting them. The information so they can make that evaluation.
And so all of that.
I was thinking more about third parties and other stakeholders.
Well, yeah, I don't know if I can comment on all the cultures and the other third parties and comments that they've made the the important part is that.
The compliance that we're doing with our regulators that have the authority to review our costs and determined the prudency of the actions that we took during the winter storm. So that that's really the piece of that matters most to us.
Okay, and I guess, 1 last thing in terms of obviously with the.
Growth opportunities and initiatives and other capital opportunities.
How how how should we be thinking about the balance of.
Funding knows and the.
The recovery cost of a couple of those.
And having to.
And also with the cost recovery associated with urea and the sort of historical costs.
Yeah.
Those are those are all things, we consider and and evaluating what our investments are going to be each year in terms of the capital dollars that we spend and.
We've given guidance on what to expect from a financing standpoint, and care and can certainly provide more context around that but.
You know we go through that that process each year of determining what our capital spend is likely to be where we're allocating that spending.
We consider the impact and 1 of the things is the resources to physically get the worked on second the financial ability to fund the work and also then the impact that it has on the customer Bill. So all of those things are considered the 1 data point I would share with you is that and average customer on our.
Some of their monthly Bill average is about $60.
And so and know that includes the gas cost as well as the the return of and the return on our capital and the cost of service. So that that gives you some perspective of the actual natural gas bill that customers have and relation maybe to some of the other bills. They have every month.
Okay. Thank you very much.
With no additional <unk>. Thank you.
At this time I would like to turn the call back over to Mr. <unk> for any additional or closing remarks.
Thank you all again for your interest and 1 gas our quiet periods of the third quarter starts 1 close on books at the end of September and extends until we release earnings in early November we will provide details on the conference call of a later date.
Good day.
That will conclude today's call. We appreciate your participation.
Yeah.
Okay.
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Yes.
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