Q1 2021 Eversource Energy Earnings Call

Good morning, and welcome to the <unk> energy first quarter 'twenty 'twenty. One results conference call. My name is Brandon and I'll be your operator for today at this time all participants are in a listen only mode. Later, we will conduct a question and answer session during which you may dial star. One if you have a question. Please note this conference is being.

And recorded and I will now turn it over to Jeffrey Kotkin you may begin Sir.

Thank you Brandon good morning, and thank you for joining us I'm, Jeff Kotkin every source of energy as Vice President for Investor Relations.

During this call we'll be referencing slides that we posted this morning on our website and as you can see on slide one some of the statements made during this investor call maybe forward looking as defined within the meaning of the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995. These forward.

Looking statements are based on management's current expectations and are subject to risks and uncertainty, which may cause the actual results to differ materially from forecasts and projections. These factors are set forth and the news release issued this morning.

Additional information about the various factors that may cause actual results to differ can be found in our annual report on form 10-K for the year ended December 31, 2020. Additionally, our explanation of how and why we use certain non-GAAP measures and how those measures reconcile to GAAP results.

<unk> is contained within our news release and the slides we posted this morning and on our most recent 10-K speaking today will be Joe Nolan, our new President and Chief Executive Officer, and Phil Lembo, Our executive Vice President and CFO also joining us today are John Moreira, our treasurer and <unk>.

And your VP for finance and regulatory and Jay Buth, our VP and controller.

Now I will turn to turn to slide two and turn over the call to Joe.

Thank you, Jeff we hope that all on the phone remain healthy and that your families are safe and well.

Over the past couple of years I've spoken to many of the investors who are on this call when I joined Jim fill and Jeff at various industry conferences, including the last couple of EI finance conferences I'm looking forward to meeting many more of you over the coming years and sharing my optimism and enthusiasm.

Forever sources, future and excellent investment theses and.

Grateful to the <unk> board of trustees, and Jim for allowing me to lead and incredibly dedicated and high performing organization I am also thankful that Jim will remain a full time employee and <unk> as executive Chairman.

And a proven and his executive level changes the <unk> board is signaling its confidence in our long term strategy that focuses on our core regulated business with an exciting investment and offshore wind.

We are on a world, where customer service and safety and reliability have never been more important.

We will never forget that we would not be and the business without a $4 3 million customers.

They are our top priority custom.

Customers pay their bills and they deserve the reliable and safe utility service that we must provide.

Over the coming decades, the tens of billions of dollars, we will invest and our energy and water delivery systems will be critical and helping new England prepare for a clean energy future and we expect to be a central catalyst so that clean energy transition.

This morning, I want a couple of cover a couple of topics associated with ever sources energy initiatives, and then turn over the call to Phil.

But first I need to address our company's relationship with Connecticut.

We have thousands of employees and Connecticut, who work hard each day to provide a $1 7 million natural gas water and electric customers with the most reliable and responsive service possible.

During emergency situations, which we have had far too often over the past year due to the historical historic storm levels.

They are working up to 16 hours a day for as many days it takes to ensure that our customers have this service restored promptly and safely even in a pandemic.

So I cannot tell you how painful it was for me to reach certain elements of the tropical storm <unk> decision that was released on April 28 day.

Not reflect the hard work of our dedicated employees and the company up and chosen to lead.

Our customers PURA and our company all want the same thing great service, each and every day of the year.

And when there was a storm event power restoration as safely and quickly as possible.

Women and men of episodes and work hard each and every day to meet these expectations.

The pure order on storm response, clearly identified areas for improvement.

We know we have to work.

Do not only our response plan, but also on our relationship with PURA.

This was apparent from the April 28 decision and a subsequent notice of violation.

I can assure you that we hear this loud and clear and already doing all we can to improve on both counts.

Turning to our clean energy initiatives, you are probably aware of the climate legislation that Massachusetts Governor Baker signed into law earlier this spring and.

Many elements the wall will allow each of the state's utilities to build up to 200 and Mick.

280 megawatts of solar generation.

And Starr electric will be able to increase its level of solar generation and rate base from 70 megawatts to 350 megawatts.

As Phil mentioned during our year end earnings call, we have budgeted approximately $500 million with this initiative from 2022 to 2025.

The other item with direct impact on us is the <unk>.

400 megawatt expansion of Massachusetts offshore wind authorization from 3200 megawatts to 5600 megawatts.

This expansion will help keep the state and at the forefront of offshore wind development in the United States.

As you can see on slide two they're on.

Now more than 10000 megawatts of untoward and offshore wind authorizations, and southern New England, and New York with Massachusetts set two watt up to 1600 megawatts weighted this year.

In fact, Massachusetts RFP was just issued on Friday of last week.

Our offshore wind partnership with worst it is very near and Dear to my heart since I have always seen that relationship and work closely with our partner in recent years.

It is an important element of our clean energy growth strategy and we have had a number of positive offshore wind developments already this year.

Starting with slide three in early January the Bureau of Ocean management, our boom released its draft environmental impact statement on South Florida project.

Comments received by late February and we expect to see a final EIF late this summer.

Volume was scheduled to rule on our final federal premise for that project and January of 2022.

Assuming that the January data is met we expect to begin construction early next year and complete the project in late 2023.

Additionally, in late March and the New York Public Service Commission.

Through the necessary New York State siting permit for the project.

Local talent and trustees of East Hampton approved the local real estate rights required from the project.

Turning to Revolution wind.

Late last month boom released schedule for reviewing the 704 megawatt project the schedule calls for a final environmental impact statement to be issued in March of 2023 and.

And for a final decision on construction and operating plan by the end of July 2023.

The release of that schedule represents a significant step forward.

For this project.

Revolution wind and South Fork are two of only three projects in the northeast and have achieved that milestone.

Over the coming months, we and <unk>.

We'll be reviewing the boom and the state of Rhode Island, and permitting process to develop a projection for the revolution wind construction schedule.

Finally, we expect to receive volume review schedule for our 924 megawatt Sunrise wind project weighted this year.

We continue to make significant progress and preparing for the commencement of construction over.

Over the past couple of months, we have announced agreements with two critical ports that will serve as a staging ground for construction.

You wanted and Connecticut will serve as a hub for turbine construction and Providence, Rhode Island will be the centre for foundation construction.

Enormous economic benefits will accrue to these communities as a result of their role and our construction activities, including hundreds of direct jobs.

We are also very encouraged by the extremely positive signs we see from Washington.

Biden has underscored his support for offshore wind construction, along the Atlantic Seaboard and <unk>.

As Marshall multiple members of his cabinet to support it.

The goal is to have about 30000 megawatts of offshore wind turbines operating and the U S by 2030.

We expect to be a significant contributor to that output through our partnership with worst day.

Already more than 17 250 megawatts are under contract to serve load and Connecticut, New York and Rhode Island.

Again, I look forward to speaking with many of you at the HVA Virtual conference. Later this month now I will turn over the call to Phil.

Thanks, Joe.

This morning, I'll cover a couple of topics I'll review the results of our first quarter 2021.

And discuss.

And add to some of the regulatory developments and Connecticut and and at FERC.

And I'll start with slide number four and noting that earnings were $1 six per share and the first quarter.

Compared with earnings of $1, one per share and the first quarter of 2020.

Results for both years included after tax costs associated with our recent acquisition of the assets of Columbia gas.

From a gas in Massachusetts, and that's <unk> <unk> per share this year and <unk> per share and 2020.

Results for our electric distribution and natural gas distribution segment showed the most significant changes year to year electric distribution.

And <unk> 27 per share and the first quarter of this year compared with earnings of 39 per share and the first quarter of 2020.

Lower results were driven by a couple of principal factors. The first is that we recorded a charge of $30 million or <unk> <unk> per share primarily to reflect customer credits of $28 $4 million and and and additional penalty of $1 6 million to be paid to the state of Connecticut.

These credits relate to a notice of violation that Connecticut regulators announced last week.

As a result of our performance and restoring power following the catastrophic impact of tropical storm East Ies last August the.

And the docket established by PURA to review the penalty is scheduled to run through mid July of this year.

Additionally, electric distribution results were negatively affected by approximately $20 million of higher storm related expenses and the first quarter of 2021 and.

And thats compared to a pretty quiet and warm first quarter in 2020.

And in fact, and this quarter, we experienced 31 separate storm events across our three states versus fairly limited activity in Q1 of 2020.

So by contrast on natural gas distribution segment showed a sharp increase in earnings because it's now about 50% larger than it was a year ago.

And 43 per share and the first quarter of 2021 compared with earnings of 26 per share and the first quarter of 2020.

Improved results were due primarily to the addition of every source gas of Massachusetts, which earned <unk> 14 per share in the quarter. In addition, we had higher revenues at and star gas and Yankee gas and these were partially offset by higher higher O&M and depreciation expense.

And I should note that the transition process forever source gas of Massachusetts continues to progress extremely well.

As we continue to migrate off of nice source business systems and onto <unk> platforms.

Leasing costs and improving service to.

To date more than 80% of the business processes have been transferred to <unk> from Knight from nice for US. It's great progress has been made.

<unk> ownership of the distribution system is being well received by customers communities and employees and we continue to meet or exceed the financial and operational targets, we had set for ourselves.

On the electric transmission segment.

And <unk> 39 per share in the first quarter of 2021.

Compared with 38 cents per share and the first quarter of 2020.

Improved results were driven by a higher level of investment in transmission facilities and this was partially offset by dilution of additional shares issued.

Our water distribution segment earned $3 $6 million and the first quarter of.

2021, compared with earnings of $2 1 million and the first quarter of last year improve.

Improved results were due largely to lower interest expense and lower and a lower effective tax rate.

As you May have noticed last month Aquarian announced an agreement to purchase a small investor owned water system that is based in Connecticut, but also serves portions of Massachusetts, and New Hampshire.

New England service company as it's called serves about 10000 customers in the three states and has rate base of about $25 million.

This acquisition is consistent with the growth strategy, we have discussed for our water delivery business and assuming.

And the regulatory approvals, we expect to close the transaction.

By the end of this year and.

For it to be accretive right away and 2022.

Rounding out the reconciliation of resource parent was down <unk> lost <unk> <unk> per share and the first quarter of 2021 and Thats, excluding the average source gas and Massachusetts transition cost the same as during the first quarter of last year, So <unk> and.

Each year.

As you probably noted and nurse and our news release and you can see on slide five we are reaffirming our long term earnings per share growth rate and the upper half of the 5% to 7% range.

Wherever we modified our current year 2021 earnings guidance to reflect the customer credits I mentioned earlier.

Now project EPS towards the lower end of the $3 81 to $3 93 range and this includes the <unk> <unk> per share impact of the credits on.

On the regulatory side.

While our primary operating companies don't have any base rate reviews pending we have several regulatory dockets open and Connecticut, and I'll summarize the status of a few of them.

In addition to the penalty I described previously pure also identified and 90 basis point reduction and our authorized distribution Roe.

This is likely to be addressed and the current C. LNP interim rate decrease proceeding.

Given the revised schedule that pure released last week, we believe any ROE reduction would take would not take place.

Our take effect until October one of this year.

To help you size that impact currently see Lnp's authorized Roe.

$9, two 5% and.

And we have approximately $5 billion of rate base at CL and Pete.

Also on April 28th pure finalized and interim decision on the recovery of certain tracked cost by sea LNP.

This decision would result in a number of changes to those track cost that would be implemented on June <unk> with other modifications deferred until October one.

The interim decision and implemented a number of positive modifications to and early a draft and we appreciate.

Pure and making those decisions and making those changes and its decision.

We were also continues to review several other dockets, including potential for grid modernization initiatives, including <unk> and.

And electric vehicle programs and storage and the status of the major open pure dockets as listed and an appendix to our slides.

Turning from Connecticut to Washington.

And we were disappointed last month and the developments around the ongoing notice of proposed ratemaking concerning incentives.

And that FERC granted for many years to utilities that participate and regional transmission organizations our Rts.

Burk will be taking comments and replies on the proposed changes over the next several weeks before deciding on a final order.

I would expect that the new England transmission owners and others will file comments opposing the change, which some C is being and consistent with the energy policy Act of 2005, and with President <unk> and focus on building out the nation's electrical infrastructure to bring more clean energy resources Tomorrow.

<unk>.

As a helpful rule of thumb, a 10 basis point reduction and our transmission Roe.

<unk> consolidated earnings by about a penny per share.

Yeah.

In terms of financings, we completed $450 million of debt issuances, so far this year.

<unk>, primarily to pay off maturities at every source parent and.

And at the aquarium and Connecticut Aquarium company and Connecticut.

We have not issued any additional equity.

This year other than through our ongoing dividend reinvestment and employee incentive programs.

However, as you know and we've stated in the past we continue to expect to issue.

Approximately $700 million of new equity through some sort of at the market program and that would occur at various points.

And time over our forecast period.

In terms of our operations, we have gotten us to a very strong start this year electric reliability continues to be and the top quartile of the industry.

Versus our peers through March are above average safety record improved even further with fewer and employee injuries.

And we experienced and the first quarter of 2020.

All three of our natural gas utilities are outperforming on their emergency response requirements.

And aquarium water quality is solidly exceeding its target.

So thank you for joining us this morning, I will turn the call back to Jeff for Q&A.

Thank you, Phil and I'm going to turn the call over to brand and just to remind you how to enter questions.

Thank you and we'll now begin the question and answer session. If you have a question. Please press star one on your phone keypad, if you'd like to be removed from the queue. Please Christie signed with <unk>.

If you're on a speakerphone please pick up your handset first before daily whats it.

And if you ask a question. Please press star one on your phone.

You bet.

Thank you brand and our first question. This morning is from Angie <unk> from Seaport Global Good morning Angie.

Good morning, guys. Thank you.

So.

Question.

Thanks.

Gross protection beyond 'twenty, one and also 2020.

And what is the offset to that.

The lower earnings and Connecticut related to the 90 day.

And that's it.

Thanks, Angie Thanks for your thanks for your call and as you can imagine and and our.

And any forecast.

It incorporates our best results on a lot of key assumptions so rates and.

Ro.

Interest rates Capex forecast, what we're looking forward on in terms of O&M and.

Et cetera, so and <unk>.

Cooperating.

Each of those elements into the forecast we're comfortable.

Comfortable and that upper half of the 5% to 7% range going forward.

Okay and then just.

Incremental capex that you guys.

Propose imi's et cetera, and Connecticut.

And in light of day.

Reduce our ROE.

Should we expect that.

Potentially yes.

And if the regulator.

And spending on the regulated electric side away from Connecticut.

I mean, if you could comment on your projections for Capex and Connecticut.

Sure.

Goal is to provide safe and reliable service and.

Standing customer service to all our customers, whether they be electric or gas or water, whether they'd be and Connecticut, Massachusetts, and new Hampshire. So.

And our investment profile is geared to ensuring that that those high standards can be met.

We're very proud of the results, we've been able to put up year after year in terms of where our reliability ranks.

And unusually it from the top decile versus our peers. So we're.

Continuing to focus on our vegetation management, and making investments there to to ensure that we have a reliable system. So.

That's the primary focus of how we determine the investments as to how it impacts and a positive way our customer service.

Great and just last question.

The electric transmission and <unk>.

And I understand that.

RTL adder.

And so that's sort of before the base now.

About the.

So some of the base <unk> and Glenn.

In light of the.

Proposal <unk>.

Removal of the art RTL out or do you expect now.

And the base ROE will also fall.

Well Angie that's a question that I have been asked for I'd say, many years and many quarters now and.

As you know we have four open.

Docket open cases at the FERC on that really go back a decade.

Our oldest one in terms of open dockets there so.

It's hard to predict the timing or the outcome of what what those cases will show so I'm not.

I'm not sure how exactly the.

FERC will look at the interplay between that.

Incentive docket versus the base case docket, but certainly I think the thing that folks should keep in mind is something I said and my comments switch.

It's very public.

Policy.

Desires by the <unk> and administration to electrification and to bring connect clean energy resources and Theres No Theres no region of the U S. That's connecting more clean energy resources, and new England, and obviously we serve.

Primary load centers in new England, and can help deliver that clean energy both from our offshore wind perspective, but also from a transmission perspective, so we'll have to wait and see.

The timing and how those play out but.

I wish I had a crystal ball that could predict and the answer at this stage, but I don't.

Understood. Thank you thanks.

Thank you Angie.

Next question. This morning is from Steve Fleishman from Wolfe Good morning, Steve.

Hey, good morning. Thanks.

So just just to clarify for 2021 guidance.

And Phil are you incorporating the 90 bps reduction starting.

October 1st then and that guidance the low end.

Yes.

And that's.

And.

Proceeding.

And is underway now and certainly we would incorporate that outcome.

And so the guidance so theres only.

If it was a quarter. If you say, it's october that might be from <unk> impact for the year Steve.

Yes.

Okay.

Good and then Joe.

Yeah.

Phil You made Joe you made the comment about.

And I'm kind of areas to improve on your response plan and improving.

The relationship with with Tiara.

Could you just give a little more color on kind of.

How youre going to do that or just strategies, there and just you.

You had up on grid, obviously settle a lot of issues with pretty much all parties and PURA.

And so.

Yes.

How do you go about.

Yes sure Thanks, Steve.

Hospital on a time down and Connecticut I spent several a couple a couple of days last week.

And we're engaged with all of the communities that we serve.

We're really focusing in on and on their priorities curious priorities. We we obviously took that water to hot it too complex 150 page order on the series that we know that that.

And that we could use some some improvement on and that's what we're focused on but I also did remind folks that the.

From that a question and <unk>.

And we've never assembled that many crews and 2500 50 crews during a pandemic required double of everything 6000 hotel rooms, 14000 meals a day double the number of trucks.

And so it was quite a unique situation.

And I think that we can always improve and we will continue to work at that and we want to win the hearts and minds of our customers back and Connecticut, and obviously, we are we're sorry, if we let them down during that storm.

Okay, great. Thank you.

Alright.

Next question is from Julien Dumoulin Smith from Bank of America, Good morning Julien.

Hey, good morning, Jeff and team. Thank you guys very much.

Maybe if I can throw the first question your way.

And pivoting off from Steve framework, how do you think about performance based rates here as.

And Avenue to demonstrate change and what.

And the timeline for implementation there do you see that as part of the next Connecticut case here, just curious as to how you and the.

90 basis point impact if you will.

Thanks, Julie and its Phil.

In terms of just the mechanics free.

Performance based rate.

Docket.

Is to be opened by June of this year, so right now.

Theres no theres no docket number.

But the expectation is that that would be opened by by June of 2021.

So.

We.

And we thrive on performance measures.

I think one of the keys to our success over many years as we.

We have a very aggressive performance management system, we measure and monitor.

All of our key perf.

Performance.

Tricks, whether they'd be.

Reliability.

And how frequently are customer hasnt outage, how long the outage takes to restore.

And what's the safety performance of our employees, what's the diversity of our of our work for us.

We measure.

Many many different.

<unk> metrics, and we perform well on and whether you look at.

Comparison to kind of historical performance are where we fall relative to peer groups. So performance as part of our DNA and I think we've delivered that we have elements of.

Performance based rates and other jurisdictions and <unk>.

Massachusetts for for many years they've had these <unk> our service quality index measures.

And where we've had to perform against and we've been very very successful there. So.

But as you know the design of those measures.

As important and we would hope to work and our collaborative and <unk>.

Constructive way with pure and other intervenors during that process, but.

The idea of performance based measures is something that we live with every day.

And the docket of that is the docket for that starting middle of this year.

Got it and maybe the dovetail with that just precisely what is the expectation on when this 90 basis point impact would roll off if you will.

And I presume in tandem with a future rate review or PDR or what have you.

But back to you on that yet.

Yes back to me.

On the the decision itself said indefinite.

So.

<unk>.

So that's that's the only direction at this point.

Julian is that that that wording in the.

And the orders said, the 90 basis points would be indefinite.

Sure.

Okay, alright, well ill leave it there. Thank you all very much.

Thank you. Thank you Julien. Our next question. This morning is from <unk> Chopra from Evercore and good morning to gas.

Hey, good morning, Jeff I, just have two kind of Connecticut and related questions really quickly clarification is more the question. This is Phil.

There is a mixed bag in terms of the <unk>.

Back to charges, some sort of going through or will be effective June 1st and October and the other is the October force.

High level the impact on the cash impact on.

And that delays.

Pretty miniscule and I am I thinking about that right.

Yes, I wouldn't say, it's minuscule I mean, it's probably.

<unk> $50 million.

And that would be spread out into the future.

So.

It's not insignificant.

But it's not.

And larger than that.

Got a $150 million and then just quickly.

Roughly the number is close to $270 million.

And deferred costs.

<unk> sales cost and when do we get a final ruling on that recovery of that.

So.

There's many.

States that have some costs net of deferred with that the largest is in massive and <unk>.

<unk>, it's about $230 million of deferred storm costs related to <unk>.

And there's the.

Storm cost in Massachusetts, and New Hampshire, also but at a smaller level so each.

Each state has their own protocol for.

Timing of when you go in and file for that so we haven't.

Developed that filing and we certainly have provided some information on our cost during the previous docket and a pure had asked that we.

Get the best estimate of what we had seen to date, but unfortunately, we have some invoices that come in over time and we have.

The gathered the mall and make sure. They are all accurate we don't pay anything unless we've reviewed it three times and I guess, it's for ways from Sunday is the expression, but.

So we don't pay for things that are.

We made appropriate and we kick those back so we after we go through that process, then we do a filing so.

And that filing could come in a future proceeding it could come in a base rate proceeding it just depends on the on the various states but.

I would expect that.

Those filings would be done over the next year on year or two and the various states.

Got it perfect. Thank you Bill.

Youre welcome.

Thank you and your cash next question is from <unk> Kim from Goldman Sachs. Good morning, and so.

Hey, good morning, Jeff.

And my first question is going.

Going back to Connecticut and.

The interim rate.

Theres been from testimony filed about.

The allowed ROE, but also the equity equity layer and so on the parties, suggesting that the equity layer should be decreased meaningfully from the current 53% just curious on your thoughts there and whether there's a way for you to potentially I took the balance sheet to address this.

Sure and Sue.

Thanks for your question and certainly in.

ROE capital structure or.

Other revenue requirement elements are part of any sort of kind of analysis that you would do so those cash.

Capital structure is one part of it and certainly PURA has broad authority and our rate and our rate setting process. So.

That's the framework that we work with them.

It hasnt been the practice in the past and Connecticut, it's been the practice to arm to.

Maintaining.

<unk> capital structure for each of our.

The subsidiaries and a way that's appropriate for that subsidiary to to finance it.

Capital needs, we do that and a very disciplined manner, obviously, we have a.

Rating agency considerations, and and any change and sort of capital structure could have a positive or negative effect on on ratings just as.

Regulatory rulings have could have a positive or negative impact on ratings. So.

So we will work collaboratively constructively with PURA over whatever docket.

These issues come up and.

But at this stage.

The precedent has been that the operating companies would have their unique capital structures that reflect their unique characteristics.

Don't forget too that at a parent company that there's things that have nothing to do with.

The kind of the customer rate issues there is.

There could be.

<unk> like non regulated investments, that's where our offshore wind is financed.

And during construction were financed with debt.

If.

You recall sort of painfully I know I recall that we had a write off of our northern pass transmission project.

That doesn't impact customers that goes right to the parent so theres things that.

The parent takes that.

So that protects the capital structure of the operating companies, but that would be something that.

Would get reviewed and any kind of rate setting process.

Right. Okay. Thanks for that color on my other question is on offshore wind and.

Orsa recently discussing some of the structural.

Structural improvements needed to make a point on fee.

And the projects. They have on mine are there any read throughs or implications on our cost or.

Construction planning process for the client projects and the U S.

Okay.

Yes no.

Good on that I think that.

And on a broader case, if you look at we've been closely monitoring and.

Apply chain issues and.

<unk> got a pandemic and our teams.

Both.

And our utility as well as on the project.

This is like priority number one interest to the supply chain and.

And.

This is where I think size really matters, having the buying power of <unk> or having the buying power of another source and then having the combined buying power really helps us to have relationships and.

And schedules and.

Multi year.

Supply chain agreements that debt.

To put us in good shape. So we haven't seen any any significant impact at this stage.

Got it thanks, Bill and congrats Joe.

Thank you.

Thank you and so next question is from Sophie Karp from Keybanc Good morning Sophie.

Hi, Good morning, Thank you for taking my question.

I wanted to switch gears to <unk>.

With gas and later.

And it's there and I'm just curious.

First quarter results were influenced by energy.

In particular developments.

And typically follow the usual seasonality to the experience and the future it.

It seems like it's a very strong results I was wondering if there was any one offs or weather impacts that we should consider going forward. Thank you.

Thank you for your question Sophie and.

So the the subsidiary when we purchase Columbia gas of Massachusetts from nice for US we rebranded rename that every source gas of Massachusetts, So that that every source gas and Massachusetts.

And as kind of a former Columbia gas subsidiary.

And star gas remains and Massachusetts, and Yankee gas remains and Connecticut. So so I'll answer the question for <unk> gas and Massachusetts Theres nothing.

Particularly.

Noteworthy it is just the operation operational results of that franchise <unk>.

<unk> delivered the 14th <unk> result.

Just like our other gas franchise, you can expect that.

The first quarter is probably going to be the strongest quarter that you see out of.

Because it is a heating and heavy heating.

<unk> and.

And the fourth quarter as a heating quarter and not as not as strong as the first quarter, but it's also heating quarter non.

Not a lot not a lot of heating going on and the second and third quarters and the gas business. So those tend to be.

None.

There's nothing.

Small or limited contribution or even negative contribution and those months, but.

The profile of the earnings profile is very similar to.

And star gas and Yankee gas in terms of when the earnings come in and as it was just from regular ongoing operations and that business nothing unusual.

Thank you just hopeful to build from.

Hey.

Youre welcome.

Thanks, Okay.

Next question. This morning is from Jeremy Tonet from Jpmorgan, and good morning, and Jeremy.

Hi, good morning.

Just wanted to turn to offshore wind a little bit more if you might feel and.

Providing a bit more commentary seemed under the prior administration thinks it slowed a bit as far as the process and it seems like the opposite could be true with the new administration and things maybe moving a bit faster. So just curious for your thoughts on that if you see potential for things to move more smoothly and maybe than what the current outline is and and then just.

With what you've received its revolution and just any thoughts on when we might get more color on capex or other project details I guess down the line just looking for color on those thoughts.

Yes. Thanks, so much for the question and good morning.

We've been obviously, it's been a breath of fresh yet by the administration.

We have had we have weekly meetings down there with.

Various.

Administration officials the White house hosted a hosted and meeting with the offshore wind developers.

Probably in about a month and a half ago and five.

And the four cabinet secretaries, and the two and the climate SaaS on that call in and focus down there is what can we do to help move this agenda and we're already seeing decisions that are coming out of there at all much.

Much faster pace.

And then we've seen in previous administrations and I just it's really.

And a sea change.

All of this business and we're very very optimistic that the process will move along.

Much faster and it will be much more orderly for all developed is not just for our projects, but yes, its been a sea change.

In terms of the second part of the question in terms of construction.

Investment.

As you can imagine and we've said before working with our partners.

Sort of the the construction strategy.

And the investment amount sort of year.

I don't want to say that yes.

I guess it is part of the competitive bid process is the best way to say it such that so we've been giving limited disclosure on sort of the capex space and.

And there's a there's a RFP coming up and Massachusetts. So obviously.

We want to.

To be able to look at that and put ourselves and the best available position. So I would say that we'd have to get a little bit further down the road in terms of rfps that are sort of and the wind column before we would give out too many too much information that we would consider to be kind of a competitive interest and these bids.

Got it that's helpful. Thanks and.

Maybe just pivoting over to the water side I'm curious I guess.

If you could refresh us how deep do you see the opportunity set there is this type of pick up we should expect.

Every year every other year or just looking for more I guess color on the strategy, how you see it coming together at this point.

Well our strategy and in the water business, we have been consistent and we vote line that for the last several years that we like the water business, we think that.

It fits very well with our clean energy story, it fits very well in terms of our regulated infrastructure skill set.

So we would we'd like to grow that business and we can grow it and a.

A couple of different two and three different ways organically.

Through looking at investments that we make and the system.

Can accumulate small kind of roll ups.

We've done it.

Half dozen or so of those over the last few years.

Or you could do something that is.

Larger in scale and scope and not that this particular transaction is.

And going to change the footprint so much of aquarium, but it does add 10000.

Customers into the to the aquarium on family and we will look for opportunities that can do that we think there are opportunities that are out there.

And we are active.

And evaluating those and then we're active and Citrix searching out other opportunities. So we think that there is.

Plenty of opportunities to be had.

It may not be just in the six states, New England region.

There could be opportunities and adjacent states that would help increase the number of customers for query on.

But I can assure you that our goal is not to just add customers.

Our goals are always to do one and there has to be in something and if a customers. We want to you don't want to get bigger just for the sake of being bigger.

Do you bring that can make for better customer service that can kind of lower cost to customers over the long period of time and also be a deal that can be accretive on the on.

The financial side so.

We carefully we probably pass on more deals or lose out on more deals because of our discipline there, but we will continue to maintain that discipline and in any business opportunity that we look at it doesn't we don't want to get bigger just to get bigger.

Got it that's helpful I'll leave it there thanks.

Thank you Jeremy.

Next question is from Paul Patterson from Glen Rock and morning, Paul.

Good morning.

So can you hear me.

Yes, Paul.

So.

So just to sort of come back to Connecticut.

Reading all of these and it's a myriad of filings and and.

And the orders and what have you I.

And I get the sense that there's sort of resistance there were concerned about rates.

And.

As you guys have a they also want grid transformation and.

And they want a lot of investment.

So at least that's how I'm seeing they want both of these things and.

And I'm.

And I'm just wondering how you thread the needle here.

Or how do you how do you picture this is.

Yes.

On the one hand, there was a demand for more investment.

On the other hand.

There seems to me at least to be whether it's with their comments on the take back the grid Act.

Panoply of stuff you're basically.

Or apprehensive about rate increases.

Or want lower rates.

How should we think about that.

Yes, Paul how do you think about it yes.

Yes. Thanks for the question Paul I think when we look at the <unk>.

<unk> per kilowatt hour on the rates and Connecticut, I think it's important to highlight for folks just how clean and.

And how carbon free that pilot refresh delivered and Connecticut.

You need to really strip out what portion of it is kind of not related.

Wanted to do a comparison across the country and I would say and that's our focus and Connecticut really and folks in new England and getting Ah.

Clean Green kilowatt hour.

And these are these are initiatives that.

Administrations and regulators have taken it upon themselves to bring to customers and and Thats something that they need to balance obviously, there's other things that they want to do down there and.

And I think it would only be fear that you break out what really is the utilities and what his stake.

Mandates on a regional mandates and and that's something I think we work every day and trying to tell.

Tell that story, but we're certainly very proud of.

Our our.

As it relates to our cash.

GAAP and free future.

Okay, but is there anything that we should think about in terms of potentially offsetting these rates or.

And is there any.

It's one thing for them to be one and green energy and everything is other things that actually want to pay for it.

Yes.

And there is there any sense that we should get in terms of whether or not.

How that might fall out I guess, the two competing interest so to speak.

Sure I mean, I think the other big.

The biggest lever on that on that side would be energy efficiency and and as you.

We are number one and the country as it relates to energy efficiency and I think what we're doing is helping our customers.

I'll use energy more wisely and reduce their consumption, which obviously will drive at that price issue with <unk>.

If you're paying a little bit more but we're helping you use less at the end of the day. The result was a net savings and that's where I think we're very very good at and we've obviously been recognized nationally for that.

Okay, and so why don't you would want to add something yes.

One thing Joe on that too as our transmission investments.

The investments we've made to.

For increased reliability on our transmission grid really helped to lower kind of congestion cost and the region. So those are a direct savings to customers as it flows through the <unk>.

And of the energy.

Part of our customer's bill.

And for capacity market.

Is down and things like that so those are the investments that we make and our transmission business are also.

And helping helping customers. So that's another way that bills.

And can go down and.

And certainly we don't we are.

And we're sort of out of the supply market, but certainly as supply costs move down.

Helpful benefit to customers.

Okay, great. Thanks, so much.

Thank you. Paul next question is from David Arcaro from Morgan Stanley Good morning, David.

Hey, good morning, Thanks, so much for taking my questions.

I was just wondering could you run through your latest outlook for equity needs here in line of some of the moving pieces with earnings with ROE, we would attract costs et cetera.

Thanks, David our equity needs are the same as we stated in the past which is <unk>.

They total lets call it $1 2 billion over five years, it's about $100 million a year through our dividend reinvestment.

Employee stock purchase types of issuances.

That aspects about 100, a year. So it's a forecast is five years this $500 million and as I said.

And my remarks, and we stated before over the course of our forecast period, we're looking to do.

<unk> $700 million.

New equity through maybe some sort of aftermarket type of program. So those needs at this stage have not changed.

Okay, great. Thanks, and I just wanted to double check how much of the seven cents.

From this quarter is one time or is any of that recurring.

No. That's just that it's related to the $30 million penalty.

One time.

Okay, great and wanted to confirm.

It sounds good thanks, so much thanks.

Thanks, David next question is from Mike Weinstein at Credit Suisse. Good morning, Mike.

Hey, good morning, and thanks for taking my question.

And I just wanted to clarify does any portion of the penalties flow through the decoupling mechanism.

To be deferred until the next.

Base rate case and.

What time, what is the timing of the base rate case, and the next one Christiane T.

So this is a direct.

Credit to customers, there's no putting it back into the decoupling. This is a this is a penalty charge that goes back to customers. So this is.

Flows directly back to customers.

The timing of the next proceeding.

And would be.

And when that PBR sort of mechanism.

And maybe that kicks it off but by us by statute.

So we are ending a three year rate.

Settlement that we had in place we're required to file every four years and Connecticut. So the next filing that we would look to do is next year and 2022.

In terms of our expectations of when we would file for new.

New base rates and Connecticut.

Got you and a follow up on Paul Patterson's line of thinking.

And the same thing I mean does this provide you think.

The storm.

<unk> as a boost to grid modernization and Connecticut.

And the state continues to review that.

And maybe a more of an opportunity for the utility going forward.

Got it thanks, so much for the for.

So the question. So it does that mean, there's a lot of dialogue actually in both Massachusetts, and Connecticut around grid Mod around Ami.

And we certainly have a seat at the table and we.

We are fully engaged and I do think there's an opportunity.

To demonstrate some of the technologies that are available that would kind of number one empower our customers, but also enhance the grid to allow for greater reliability and.

Cost savings for our customers. So yes, I definitely agree that this should provide us the platform.

Yeah.

Got you.

And what can you remind us what you're assuming for FERC transmission ROE and the long term guidance I remember youre fairly conservative I think you have the current.

What youre currently allowed or not I don't have anything.

Higher that just curious.

That's correct.

The current allowed 10 five.

$5 seven base rate.

Gotcha.

Yes, it was.

It's striking.

So a year ago right.

Positive.

Positive reaction from Massachusetts, regulators and the governor right towards the company.

And they wanted to do that.

To take control of <unk>.

Columbia gas up there and.

And that's what's happening.

And Connecticut.

It's a striking difference.

Across the company.

And hopefully yes.

You can figure out a way to.

I guess, we can.

Netiquette regulators and see the same way that they see you in Massachusetts.

Yes, we agree.

Sure.

And we're always sought after during natural disasters and crisis for our team to come in and take care of.

Business for folks across the country. So it is on.

Obviously as disturbing when that takes place but.

Rest assured that we will win back the hearts and minds of folks and Connecticut. It was a very unique.

During a pandemic folks had been.

And of sheltering in place from many many months.

And obviously the loss of electricity and connectivity.

<unk>, great challenges of folks and and we recognize that and.

We are going to do all we can to turn that situation around and have the same level of confidence that folks have at year, and Massachusetts, certainly when we get called upon for the Columbia gas situation and.

I think that we can do that and I feel good about our path forward. So thank you for that question.

Great and.

Thank you very much.

Thanks, Mike net.

Question from Travis Miller from Morningstar, Good morning, Travis good.

Good morning, everyone and thank you.

Answered very comprehensively and most of my questions, but two quick ones from me one on Canada could does the pure activity both.

Decisions and the ongoing stuff does that.

And the takeaway any legislative actions that were out there or are there still any proposals on the legislation side.

Sure.

Yes, so yes, thanks Travis for the for the question. So the legislature. During this session has really allowed PURA to implement a lot of the stuff that they had done and the and.

And the fault legislation, so we're not seeing any activity.

And right now they are just trying to.

Put the rules in place and that's really what we're actively involved and so we have not seen any additional legislative activity.

Other than some basic stuff around maybe solar and storage.

Okay, Great and then a quick one on offshore wind with the schedule that you now have what's the flexibility in terms of technology and we're seeing technology develop this almost daily in terms of offshore wind and efficiency and turbine size and stuff and what kind of flexibility you have and the next two three years.

Before you start putting steel on the ground.

Change that.

Yes. So another another helpful question, it's interesting when you think of delay.

Everyone always thinks cost increases, but I will tell you that and this business the offshore wind business, it's been incredible the types of advancement and.

And technology turbine sizes, and I will tell you that our permits all the premise that we have filed have that level of flexibility to be able to upsize.

So I will tell you that.

Delay and this and these circumstances.

It has been a very positive.

And thing for for our business and we're very very optimistic.

Okay. So the Eas doesn't lock you in any kind of technology or anything.

No.

And it has caps on size.

And they can take it up to maybe 14 megawatt.

But that's the level of flexibility up and that range. Okay.

Great. Thanks, so much.

Alright. Thank you Travis I know on a number of folks have already moved on to the 10 o'clock call. So we'll will end and here. Thank you very very much for all your time today. If you have any additional questions. Please.

Please let us know give us a call or send us and email and we look forward to seeing you at the coming conferences.

Thank you ladies and gentlemen. This concludes today's conference. Thank you for joining you may now disconnect.

Thank you Brandon and thanks for all your help again.

Take care.

Alright take care Bye bye.

Okay.