Q1 2021 Southwest Gas Holdings Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the southwest Gas Holdings 2021 first quarter earnings Conference call. At this time, all participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session. If you would like to ask a question. During this time, we will need to price star and the number one on your telephone keypad to withdraw your question press the pound key.
I'd like to turn it over to Mr. Ken Kenny Vice President and Finance and Treasurer, you may begin the conference there.
Thank you John.
Welcome to southwest Gas Holdings, Inc.
And 'twenty, one first quarter earnings conference call as John stated My name is Ken Kenny and I Am Vice President Finance and Treasurer, Our conference call is being broadcast live over the Internet for those of you who would like to access the webcast. Please visit our website and app.
Www Dot <unk> gas.
Moving dot com and click on the conference call link we have slides on the internet, which can be accessed to follow our presentation. Today, we have Mr. John P. Hester.
And Chief Executive Officer, Mr. Gregory J Peterson, Senior Vice President and Chief Financial Officer, and Mr. Justin L. Brown, Senior Vice President and General Counsel and southwest Gas Corporation and.
Other members of senior management to provide a brief overview of the company's operation and earnings ended March 31, and 2021 and an update to earnings per share guidance for 2021.
Also the company will address certain factors that may impact this coming years earnings.
Further our lawyers have asked me to remind you that some of the information and will be discussed contains forward looking statements. These statements are based on management's assumptions, which may or may not come true and you should refer to the language on slide three in the press release and also our <unk>.
Filings for a description of the factors that may cause actual results to differ from our forward looking statements. All forward looking statements are made as of today and we assume no obligation to update any such deep.
With that said I'd like to turn the time over to John.
Thanks, Ken.
Turning to slide four we outline some highlights from the first quarter and this year from holdings perspective, we had record earnings per share for the first quarter $2.04. We also increased our dividend from the 15th consecutive.
Second I'm here and.
And we slightly narrowed our earnings guidance range to $4 deformed dollars 20 cents and observation of our first quarter results at our regulated natural gas utility operations. We continue to experience strong growth, adding 37000, new customers over the past year are operating.
Margin increased by $24 million, we established and $250 million 364 day loan to fund and incremental gas cost associated with extreme Texas weather in February and the settlement and previously reached and our California rate case was approved by the CPUC.
And our utility infrastructure services group revenues increased by $30 million from nine 1% some of which derived from support to some of our utility customers experienced impacts from our February and Texas phrase.
And so saw EBITDA for the quarter and doubling to $26 $7 million.
Moving to slide number five we provide and outline for today's call. Greg Peterson will provide a detailed update on our financial results from the period ended March 31, when the segment breakdown for our regulated and unregulated operations, along with expectations for our liquidity planned capital expenditures.
And dividend and rate base growth, Justin Brown will provide a regulatory all day and I'll provide an update on our growing customer base. Our continued focus on sustainability and our expectations for 2020, one and beyond with that I will turn the call over to Greg. Thanks.
Thanks, John let's begin with the summary of total company operating results on slide six.
For the first quarter of 2021 consolidated net income was $117 million or $2 and <unk> <unk> per diluted share compared to 72, and a half million dollars or a $1 31 per share for the first quarter of 2020.
Temporary changes and the cash surrender values of company owned life insurance or coli policies reflected income of $2 7 million or and nickel per share and the current quarter versus a loss of 15 and a half million dollars from 28 cents per share and the prior year quarter.
For the 12 months ended March 31, and 2021 net income was $277 million or 49 per diluted share compared to net income and the prior year period of $192 million or $3 57 per share.
The current 12 month period included $27 4 million or <unk> 48 per share and coli income while the prior year period experienced a coli related loss of $5 7 million or <unk> 10 per share.
Next we will take a detailed look.
And for each segment, starting with the quarterly comparison of natural gas operations on slide seven.
Net income for the natural gas operations segment was $118 7 million for the first quarter of 2021, and an increase of $35 1 million compared to last year's first quarter. A couple of items stand out and this waterfall chart and I'll touch on them first the $23 $9 million increase and offer.
Margin was driven by $18 million and for rate relief associated with recently completed rate cases, and our three state service territory.
Continuing strong customer growth contributed $6 million of operating margin as we experienced 37001st time meter sets over the past 12 months, a one 8% growth rate.
The other income increase of $21 1 billion, primarily is due to changes and the cash surrender values of coli policies between quarters that I mentioned as.
And as you May remember COVID-19, influenced a 20% decline and the S&P 500 during the first quarter of 2020.
Resulting in a 15 and a half million dollars coli loss for Q1 2020 for us.
At that time, the investments underlying the cash surrender values of the policies from weighted over 50% towards equities.
After a recovery of the market and our coli values later in 2020, the company rebalanced the underlying investments to approximately 25% and equities, which is designed to reduce the volatility and coli income and the current quarter coli income was $2 $7 million.
The $8 $3 million increase and depreciation amortization and general taxes includes $4 million from depreciation and $4 3 million from general taxes.
The general tax increase is due to the resetting of the Arizona property tax tracker and quarterly year over year comparisons are anticipated to reflect a somewhat similar level of expense increase for each quarter and 2021.
In addition to the normal increase and depreciation due to our current level of capital expenditures and the implementation of the new customer service system placed in service in May.
And and anticipated implementation later in the year of a new gas transaction system are expected to increase full year 2021 amortization expense by $5 million to $6 million.
Operations, and maintenance or O&M expense increased $3 million and 3% compared to the prior year quarter and includes about 400000 of incremental bad debt expense.
Late payment fee moratoriums are beginning to be listed as the economies and our service territory has returned to more normal operations.
Let's go to slide eight which depicts centuries comparative changes for the first quarter.
Results for century, our utility infrastructure services segment improved $9 3 million and the first quarter of 2021 versus the first quarter of the prior year.
Due to business seasonality losses during the first quarter are typically due to the impact from winter weather on operations and shown on this slide the current quarter reflects a revenue increase of 30, and a half million or 9%, primarily due to 21 6 million of incremental electric infrastructure work.
Which includes approximately $9 million from emergency storm restoration services performed by line Tech volume tornadoes and ice storms in Texas and surrounding areas.
The remaining revenue increase includes the benefits of favorable weather working conditions and several areas accelerating some work previously planned for later in the year.
Infrastructure services expenses increased $16 3 million or 5%, primarily due to costs associated with the increase and work performed.
Operating efficiencies improved due to favorable weather conditions and reduced COVID-19 restrictions from the prior year.
Let's look at total company 12 month results on slide nine.
This slide depicts the relative contributions by our two business segments. During the 12 months ended March 31 and 2021.
As you can see natural gas operations provided 70% of our consolidated net income while centuries utility infrastructure services group provided 30%.
This is consistent with our near term expectations.
Slide 10 shows the components of $58 million increase and natural gas operations income between 12 month periods.
Like the first quarter coli fluctuations had a significant impact as the current 12 months period includes a 27 $4 million increase and coli cash surrender values.
Reflecting the rebound from the COVID-19 influence first quarter of 2020 and outsized performance during the remainder of that here the.
And the prior 12 month period reflected a coli loss of $5 $7 million, resulting in a $33 $1 million change between periods.
As I mentioned earlier, we rebalanced the underlying investments associated with the coli policies to minimize future cash surrender value and volatility while maintaining the face values of the policies.
The $33 $9 million improvement and operating margin includes $24 million and combined rate and leads and Arizona, California, and Nevada and $15 million from solid customer growth.
The $10 three or 2%.
Decrease and O&M includes lower travel and in person training costs of $5 million due to the impacts of COVID-19.
Modified process to minimize customer contact or Inc. Tenant changes saved.
3 million between periods, partially offsetting these benefits was $6 million of incremental damage prevention or call before you dig costs associated with utility and construction related activities throughout our service territories.
The $21 $8 million increase in depreciation and amortization and general taxes reflects the impacts of the $634 million or 8% increase and average gas plant and service and one quarter of the new level of property taxes under the Arizona tracking mechanisms.
The components of the 12 month change and our utility infrastructure services segment are reflected on slide 11.
This slide shows the components of the $34 million increase and century net income between 12 month periods revenues increased $207 million or 12%, including a $166 million of incremental electric infrastructure revenues.
Included in the incremental electric revenues and the 12 month period was $95 million from emergency restoration services performed by line Tech following hurricane tornado and other storm damage to customers above ground utility infrastructure compared to $13 2 million and similar services during the corresponding.
And in period a year ago.
Revenue is also grew with existing gas infrastructure customers.
Infrastructure expenses were $154 million or 10% higher than the prior year period, largely due to incremental expenses related to electric infrastructure work of 91 4 million Inc.
<unk> costs associated with storm restoration work and general and administrative costs, which are a component of infrastructure services expenses were $26 million higher and the current 12 month period due to the growth of the business and higher profit based incentive compensation costs.
Depreciation and amortization increased $7 9 million, including $6 3 million associated with equipment utilized to support the expanded electric infrastructure services work.
For the 12 months ended March 31 and 2021.
Century operations contributed $84 2 million and net income toward our consolidated results.
Slide 12 depicts the substantial increase and century EBITDA for the quarter and 12 months ended March 31, 2021, the quarterly increase was $13 2 million or 98%, while the 12 month increase was $48 9 million or 28%.
Slide 13 shows the comparative position of century versus a core group of and peer companies.
Over the past 10 years century ranked highest and compound annual growth rates for both the net income and EBITDA, while maintaining the lowest volatility from those metrics. We believe centuries focus on distribution construction for both gas and electric is a competitive advantage and let.
Let me briefly touch on and on our gas segment.
Liquidity and capital expenditures and the associated financing plans beginning on slide 14.
This slide shows a solid liquidity position of our utility with the issuance of $250 million and short term borrowings and March to pay for the like amount of incremental gas costs associated with the spike in prices in February we had available capacity under our revolving credit facility of $233 million.
And cash on hand of $49 8 million as of March 31, and 2021.
Our plans for capital investment across our three state service territory are detailed on slide 15, we.
We plan to invest approximately $2 $1 billion over the next three years to serve new growth and reinforce the safety and reliability of our gas distribution network, we anticipated funding about 50% of those investments with internal cash flows and funding the remaining balance with a pretty EBIT mix of equity and.
Death.
As shown on slide 16, when you add in our utility upstream dividend payout expectations, we anticipate our three year capital needs will be approximately $2 5 billion we've.
We plan to source up with about $1 2 billion and cash flow from operations, approximately $600 million and utility debt issuances and about $700 million and equity issuances as indicated in our 10-Q southwest gas holdings has a new $500 million ATM program that we plan to utilize over the next two to three years.
Yes.
And the graphic on slide 17 illustrates the continued expected investment of capital of about $700 million per year.
Compared to our historic expenditures.
Slide 18 shows the recent growth of the dividend at SWM, which we believe is an important part of the total shareholder return and we offer to our investors. We have increased the dividend each year for the past 15 years and target a payout ratio of about 55% to 65%.
Turning to slide 19 that continued investment and our natural gas distribution systems is expected to grow our rate base from $4 5 billion at the beginning of this year to $6 5 billion at the end of 2025, a five year compound annual growth rate of seven 5%.
I'll now turn the call over to Justin Brown for an update on regulatory matters. Thanks.
Thanks, Greg.
During the first quarter, we received final approval of our proposed settlement and our California General rate case with this approval, we will see increased revenues of approximately $66 million year over year day to refresh rates across each of our state regulatory jurisdictions.
As shown on slide 20, and the final decision on our California General rate case settlement was approved in March. The decision provides a revenue increase of approximately $6 5 million and an ROE of 10% relative to and equity layer of 52%. The approval allows the company to continue our annual attrition filings, which will allow us to achieve.
<unk> revenues by 275% annually over the next five year rate cycle rates.
Rates became effective April one, but the company was previously authorized to track the impact of the change and margin beginning January one and a memorandum account and tell rates became effective as such we plan to make a filing later this year to adjust rates to reflect those amounts that have been tracked since January one.
And two other very important components of the rate case include approval of our proposed risk informed decision, making programs, which will allow us to invest up to $119 million over the next five years to ensure continued safe and reliable service to our California customers and we will also be allowed to recover these costs annually through a surcharge.
In addition, we agreed to remove a large replacement project and North Lake Tahoe from rate base or from base rates.
And moving to a surcharge. This project was originally estimated as a $60 million project and we included half as part of the future test period, and our original filing which accounted for about $4 million of the original $12 8 million proposed deficiency and the case. This amount will now be recovered annually through a surcharge and segments of the project are completed.
Turning to slide 21 rates, resulting from our Arizona General rate case that became effective January one and allowing for increased revenues of approximately 37.002 million 21 net increases in addition to the approximate $23 million increase that was approved and the company's Nevada General rate case last year with <unk>.
Rates that became effective in October of 2020.
Moving to slide 22, and February we made a compliance filing and Arizona identify and our plan for reconciling Unrecovered revenues from the previously approved coil and VSP programs and 2019, the commission froze the existing surcharges and suspended future surcharge filings pending the outcome and our general.
Our rate case as such we now need to reconcile the differences between the coil and VSP surcharge revenue, we've received to date and the amount outstanding through calendar year 2020, plus address the BSP plant that was not included in base rates. Following our most recent rate case.
And total this adds up to about $74 million we.
We plan to make a filing later this month requesting to adjust the surcharges to recover these amounts at which time the commission will evaluate their proposal, including the time period in which the costs are going to be recover we would expect to see a decision before the end of the year.
Turning to slide 23, with a quick update on our current expansion related projects that are underway and Nevada, and southern Nevada, We continue to make progress on our $28 million expansion and project and mesquite with both homebuilders and commercial customers. So carrying contracts for natural gas service as we continue to build out the infrastructure within the.
The city and northern Nevada, the $62 million expansion project and Spring Creek also continues to make progress and we will began buildout and the second phase of the project and 2021, while we continue to hook up customers from the first phase, where we saw 100% of the eligible customers request gas service lastly.
Turning to slide 24, we have a new expansion opportunity and Arizona. They don't involve the acquisition of the gas assets up Graham County utilities, a member on cooperative located in southeast.
Arizona.
The acquisition contemplate a $3 $5 million transaction comprised of approximately right comprised of approximate rate base of $2 5 million and and acquisition of approximately $1 million, which will be proposed for recovery and the Companys next general rate case.
Grant County Utilities has approximately 5200 members who are also customers of the utility and they've already voted in favor of the sell up the gas assets to southwest gas sub.
Subsequent to the member approval southwest gas and Grant County filed a joint application with the Arizona Corporation Commission and April seeking final authority.
To close the acquisition, we anticipate receiving approval and the acquisition before year end and with that I'll turn it back to John.
Thanks, Justin.
Turning to slide 25, as I mentioned at the outset of the call. We continue to experience strong customer growth and their local economies rebound from COVID-19 related commerce restrictions and people and businesses continue to find our service territories desirable places to relocate two and growth slide 25.
Not only shows and we added over 37000 customers over the past year, but the ear on your trailing 12 month gains and each month were stronger than the year before.
Moving to slide 26 part of the continued strong demand for natural gas and our service territories. There is attributable to the excellent customer service our employees and provide our customers. We earned a 96% satisfaction rating for our customers and 91% of our customers consider and natural gas service to.
And their preferred energy provider. We've also on the recent J D power best and the West Service Awards, and both residential and business categories.
On slide 27.
We show some additional detail on the diversified nature of our customer base and our customers are mostly residential and commercial and are spread across three different states each of which has constructed a decoupled rate designs that not only provide revenue stability, but also support our encouragement of energy efficiency to cash.
Keep bills low for our customers.
Turning to slide 28, and provide some recent media references to the strongly rebounding, Arizona economy or half of our 2 million customers reside population growth, new home sales and economic momentum and Arizona, all significantly exceed national averages and moving to slide 29.
Similar to Arizona, and Nevada, we also seem very brisk and economic growth.
Rebounding economy continued population in migration and new home sales continue at accelerated paces due to our state's business friendly climate and desirable desert living lifestyle on slide 30 is just and referenced we show that continued heightened demand for natural gas service.
And is allowing us to expand our service territories and reach new customers pursuant to economic development oriented and legislation and Nevada, we've apportioned up to $100 million of new capital to reach these communities and both northern and Southern Nevada Service territory expansions and Mosquito and Spring Creek.
Well, not only provide convenience and energy cost savings to our new customers, but will allow them to reduce their communities carbon footprint and as they move towards natural gas usage and away from more carbon intense energy alternatives.
Slide 31, as a reminder, that sustainability is a primary focus itself was gas as we embrace greenhouse gas reduction efforts and pivot our supply towards exciting new opportunities turning to slide 32, we outline a variety of legislative and regulatory efforts, we have undertaken and each.
Each of our states to pursue compressed natural gas renewable natural gas hydrogen and more we're finding very favorable support and both our legislative and regulatory venues to continue pursuit of initiatives that are aligned with the efforts to reduce greenhouse gas emissions and be responsive to interests related to climate change.
Range moving to slide 33.
<unk> support and commercial interest that we're seeing and our service territory is related to renewable natural gas compressed natural gas hydrogen and other technologies is translating into real projects throughout our service area ours southwest gas is partnering with dairy farms wastewater treatment.
And that's landfills and fleet transportation operators to provide environmentally friendly energy options and we expect to continue to grow significantly and the coming years.
On slide 34, we reference our efforts to ensure methane emissions and important greenhouse gas concern from our distribution system are minimized southwest gas operates one of the most modern gas distribution systems and the nation, our initiatives to replace older vintages of pipe and adopt operational Pratt.
Mrs that reduce escaping methane have allowed us to significantly reduce methane emissions, even while the number of miles of pipe and service has grown dramatically.
Turning to slide 35 for more on our many initiatives pursuing a sustainable future for the communities. We serve please see our latest sustainability report, which can be accessed at the website noted near the bottom of the slide.
Moving to slide 36, we summarize the key components of our business that we believe create and excellent value proposition for our investors for our natural gas operations. We anticipate continued strong customer growth investment and Capex and result in rate base growth, we will continue to prioritize cost controls.
And low bills as a competitive advantage for us compared to other energy providers, we will continue to expand our efforts pursuing a sustainable energy future for our customers. We will continue constructive collaborative relationships with our regulators and see continued growth from both earnings and dividends and.
And at our utility infrastructure services business segment, we will pursue growth opportunities to replace gas and electric infrastructure with our regulated utility customers manage our cost with an eye towards operational excellence grow our profitability and dividends and provide a source of cash for holdings.
On slide 37, as I indicated and at the outset of the call and recognition of our first quarter performance. We are slightly modifying our previously provided earnings guidance range of $3 95 to $4 20, and moving to a range of $4 to $4 20.
<unk> five cents off the bottom of our previously provided range.
On Slide 38, we provide 2021 line item guidance supporting our earnings per share guidance range and.
And our natural gas operations, we expect operating margin to increase by 6% to 8% operating margins rise by 3% to 5% total pension costs are expected to be flat compared to last year. We assume normalized company owned life insurance returns of $3 million to $5 million and expect capital expenditures for the year to total about <unk> <unk>.
$100 million and our century infrastructure segment revenues should rise by 1% and 4% over our record results. This past year operating income should be five three to five 8% of revenues and interest expense is estimated at $7 million to $8 million net income expectations are net.
Non controlling interests and recall the fluctuations and Canadian exchange rates can influence results due to our Canadian operations.
Moving to slide 39, we share some of our longer term expectations at the southwest gas holdings level, we anticipate equity issuances totaling $600 million to $800 million over the three years ended 2023, and a targeted dividend payout ratio of 55% to 65% at our regulated.
<unk> operations, we expect to invest $3 $5 billion to grow and modernize our gas distribution network over the five years ended 2025 with rate base expected to grow at a compounded annual growth rate of seven 5% per year over that same period and at our center.
<unk> operations, we expect revenues to grow and average of 5% to 8% annually over the three years ending 2023 operating income was expected to be 5.25% to 6.25% over that same period, and EBITDA should approximate 10% to 11% of revenues finally.
Turning to slide 40, and we believe southwest gas holdings offers our investors the compelling growth oriented investments. We offered two complementary business segments, which are both poised for significant growth from the years ahead with our regulated operations expected to contribute 71% of holdings net and.
Income from the three year period ended 2023, and our infrastructure services segment contributing 29% our regulated utility operations are expected to continue experiencing great growth and customers' capex and rate base, while providing safe reliable affordable and sustainable energy.
And as to our customers and with our century infrastructure services segment, providing complementary growth opportunities serving the growing needs of gas and electric distribution companies across North America, while providing increasing dividends and cash flows for southwest gas holdings.
And that I'll return the call to Ken.
Thanks, John.
That concludes our prepared presentation.
And of accidents and our slides we have also provided an appendix with slides and that includes other pertinent information about southwest gas holdings and its two business segments.
These slides can be reviewed and you can be use.
Our operator, John will now explain the process for asking questions.
Yeah.
Thank you at this time I would like to remind everyone. If you would like to ask a question you can press Star then the number one on your telephone keypad.
Again, that's star then the number one on your telephone keypad to ask a question, we'll pause just for a moment to compile the Q&A roster.
Yeah.
Yeah.
First question is coming from the line of Richard Sunderland from JP Morgan.
Your line is open.
Hi, good morning, Thanks for the time today.
Good morning.
Maybe starting on century, just curious on century's results. This quarter do you see this contribution from sustainable and potentially leading to additional growth on the electric side.
Yeah.
Richard This is John I think that's definitely we expect to see continued growth at century on the electric side, we think that there are opportunities to expand the work that we're doing with our current customers and we also are looking at opportunities to cross sell services. So in other words, if we have.
A long standing relationship with the combination utility that we're currently doing a lot of cash work for we're going to make sure that we know that they know that we can offer them electric services with the same level of high quality and safety and then of course, if there are any opportunistic bolt on M&A.
The options and the future the electric sector is certainly something that we.
We would look towards possibly expanding further in that manner as well.
Got it and I appreciate the color there and.
And then maybe turning to the upcoming coil Q filing and what are your expectations for the recovery process. Following the denial of the electric rider and the state recently, just curious and theirs.
Opposition from these types of mechanisms right now or maybe outfits and the larger and post test year discussion.
This statement.
Yes. Richard is just then I think this is a little bit different than some of those discussions I think those were.
But some of the more recent ones are more kind of prospective in nature as they are evaluating aps's rate case and things I mean these were previously approved I think we've talked before and also about the fact that.
When these were originally when the surcharges were originally frozen and suspended we actually moved the 2019 request, which was $12 million into the rate case as part of our amendment and that was ultimately approved and so I think from our perspective, when we look at that track record I mean, we.
Dissipate that this is something that will go through that they'll evaluate it and it should I think from our perspective follow a similar path to that.
Our expectations.
Got it to you and maybe in terms of the.
And the guard rails on the process here you see the debate centered more around.
And the timing or cadence of recovery or do you see other issues cropping up here.
Yes, I mean, I think that's a fair way to look at it I know like and our rate case example, as I mentioned the 12, we did it.
And included kind of back over a three year period, so about $4 million a year.
I would expect that consistent with your comment that some of the discussion is going to be more on the cadence and timing of it rather than the actual merits and I think.
From our perspective.
We went through the rate case process, there was absolutely zero findings.
About the you know the plant that was invested the performance of the mechanisms. They continued the coil program.
Decided not to continue the BSP, but when you look at kind of at record combined with.
The experience that we saw with moving the 19th surcharge amount to the rate case.
It's hard to imagine that there's going to be other issues that crop up but.
And these regulatory proceedings and Theres always something that comes up someone makes an argument that that we'll plan on addressing.
Dressing, but as we stand here today.
And I think we have a pretty good cash.
And in terms of what was previously approved the mechanisms are performance and adherence to those mechanisms and now it's a matter of just kind of truing that up and figuring out the time frame for which that will occur.
Got it and I appreciate the context here. Thank you.
Okay, and if you would like to ask a question. Please press Star then the number one on your telephone keypad.
Next question is coming from the line of Cody Clark from Bank of America.
Your line is open.
Hey, everyone. Thanks for taking my question.
Sure Corning.
So just on recovery and the the gas purchase costs and I'm wondering how you're thinking about you know great and place and considerations.
And also try and get recovery on on the riders that you just talked about.
Okay.
It got its just and again you know when we first experience.
And the price bag I mean, one of the first things. We did was evaluated kind of what the anticipated impact was going to be and looked at whether we needed to make any kind of incremental filing to extend the time period in which those are going to be recovered because of that sensitivity and as John mentioned during the call.
We have a big focus on making sure that our bills are affordable and competitive base.
Based on our analysis, and looking where gas costs have been as recently as the last three to five years, what we're going to experience as a result of this spike is not going to exceed those amounts that customers were experiencing just a few years ago. So we don't anticipate.
Any issues with respect to the gas cost recovery as it stands today and we anticipate currently that are mechanisms will.
Now to recover those costs over the time periods by which the mechanisms are designed.
And and I think that kind of goes hand in hand, with the tracker I mean, it's when you look at the tracker dollars. You know this is something where the commission had in place the annual surcharges and they wanted to take a closer look at some of the things based on some accusations that some the intervenors had made and the surcharge filings.
And we went through that process. There were no findings of any wrongdoing whatsoever, and so from our perspective.
And we'll work with them on a cadence of what time period to recover these to make sure that again, there is not any kind of unconscionable bill impact to customers because thats something were sensitive too.
Okay got it that's super helpful and is there any initial thoughts around timing on when we might get some more details on that.
On the surcharge filing.
Yeah right.
Yes.
We're going to make that filing this month. So that's something you should be able to see as part of our filing.
Before the end of the month.
Gotcha, Okay, and then just on R&D, if I can't quickly.
Can you provide a little bit more color and how you're thinking about this opportunity in terms of your your longer term growth.
Operating some of the more constructive jurisdictions and the country for these kind of projects. So it seems like there could be some upside.
Yeah Cody this is John and I agree with you I think there is upside for that I think it is an exciting new opportunity.
We have already as I mentioned earlier started a lot of projects, we've been working with our legislature and our regulators and.
And now for the most part it's kind of all good we're also seeing.
Higher interest by our customers and this kind of product for example here in southern Nevada.
The municipal bus fleet, operator was previously operating their buses on compressed natural gas and.
And they wanted to reduce the carbon footprint, even more so they were considering the possibility of electric buses, but they are significantly more expensive and operationally and inferior. So we worked with them to get a supply for them of RMG that will essentially let them.
From.
Compressed natural gas that's conventional to compressed natural gas since our and G and be able to address their interest and reducing greenhouse gas and so I think youre going to see a lot of opportunities on that on the road ahead and we're excited about it.
Great and close them.
And that's.
All I had thanks, so much for you guys.
Thanks Cody.
Next question is coming from the line of Chris Elling House from Siebert Williams Youre line is open.
Hey, guys good morning, Chris.
E five cent increase and the and.
Bottom and the guidance range can we infer that thats, the maybe what you might call the unusual level of the country.
<unk>.
Restoration work first quarter.
Chris This is Greg I don't know that I would classify it has something to do with the level of storm work that they did in Q1 more that they had solid performance in Q1 as you are aware.
The first quarter is always a down quarter for centuries, that's the worst winter time, whether they work and then kind of slows the gas work and so we were very pleased with the level of work that they were able to get done and the first quarter and it took a little bit of.
And the uncertainty out of the rest of the year by doing that so that was the impetus and the basis for raising that bottom part of the guidance up and nickel.
Does that sort of accelerated work level give them greater opportunities for the rest of the year.
And this is Greg and I think they they've always had really good opportunities as I mentioned and in my remarks.
Some of the work that they did get.
Because there was some favorable weather in Q1 was some work that they had planned to do a little later in the year, but they are certainly open and and doing well with their customers as we're all aware the infrastructure area throughout the U S is looking to harden their assets right both on the.
Electric and gas side to make them safer and more reliable. So I think the future is very bright for century, and maybe Q1 is just a small indication of what lies lies.
Go ahead for them.
Obviously, you've had some pretty.
Strong century.
Revenues from the electric side.
Can you give us some color about how much of that is just some of the hurricane restoration and the winter restoration as opposed to.
How much traction you're getting and the cross selling opportunity that you had at the times revenue.
Hey, Chris This is John and I think really it's both.
That you know when we made the line Tech acquisition, and we're able to grow that at really provide great opportunities to provide more electric services as part of their platform and I think that strategically and that's the direction. We want to continue to grow when we had the line tech.
And as we were able to add what we would classify as a non union electric provider and we think that there are a lot of opportunities and the unionized electric space as well so not only as you pointed out are we going to want to make sure that we're there to help our regulated.
And the electric utility customers rebound from events that mother nature imposes on them.
But we also are going to want to see if there are opportunities to continue to expand the percentage of revenues that that business generates from the electric sector.
Okay.
Yes, and then it's about good interest.
Our and Gs side, the casinos and Vegas had been pretty aggressive and sustainability issues.
And you talked about interest coming from your customers I assume that.
Casinos are pretty well aligned.
Kurt.
Absolutely Chris This is John again, they're very interested in that and in fact.
And we were recently working with one of the larger properties to see if there was an opportunity to convert their supply entirely over to hydrogen and so that's another option because as you know Chris from spending.
A regular amount of time and our service territory that is a differentiator that a lot of those properties look towards to encourage customers to visit their property and vis vis other property and so I think that definitely there will be opportunities with <unk>.
Sorts, but there'll also be opportunities with a lot of other businesses.
I'm sure you could name that are very sensitive about their carbon footprint looking for opportunities to reduce it and I think our N. G is one of the ways. They can do that and a fairly seamless way at a fairly low cost. So we're going to want it.
And to pursue those opportunities not only because we think that it helps us.
Checked a sustainable image for the future, but frankly, because our customers are demanding it.
Okay.
Lastly.
The small acquisition and and Arizona are you guys seeing other co op opportunities out there.
Chris This is John again, I think that there could be other opportunities, we have and talked with a number of other parties. We don't have anything else on the board right now, but as I'm sure you will appreciate.
And the operational requirements of running and natural gas distribution system with <unk>.
Safety with upgrading your distribution network etcetera, I think that there are other folks that are looking at whether that is a responsibility that they would just assume AR turnover to another party like us. So certainly we're going to be very interested and that.
And as soon as we see those opportunities come up a lot of capitalize them and them and I think that the regulators are frankly supportive of that because if you can move from a relatively small operator and gear.
That and the family of a regular relatively big operator like us it makes safety oriented regulation and potential rate impacts from aging infrastructure a lot more palatable to those communities.
Sure. Okay, Thanks, John and everybody have a great weekend, okay. Thanks, Chris.
We don't have any questions at this time I'll be turning it back to the presenters.
Well that concludes our prepared presentation.
Thank you John for.
Doing your work is the operator.
And we appreciate your participation and interest and southwest Gas Holdings, Inc, and everyone have a great weekend. Thank you.
This concludes today's conference call. Thank you all for participating you may now disconnect.
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