Q3 2021 Portland General Electric Co Earnings Call

October 29, 2021

Good morning, everyone and welcome to the Portland General Electric company's third quarter 2021 earnings results Conference call.

Today is Friday October 29, 2021. This call is being recorded and as such all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad.

If you'd like to withdraw your question. Please press the pound key on your telephone keypad.

If you do intend to ask a question. Please avoid the use of speaker phones for opening remarks, I'd like to turn the conference call over to Portland General Electric's Senior director of Investor Relations Treasury and risk management hard done her a meal. Please go ahead sir.

Thank you Jonathan Good morning, everyone I am pleased that youre able to join us today.

We begin this morning I'd like to remind you that we have prepared a presentation to supplement our discussion, which we'll be referencing throughout the call.

Slides are available on our website at investors <unk> Portland General Dotcom.

Turning to slide two some of our remarks. This morning will constitute forward looking statements. We caution you that such statements involve inherent risks and uncertainty and actual results may differ materially from our expectations.

For a description of some of the factors that could cause the actual results to differ materially. Please refer to our earnings press release and our most recent periodic reports on forms 10-K, and 10-Q, which are available on our website.

Leading our discussion today are marine Pope President and CEO and Jim Ajello Senior Vice President of Finance CFO and Treasurer. Following their prepared remarks, we will open the line for your questions and now it's my pleasure to turn the call over to Maria.

Good morning, and thank you Jonathan and thank you all for joining us.

Summer weather and power market volatility had a significant impact on our region and on our results this quarter.

Turning to slide four we reported net income of $50 million or 56 cents per share for the third quarter of 2021. This compares with a loss of $17 million or 19.

Per share for the third quarter of 2020.

Year to date financial performance is on track and despite third quarter volatility in the energy markets and higher O&M, we are reaffirming our 2021 earnings guidance of $2 70.

To $2 85 per share or.

Our long term outlook remains unchanged and we are reaffirming our 4% to 6% long term earnings growth guidance.

Overall, our business is strong driven by loan growth from the technology and digital sectors as well as elevated residential use due in part to the hot summer weather and continued COVID-19 constraints.

Year to date revenue is up 12% versus 2020 and for the quarter up 17% versus last year.

Jim will cover third quarter results in more detail provide regulatory capital updates and discuss the outlook for the rest of the year.

The ongoing impacts of climate change underscore the importance of investments in action.

We are taking to rapidly transition to a clean energy future and meet our 2030 de carbonization goals, while also ensuring that we have sufficient capacity.

We estimate that our 2030 targets will require approximately 1500 to 2000 megawatts of additional carbon free resources and approximately 800 megawatts not admitting capacity resources. In addition to removing call from our portfolio.

We're seeking approximately 1000 megawatts of renewable and non emitting capacity resources as part of our RFP, which will be issued in December.

As part of this procurement, we plan to add 375 to 500 megawatts of renewables to our portfolio.

We will also bring on approximately 375 of non admitting to dispatch the capacity.

We will work with the <unk> and party to evaluate opportunities to procure additional resources. So the types of projects submitted in the IRB process excuse me the RFP process makes sense for our customers and are attractively priced.

We could see procuring about a third of our clean energy resources needed to meet the 2030 emissions target reductions with data RSP.

We not only need more renewables.

Need to upgrade the grid to integrate these resources, making it easier for customers to participate in demand response, and distributed energy programs, helping to keep service reliable and affordable.

And our recent distributed resource excuse me just for these system plan, we lay out plans for the grid of the future. It supports robust two way energy flows and better manage their energy use, especially during peak periods.

We estimate that as much as 25%.

Flexibility needed to meet our Decarbonize future would come from customers and distributed energy resources, such as solar panels battery electric vehicles.

During the 2021 summer heat them, we worked with customers to say 62 megawatts of power equivalent to powering 25000 homes.

We're working to significantly grow this program to 500 megawatts.

Of 2023.

We are very pleased to have been selected by the department of energy as part of their connect communities program and are working with local to Eni groups on the placement of resources, such as batteries, two way EV charging and solar panels to ensure that our customers and underserved communities.

This clean energy transition.

As one of the early participants in the Western energy imbalance market, we have been a leader in advocating for the expansion and strengthening of wholesale markets to increase reliability accelerate de carbonization and lower cost for customers.

P J in our utility partners across the west are working to bolster reliability planning advanced integrated market and examine the benefits of a western regional transmission organization.

Throughout these processes, we will continue to advocate for rigorous resource adequacy standards.

Sustainability.

Is foundational to our business.

In September we published our ESG report building upon our number one ranked voluntarily voluntary renewable program.

Sustainability is part of the fabric of everything we do including financing. We recently adopted a green financing framework under which we successfully placed $150 million in green bonds.

Yesterday, we filed a rate case with the federal Energy Regulatory Commission to review, our third party transmission revenue.

The revenue that we received from these new prices will offset retail customer prices to a revenue credit.

We continue to make progress on our 2022 general rate case and have reached settlements with stakeholders in October that resolves the cost of equity.

And you're at nine 5% as well as a 50 50 cap structure.

We look forward to working with stakeholders on the remaining items.

Finally.

I'm pleased to welcome Dawn Farrell to our board of Directors, Don retired as President and CEO Transalta in March our deep experience in the energy sector as well as her leadership and transforming a thermal based generation company to a leading clean renewable energy company will be important as we advance our own.

Formation.

Now I'd like to turn the call over to Jim. Thank you Maria and good morning, everyone. Our third quarter results reflect the ongoing opportunity and the challenge is the economy enters a new normal we experienced strong load growth from higher demand and hotter weather at the same time volatility in the power markets.

Was evident throughout the summer.

The fundamentals of our economy remains strong and our fueling strong growth in energy demand and a growing labor market with continued job growth in the region. This quarter, we had strong deliveries across our customer segments with additional benefits from favorable weather.

Our high Tech and digital services sectors continue to grow at a rapid pace, 9% higher when compared to Q3 2020 customers are expanding capacity and we've seen an uptick in site selection activity by data center developers and others residential usage.

<unk> significantly elevated as a remote work continues we anticipate these trends to continue.

And this has contributed to our strong year over year load growth.

Turning to slide five we reported GAAP income of 56 cents per share in the third quarter of <unk> 21, compared to a GAAP loss of <unk> 19 per share in the third quarter of 2020 non-GAAP income for the third quarter of 2020 is 90.

After removing the negative impact of the energy trading losses.

I'll cover our financial performance quarter over quarter on slide six.

Beginning with a loss of <unk> 19.

Per share for the third quarter of 2020, we will add back the $1.09 one time impact of the energy trading losses.

We experienced a 37 cent increase in total revenue is primarily due to the strong economy driving growth in our service territory with the balance due to warmer weather. This represents a 17% year over year increase in total revenues.

Offsetting this was a 39.

Of unfavorable power cost, we experienced substantially higher market prices due to warmer weather and increased regional demand for capacity as well as lower renewable generation.

As a result, we are forecast to be above the $30 million threshold to begin customer cost sharing pursuant to our power cost adjustment mechanism through.

Through the quarter, we have deferred $27 million, which represents 90% of the variance above that threshold, we anticipate the regulatory process related to this deferral will begin in 2022 after the pending rate case concludes.

Our power cost this summer were not materially impacted by rising natural gas prices.

Our portfolio is well positioned and a bit long to balanced gas price fluctuation and we have significant gas storage at the $4 1 billion cubic foot north mist facility that we can draw upon.

As needed.

And 11 decreased EPS from costs associated with our fixed operating expenses, including <unk> for enhanced wildfire mitigation <unk> of additional vegetation management, including work that was delayed as we focused on storm restoration during the second quarter two cents of service restoration costs.

And two cents of miscellaneous other expenses.

There was an 18th cent decrease to EPS from administrative expense.

Half of the year over year increase is attributed to items that were unique to 2020, including seven and adjustments to incentive programs. Following the energy trading losses in the prior period and <unk> from the deferral of bad debt. Following the approval of the COVID-19 deferral.

The remaining administrative expense can be attributed to <unk> for outside services to support improvements to our customer experience.

<unk> increase in employee benefit expenses in <unk> from miscellaneous other expenses.

While O&M was higher this quarter when compared to Q3 2020 on a year over year basis, our cost have increased only 2% annually. Since 2019. The fact that we have reduced planned outages by 29% year over year stood up a large wildfire prevention program and Greg.

Increased vegetation management is a testament to the efficiency, we built into the O&M program.

Managing costs, consistent with inflation, while increasing wildfire resiliency, improving our customer experience and growing our digital capabilities demonstrates the effectiveness and efficiency of our workforce as well as the use of technology.

Finally, there was a <unk> decreased the EPS from the following items <unk> benefit from lower depreciation and amortization due to plant.

Retirements <unk> of higher tax expense due to the timing difference of.

Retirements in 2020.

And <unk> from other unfavorable miscellaneous items.

Turning to slide seven last month, we reached an agreement with stakeholders on cost of capital and our 2022 General rate case, our agreement supports our capital structure of 50% debt, 50% equity and a nine 5% allowed Roe.

We see this as a constructive outcome and look forward to discussing remaining unsettled issues with parties in the case.

As you saw earlier this month, we made several regulatory filings, which we shared and which we shared our plans to advance the strategy to meet our targets for reducing greenhouse emissions and the power. We served customers Maria discussed our RFP plans earlier in this call we still plan to bid in benchmark <unk>.

<unk> into the RFP process to support our bids we filed for an affiliated interest entity that will help support our de carbonization injuries.

Our proposal is intended to address certain structural tax disadvantages encountered by utilities due to the unintended consequences of tax normalization requirements. The affiliate interest would provide a greater price benefit to our customers as P. J.

Decarbonize its generation portfolio.

Turning to slide eight which shows our updated capital forecast through 2025, we increased our capital expenditure forecast by over $100 million. This quarter. This increase was concentrated in 2022 and is primarily associated with grid based investments.

<unk> recent settlement in the GIC, assuming approval by the OTC. This affirms that we will not need to issue equity in 2022 to meet our capital requirements unless there is a significant renewable addition, stemming from the aforementioned RFP, we continue to maintain a solid balance sheet.

Including strong liquidity and investment grade ratings.

Company by a stable credit outlook total available liquidity at 930 is just over $1 billion at.

At PGE sustainability is woven into the fabric of who we are as a company and we stand behind that through our actions as an organization, including in our financing plans. This quarter, we renewed and increased by $150 million our revolving credit facility to include sustainability linked to performance metrics.

We also refinanced the wheat ridge renewable energy facility with low cost debt under a green bond and alignment with our green financing framework. The demand for this was evident as it was nearly six times oversubscribed. Our investors are keen to purchase debt linked to sustainable investments going forward, we will seek out opportunities.

<unk> tie our long term debt.

Toward our sustainability strategy two capital investments not only are these actions good for our business, but theyre also good for society.

Turning to slide nine our year, our year to date 2021 performance remains on track.

We reaffirm our guidance range of $2 70 to $2 85.

And we remain on track to achieve long term earnings growth guidance.

4% to 6% from the 2019 base year.

The picture for 2021 and beyond remains clear strong growth in customer demand for clean affordable safe reliable and equitable energy paves the way for us to execute on our long term financial targets and deliver value for customers and investors alike, and now operator, we're ready for questions.

Certainly ladies and gentlemen, once again, if you have a question. Please press Star then one on your Touchtone telephone. If your question has been answered and you'd like to remove yourself from the queue. Please press the pound key our first question comes from the line of Intel Kim from Goldman Sachs. Your question. Please.

Thank you.

My first question.

Okay.

Financial in nature, just Jim for the year do you think about the year to date results.

And you're reiterating the midpoint of the guidance range that you are right last year.

To imply a pretty healthy fourth quarter earnings.

Relative to if you look at 2019 fourth quarter or.

Fourth quarter results can you just help us.

Generally piece.

Piece together some of the moving parts that gets us there.

Yes, Thanks <unk>.

As I understood. Your question you are trying to in effect walk.

From where we are today to the.

Result of the 2021 guidance.

In fact, what we might do in the fourth quarter. So let me, let me try to Kurt Kurt do I get that right yes.

Yes, that's correct, okay perfect. Okay. So let's.

Look back to the fourth quarter of 2020.

Sure.

Earnings were <unk> 57 per share you may recall, but also we recorded a.

Asset retirement.

Obligation for our Sullivan, our hydro facility a facility that's well over 100 years old in fact.

And that was <unk> 17, a share we also adjusted.

Incentives for that fourth quarter as non-GAAP earnings where we're.

Picking up speed in the fourth quarter. So in reality, what happened was the way I look at the fourth quarter and I walk to the fourth quarter of this year, we had about 22.

Between the ROE and the incentive adjustment.

Added to the <unk> 57 to normalize the fourth quarter of 2020, which gets you to about 79.

And that in fact.

It gets you to about the mid point, if that were to reoccur again in 2021 of the present range does that help.

Okay, so the arrow, but pretty.

Okay component of it.

Yes, the <unk> was 17 cents a share incentive adjustments $5 20 to add debt to 57, you would normalize fourth quarter of 20% to 79, a share and we're at 198 or 198 as you would know for the year to date.

Presently alright.

Alright.

Okay.

That definitely helps and thank you for that.

Second question.

Maria just broader picture I think.

No question guys, it's the state of Oregon.

Peter.

Proposing and advocating and acting on.

The clean energy transformation in Portland.

Part of that.

We think about the the pending reconciliation package that is out there and the potential for extensions.

And from changes to how those mechanisms work how does that how do you think about that impacting or creating them.

Mental opportunities maybe even over the next five years in terms of different clean energy investments that could come about.

First of all it's a great question and we were very pleased to see the announcements yesterday, our significant investments that will help us and others transition to a clean energy economy. The structure of the tax credits in the bill are particularly important to us.

As you know we've worked with Senator Wyden on Tech neutral tax credits those are reflected in what was discussed yesterday by the president.

And also important to us as tax normalization.

That's included in there.

<unk> working.

Very focused on normalization for transmission and in particular for storage and so that those remain our goals of ours should that not take place the affiliate filing that.

Jim talked about will give us.

The level playing field to continue to move forward with important component.

From a.

Utility standpoint for our customers.

Around battery storage and others. So that we can get the very lowest cost for customers as we make this important transition.

Understood.

Is it for me thank you.

Thank you.

Thank you. Our next question comes from the line of Julien Dumoulin Smith from Bank of America. Your question. Please.

Thank you Andrea and good morning.

Good morning team, Thank you and congrats to Don as well I don't know if she is there, but well done on bringing on more talent here.

But.

Yeah.

If I could just jump into the rate case, just real quickly here two quick clarification. So.

First off just following the earlier settlement.

Obviously on cap section row.

How do you frame the potential to settle.

Other outstanding items and just the process.

They're in and then and then related to that if you could clarify given the capital structure.

50 50 authorized.

Does that change any equity dynamics.

Far as Youre concerned here.

Julian it's Jim good morning, I'll kick off so.

To take your last question first yes. It does it gives me confidence that we could go into 2022 without the issuance of any equity. We're in very good shape from a balance sheet standpoint, our cost of financing and able to fund even that increased capital program that I spoke of a moment ago we've changed.

Debt from $5 50 next year or two to $6 55.

And I'll just go further and Maria may want to add in a moment, but.

We received comments earlier this week, we are evaluating those.

I would say that this is a normal part of the process.

Just wanted to remind everyone that.

We we deferred filing a bit here earlier this year.

In consideration of the community impacts on Covid. So I think we were we.

We respect that everybody's interest in terms of timing.

We feel we put forward a pretty modest proposal frankly.

About three 9% 2% of that was in the AUT itself, it's largely a capital case, we added 990.

<unk> $93 million of capital between the last time rates were filed.

We have kept as I mentioned this in the remarks, a moment ago, our O&M pretty tight over that period of time, So and as you would know the company has a history of settling so we are about to get into a process where were we will exchange information and hopefully get to that outcome, but it's too soon to predict anything.

All Maria anything to add no one I want to emphasize that as we've made decisions around our rate case, we have been particularly cognizant of the economy and particularly on those most impacted by the pandemic and we as a result delayed filing our rate case.

I would also say that we were able to do that because of all of the tremendous work that our colleagues here at Portland General have done in Jim's prepared remarks, he talked about.

The efficiencies.

We have gotten from better use of technology digital driving efficiencies across our entire company is a matter of fact, our planned outages are down significantly over 20%.

We have seen better utilization of our assets better work management flow.

And.

There's no question that we are getting more work done than we have in the past.

And I'm really encouraged that we were able to keep through all of the ups and downs of the last 18 months to two years O&M, increasing at only 2% annually and this focus on cost, but more importantly on efficiency in driving outcomes for customers has allowed us to have.

The flexibility to delay to delay our rate cases, we brought on really important reliability.

Capital.

Capital also in the compliance area as Jim mentioned, we have really focused on vegetation management wildfire protection.

And as you know people are moving to Oregon, and we have quite the expansion in our digital.

And high Tech areas and so we have built.

Number of new Substations, even expanded some other of our infrastructure and.

It's really because of the good work of people at Portland General that we've been able to keep our prices as low as we are particularly in light of all of that is going on in our economy today.

Yeah.

Got it excellent.

And just if I can pivot to hear to the affiliate dynamic just real quickly you brought this up they seem somewhat novel.

Can you speak a little bit more as to.

Just how that might expand the opportunity or why pivot to this opportunity now given that you haven't used it in the past I understand that tax normalization obviously.

Has been in a better been out there and then maybe your level of confidence there and now that youre pivoting to this.

This strategic focus here on winning.

Sure. So first of all we remain hopeful.

And the industry is focused on resolving the tax normalization issues in those discussions as you have seen Senator wyden quoted in political and whatnot are very much in play.

This is not this affiliate filing is not new we've been talking about it for a long time and debating it.

So it's very similar to many other affiliate filings that you see across the country.

Wow us to utilize tax.

Tax advantages to reduce renewable costs from customers for customers.

To allow for more competition and really so that our customers can have the very lowest cost energy that's reliable as we transition to ever increasing amounts of new renewables.

We have we as well as many others have very aggressive 2030, and 2020 golf and we think this is an important tool in that toolbox.

Julien I think I hear you asking the question of why now and why US and in addition to the structural disadvantages.

Paired to the way independent power producers can accelerate those tax credits and we have to normalize them over the life of the asset 30 years, let's say.

We're about to enter into a pivot and pivoted to a very significant growth plan in renewables, we wanted to be extremely active benchmark and owner of those assets and we need to level, the playing field and have the tools to do that.

We need a couple of thousand megawatts between now and the end of the decade, and we want to be in that mix.

Don't expect to win everything, but we expect to be very competitive and we need the tools to do that and Thats really the framework and why now we're doing that.

Okay fair enough excellent.

I will leave it there guys. Thank you.

Sure. Thank you Julien.

Thank you our next question.

Our next question comes from the line of David Peters from Wolfe Research. Your question. Please.

Hey, good morning, guys.

Morning.

The question first question I just have is just on the net variable power costs, obviously, the magnitude of that seems fairly unprecedented.

And then the deferral of $27 million just curious how you.

Do you expect this to play out exactly just because I think this is the first time, you expect to kind of bridge that.

And then just kind of particularly with the backdrop that you have several several other.

Sizable with deferrals pending and our outstanding along with the rate case.

Are there any creative ways to kind of mitigate potential bill impacts for customers here going forward.

Dave I would agree with your observations.

Mike My time here is fairly short, but I look back and I think youre right about that.

The nature of the levels here.

What was the weather and the markets that we experienced over the summertime.

So I look at the mechanism itself.

As.

And our deferral under that mechanism is highly formulaic.

There are deferrals and there are deferrals. This one I believe is can be objectively calculated.

At the level that we have recorded it and so I believe that.

This particular.

Pearl is very straightforward very verifiable and the way it would work it typically typically I would say it's subject to discussion with the op C. As we would amortize that over a couple of year period, starting as I mentioned in the remarks.

After we adjudicate this.

Pending trc that we have at the moment, so that's that one.

You.

You referred to the other deferrals, which are substantial.

As you can calculate there are nearly 150 million altogether, but they're very different in nature.

There is the Covid deferral.

Which again is subject to I think a pretty straightforward calculation around around debt bad debt and then they're more complex deferrals.

Around the wildfires.

2020.

And the last one being the biggest evolve which is the February storm costs. So I think.

I'll describe these in terms of both.

Size and <unk>.

Sending.

Complexity.

And I fully expect since we don't have a securitization.

The capability in the state at least not yet.

We will have to sit down.

<unk>.

Agree on an amortization schedule and as I described those deferrals. They will go from shorter to probably a longer period of time. So the latter deferrals that I've mentioned, probably over a number of years, maybe many years.

So.

That's how I look at it David and that's how I would think about it going forward.

Let me add a couple of things to that.

We have gone through an extraordinary period of time, and we obviously had the pandemic.

We had a while very destructive wildfires.

Had a once in 40 year ice storm, where more than half of our customers who are out of power and we had over 700.

Distinct customer outages.

We also had the hiseq deal events and it's really has been a.

And unusual point in time, most utilities will use the securitization structure and that I think it's something that we will explore with parties.

Very important as well because we're able to take advantage of very low cost debt rates.

And so that will that will certainly be something that we will we will pursue I think it's really important as we look going forward around power costs.

The pecan is really just one link.

In the chain of power cost recovery.

I think of this as kind of a.

Four or five step process. The first one is our our forecasting methodologies.

And earlier this year.

Late last year, we made changes to some of our modeling assumptions.

With discussions with parties and OTC and those changes allow for more volatility.

To be reflected in our modeling.

That's particularly important with the variability of hydro and wind.

The second would be our AUT.

Our power cost filing that we do each year, we are able to chew up market prices for power as we go into the prompt year.

And then third really our procurement strategy and de risking through our power operations and they have done an excellent job at that and I'd say they are working very closely on this would be my fault there yet in terms of plant operation.

And making sure that our plants have the utmost reliability on the most challenging days of the year, whether those be ice storms and freezing temperatures are high-keyed events.

And then finally, the pecan comes in and provides a regulatory backstop for our extraordinary volatility we've experienced this summer. So I think these are really unusual times as we look forward.

Into 2022.

You can see we've been in discussions with parties around the A&P, we're about to we'll be locking down those numbers as we move forward.

About half of the $60 million increase that we're roughly forecasting.

Is directly related to higher load and so that's a good thing.

And we couldnt be more pleased with the expansion that we're seeing in the industrial commercial sector as well as with customer growth as people are still moving into our service territory into Oregon.

And then we're seeing about the other half related.

Either derisking the portfolio with capacity and making sure that we have adequate reserves going into the year and then also just higher prices that are reflected one of the things that I'm really pleased with our hedging strategy with regards to natural gas, which has been in place for almost a decade.

Yeah.

And is really.

Meaning that our customers are not experiencing the volatility of natural gas prices and so it's nice to see when these practices make a bottomline different to every bill we send out to our customers and we're able to insulate them from some of the volatility that we're seeing across.

Markets in the energy space.

Alright, thank you for that detail.

Second question I had just just back to the rate case.

We saw staff's testimony earlier this week and obviously, a big Delta versus you guys ask which I don't think is inconsistent with the history, but.

Could you maybe just comment on what you saw in there understanding that you do you think there is still a good chance of settlement.

And then just chances on getting some of those.

Proposed changes approved around the storm accrual and decoupling.

Yeah, David I'll start and Maria May want to add to it you are right I mean I appreciate your comment not inconsistent with history, we don't overreact to these things either.

These are the kinds of things but.

Happen in cases like this.

Aye.

I will tell you that I think we should pursue the DRC and all of its detail.

We desire to get to a settlement.

But the deferrals are on separate tracks and separate dockets, and therefore should be separated from the case and that's our view and Thats the way its setup.

Two to go forward here and as you know the settlement prospects here are always something that we tried to do.

And we.

We will deal with the deferrals in due course, but but there'll be on a separate track.

I don't think I have anything to add in oil work collaboratively with parties.

We will be transparent.

And I think help everyone understand.

The magnitude of the past year to 18 months.

And the good work that we have done to address.

The issues.

That mother nature has brought us in to create a more reliable and resilient utility as we go forward.

Alright, Thank you guys.

Thank you. Thank you.

Thank you. Our next question comes from the line of Sharp Theresa from Guggenheim Partners. Your question. Please.

Hey, good morning, guys.

Sure.

Maybe just starting at a higher level.

Obviously laid out some pretty substantial energy and capacity needs through 2013, I understand it won't necessarily all be utility owned as Maria obviously, you highlighted in the prepared remarks, but how should we sort of think about maybe this opportunity in the context of your guided 4% to 6% growth on that.

Past.

You've talked about the current RFP push you higher in that range. So with the size of the overall need be enough to get you to consider maybe guiding even higher.

Sure it's Jim good morning, so.

I will tell you are set up for the guidance range here is not.

Including.

Any any generation facilities that we may be fortunate enough to compete and win for <unk>.

This next round in fact.

We'd anticipate a couple of ERP is in this decade, maybe two or three and success of.

Calls for more resources.

We've recently upped our expectations and we've been encouraged to up our expectations given the.

The March that we're on here so just to make it clear none of that ownership would be in the 4% to 6%.

And it also.

Let's not forget here, we're backing out.

As soon as practicable our interest in the Colstrip plant, we have accelerated depreciation.

That's been.

Agreed to still needs to be.

Approved finally by the Oregon PUC in the context of this rate case, but we have a settlement there too.

Celebrate depreciation of 2025, so so we're making a really strong pivot.

Two a significant purchase and perhaps ownership program.

But in terms of ownership that's not in the guidance nor is the capital that we've laid out.

The debt.

To operate the system.

Including any of the capital that we would need to build those those assets.

So just.

Maybe just brings a follow up so is the current process is that supportive of how your guide.

Stemming the runway or could it actually be accretive.

If I'm not if I understand Youre correct your question correctly.

<unk>.

Additionally.

As Jim mentioned any additional.

Our.

Ownership opportunities through the IRB should those speeds of at least cost least risk.

Projects would be accretive to our 46% growth yes for sure.

As you can expect Shar that we would capitalize those appropriately but at the end of the day will be accretive sure.

Okay. Okay. Thank you very much for that and then just on the RFP process right in the event.

You were successful when would you be looking to do associated equity would you automatically be eligible for an associate rider for recovery or would you have to go back and put up at Trc.

So we do have a renewable adjustment mechanism.

Allows us to track in renewable energy.

Very favorable element, it's a mechanism that we've used.

On numerous occasions, and most recently with the ridge energy facility.

But I'll add sure that we wouldn't know about the award periods until probably the spring into early summer.

Construction would take place.

Design and construction would take place later that year into 23, and 24, so financing would happen in that timeframe and we have such a terrific liquidity position that we could leg into any ownership without immediately needing to go into the market.

For much in the way of financing certainly equity financing.

Okay perfect. That's all the questions. Thank you very much appreciate it sure yes.

Thank you. Our next question comes from the line of Peter Gordon from Mizuho. Your question. Please.

Hi, Thanks for taking my question just to follow up on the power cost side of things is there any more color you can give on what drove the volatility that you saw this quarter and then secondly, what gives you comfort that that volatility is not.

Yes, the new normal going forward. Thank you.

Sure well in the west and maybe even in the rest of the countries you look at sports trees.

All over the place I think it's really important that we recognize.

The high heat events that we had.

And so that created.

To forecast those events, but not too far out into the future. We also had.

Quite a bit less hydro power in the region in line with hydropower is actually wind generation as well and that created quite a bit of volatility in market prices throughout the west and those that we were exposed to I would say that we particularly saw run up.

Before the day ahead markets would have some of the highest prices and then they would frequently would fall off.

<unk> and.

Mealtime.

As we think about working across the last we've seen an additional liquidity as we're more integrated.

And I would say power and energy trading eating leaders are really looking at how we expand the integration and pooling of resources across the entire last to whether that's too Dan had markets and the expansion of the EAM with queso, whether that is through reliability discussions at the northwest power.

Pool or whether thats through other forums, where people are really looking at how we manage going forward.

We're fortunate to have as I walked through.

<unk> to update our power costs.

And every year through the annual update mechanism until we were able to reflect the learnings year to year into our future power costs and the reality.

These market conditions as you know we've across the last two reduced a number of significant thermal plants.

Thats, having thats, having an impact on.

As we get into <unk> periods of time, there are less resources and standby that could come back onto the market. As a result, I think we will continue to see volatility and we are learning and managing through it.

Okay. Thank you.

Thank you. Our next question comes from the line of Travis Miller from Morningstar. Your question. Please.

Good morning, Thank you.

You answered a lot of my questions until I appreciate that I wanted to go back to the Capex increase.

Can you talk a little bit more about that what types of projects led you to increase that 2022 number and what was the factor or factors during the quarter. The last three months that led you to raise that number the $100 million or so.

So let me build a little bit on the answer I just gave to the prior question around reliability and market one of the things that that's also really important as a tool in our toolbox and I mentioned it in my prepared remarks was that.

Being able to use essentially 25% of the capacity in and sort of shock absorber of markets in the distribution system and so as we move forward, we have accelerated our plans around our distributed resource.

Plans, whether thats, a <unk> can be solar battery storage electric vehicles and their ability to charging and create a buffer but also demand response programs.

We have had one of the most robust.

Energy conservation programs in the contract that we lead in those areas and so all of this together combined with the infrastructure that needs to support.

A really smart flexible grid as we integrate more renewables and try and reduce the impact of volatility is important it's not just important to pricing. It is important to overall reliability.

Let Jim talk to you a little bit more about the specific buckets of capital.

That we have.

Please know that we are moving quickly to reflect the new realities.

All of our markets and the need for greater sustainability in a carbon free future.

Hey, Travis I'll add that.

Largely we don't we don't think of Capex as such.

Something that is.

Temporary and the.

Short term, we think of it as a long term matter. So just looking at.

The 22, the reference to the higher.

Capex at 655 versus $5 50, so largely that's 60% 65% in fact grid related just to prove the point that Maria was making about $25 million of that.

Really is from our integrated Operation Center, which we're finishing up we're adding some facilities out there thats about a $200 million of investment a little bit of that carries over into the.

The new year 2022, we've got some.

Work on the generation side as you would imagine as everyone would have maintenance capex there and then.

We're investing a great deal in technology, that's the other chunk or part of that Digitization more customer service activities improved.

Work.

Flow and how we manage.

Ziv amounts of data that we're collecting some of our systems are older needs to be replaced.

Operating systems administrative systems, and what have you. So and then as you look to the out years 2023 of 2025 again those exclude us.

Does anything in 'twenty two for generation that we may build.

It's largely grade related work.

You could really see the.

Technology investments continuing the $85 million, but then it's close to $400 million.

And all of the topics that Maria just mentioned so it's really about grid resiliency other than any generation, which is not included here.

Okay, Great. That's helpful. One higher level question, obviously, you've talked about a lot of capacity needs relative to energy.

How do you think about capacity.

80% carbon reduction world or even 100% clean.

Energy World. These days typically we think about capacity as a fossil fuel source type of resources.

So.

We started out blessed to be in the Pacific Northwest, where overall hydro generation makes up about 50% 55%.

Of the generation in the region. So I think it's important to acknowledge that we have a natural competitive advantage from that standpoint and much of that in addition, as low cost we all.

Also do you have.

Capacity factor from both wind and solar and the diversity of being able to use us combined and then adding battery storage in our <unk> facility is a great example of not only that since it combines all three of those technologies in its scale, but it also better utilizes very scarce resources of transmission.

So thats important.

I would also say I've mentioned about being able to use the distribution system as a shock absorber and really a source of capacity across our area and that that will grow very rapidly and is a really important component for us I would also say that we have a number of partnerships, we've announced a partnership with.

Douglas PD one of the hydro operators on the mid sea, we provide energy services. They provide capacity to us and you can see a renewal of a contract we have with the confirmatory trials to the warm springs, along those same lines on the disputes river as well as many others.

What I would call in.

All of the above set of solutions, including all of the integrated aspects of west wide markets and the need to move much faster and accelerate the pace of change across the entire west. So it's an exciting time.

These are challenging problems I don't want to under <unk>.

Estimate are sound as if we have all the answers we're going to be learning and growing.

Through this with every year and it really is going to be.

The challenge of the next decade around reliable sources of capacity that supports ever increasing usage of electricity and we're excited to be leading the clean energy future, Yes, Travis I'll, just wind up here by saying that in the 20.

'twenty, one RFP that were talking about launching here in the near term about 375 megawatts of non emitting capacity is being called for and I'm going to be very interested to see.

POW battery technology and the cost curves.

So up in terms of that auction I can't prejudge it right now.

But that's a pretty big purchase for a system of this size.

So, we'll see where that goes and it may not only be batteries.

The sense, we have from the market is that they will show up and of course pricing will be very very important.

Yes, indeed, thank you very much that's very helpful. I appreciate it thank you.

Thank you. Our next question comes from the line of Andrew Levy from Hite Edge. Your question. Please.

Hey, guys.

Oh handy.

Couple of questions.

First on.

I'm kind of what's going on in Congress Congress direct pay.

Gotcha.

Familiar with that and looked at that.

Yes.

Yes, yes.

Okay before I ask my question.

So how does that kind of play in.

Assuming you win a portion of.

This capacity that's needed.

That's both good for you guys for the ratepayers.

It brings in more cash immediately maybe affect rate base, a little bit as well.

But what.

What youre, saying.

The situation, where you may need to issue some equity eventually to pay for.

Yes.

The additions how would that kind of offset that equity need and may be changed.

Outlook as far as growth and then.

Additionally, I would think it would also make it more competitive.

As a bidder for these assets to buy.

Something like that in your calculation.

So Andy first of all thank you for the question and you're absolutely right.

Our ability to deploy all of the tools that we have whether the tax equity whether it be through Ptc's itc's direct pay grants from department of energy as I as I mentioned, we received a grant for some projects in our distribution system targeting low.

Income areas.

All of these things are incredibly important tools.

As we deliver cost effective renewable and reliable energy to our customers.

We call them adhere is up leveling the playing field, but it's really important that customers do not see price shocks and that we're able to use all of these tools competitively and effectively.

For our service territory in the state of Oregon.

All the customers that we serve there's no question that direct payload offset needs for equity and gives us more optionality as we move forward as with many other aspects in the reconciliation plan.

As well as sell.

All of this tax issues are still being worked out.

Fine of the direct pay PTC, Andy because well I think it's probably pretty pretty obvious, but it's a significant game for our customers a significant gain for the company. The thing that I would add to Murray as explanation is that.

This could help us eliminate some of the Unutilized credits that we have carrying forward right. So you'd have more efficiency in that regard as well so the cash benefits to cash flow the lack or the lessened equity requirements.

Are all benefits and I hope, we get that just to be honest.

Okay and then.

Kind of continuing on.

Then you have this like regulatory structural regulatory lag that's a fairly fixed cost.

Taking that doesn't really grow a lot as far as the actual.

Cost of lag.

So as your rate base growth.

By definition that lag, especially if you end up adding significant capacity and capex that lag.

Theoretically.

Sure shrink.

Okay.

Yes, absolutely right.

Yet another reason why we're benefiting from the growth in our territory that sort of growth.

Should.

Benefit us in a number of ways, including including that lag right.

As you know I mean, the OTC, Oh, PUC calculates our our equity returns differently than we would from an accounting standpoint.

We punch over 9% on an accounting standpoint, so we do relatively well I think.

With investors.

In terms of the allowed ROE of course, they take out the short term.

Debt here, so we actually have a bit higher ratio on equity.

As calculated by <unk> standards, then we would on an accounting basis, but our returns are better.

On an accounting basis, there, but you are right.

It's the concept of spreading.

Those expenses over a larger base.

Fundamentally right. It also reduces the volatility as you would have a larger more stable base to.

To start with.

Got it and one last question.

Kind of circling back to the beginning.

So just on the pecan.

So.

This.

Your strategy as far as kind of eliminating.

On that risk.

The shareholder and for the Ratepayer bye.

By adding this capacity over time and whether it's contract floor that obviously will help on the volatility, especially if we get extreme weather, but I'm just curious just for 2023 by 2022.

Jumping ahead.

Every year matters to me as I get older sandwiches.

As my time here.

<unk>.

For all of Us.

2022, again without divulging.

Anything that you may not want to divulge as long as you know had a year ago.

Okay.

Going into the market.

What's kind of your strategy as far as trying to eliminate.

If we got extreme weather again, we don't know what the weather's going to be with the tried and eliminate some of that volatility.

Next year.

The shareholder.

Got it.

Yes, so first of all we take a.

Constant or an all in above set of strategies.

It starts with how we run our generation facilities.

And ensuring that they are 100% reliable during the most challenging days of the year.

The next is how we integrate those generation facilities across our power operations area and ensuring that we have the right amount of capacity.

Procured and the right reserve margins for the increased volatility that we're seeing as we move forward.

And clearly all of those things and we've taken actions on.

We also have.

Adjusted and worked with parties and the commission.

Our modeling techniques to make sure that our modeling is reflecting the current market reality of having less quite frankly thermal resources that can just be turned on and off.

So those things are really important as we look farther out.

Better integration of.

Renewables into our distribution system and so we have accelerated in 'twenty, starting now and through 2022 and 2023 are distributed resource plan and that's really important to be able to use the distribution system essentially.

Circuit breaker and a source of generation and we found that this was particularly helpful. During the high heat dome event, where we were able to move around.

Some of our distributed.

Resources in the system as well as.

Manish transformer outages and others and really manage for reliability at that time, and then finally working with all of our utilities across the west to ensure that we're working on day ahead market. We're working on further integration and other areas around reliability.

And then finally looking at all the way down to assessing our <unk> and other mechanisms that will will help us in Florida. So we're taking a layered approach starting with ourselves and corrective actions we can do.

Things that we can do that are new and different using technology, and then things that we can deal with through partnerships and others. So I hope that this is this is really important work and it is unique work of our regulated utility and we're fortunate to be vertically integrated and to be able to serve our customers. There is no.

Question that our customers want ever increasing amounts of.

Clean energy, but theyre not going to trade off cost and reliability and we learned a lot. This summer from the extreme conditions that we.

We found ourselves in.

Our system.

Worked very well generation as well as the T&D system very limited impacts on the customer. So I think we were battle tested in that regard, but at the same time those more extreme conditions I think someone said earlier on the call are those the new normal or or not and we don't know but.

And I won't say much more than this we have already prepared very well for next summer in terms of our positioning and.

I think we're going to be extremely well prepared as we go into the season next year.

Okay, that's terrific and yes, I mean, the main thing is.

You kept the lifestyle.

The board.

Yes, I was very proud I was very proud of the group.

Both on the generation side in the T&D side under extreme very extreme conditions.

And each point in time, whether it be fires or ice storms or heat tones or whatnot, we are rapidly iterating and learning faster than we ever have before.

AI.

Okay everyone.

I know I know I've.

I've taken enough time, and it's like 12 O finding people probably want a glass much but I'll see you guys David Thanks, Andy.

See you in person and we don't have to worry about the mute button.

And a lot of people.

Okay.

Yes.

Thank you. Our next question comes from the line of Brian Russo from Sidoti Your question. Please.

Yeah, Hi, just curious when you sit to AUC in it.

Our cost.

Do you assume normal hydro conditions or.

Utilize NIH.

Forecast.

When setting that and when is the actual date in which the <unk>.

Set.

So we use a long standing hydro forecast.

And sometimes we're a little bit above them, sometimes we're below them those hydro forecast go back decades, and believe it or not but in the early part of the 13th and 14th that I have to go back and look at exact date, we had tremendous droughts across the west So that data is actually reflected in the hydro forecast as well.

And then for the <unk>.

Wind forecast, which is just as importantly use five year rolling averages.

And we've had pretty tough wind conditions as well so thats reflected in the history that she is all of that data also goes into how the market is pricing both.

Electricity and gas and that those prices are true up and that we will in the next couple of days and weeks, we will be setting the AUT and then that will be what we'll use for 2022.

Combined with the new modeling that we've worked together on.

With the parties.

Right because it because I know that the forecasts are for.

Wet and cold weather in the Pacific Northwest and I was wondering if.

That's captured in the tariff.

Or if that if that creates.

Sure.

To benefit.

Potentially retain under the P Chem.

So the current weather conditions of the current forecast is not necessarily used and how we are setting we use it goes into our calculations of the long term longer term or in the case of wind five year averages.

And I can tell you.

We are expecting a full year of <unk>.

Wet and cold weather, we are off to a good start in that instance, and that will be very helpful for hydro conditions.

As well as.

Restocking not only reservoirs, but also in some instances a lot of tables. So all of that is good and will be a benefit. This next year I would also note that with.

Those were.

Wet and cold temperatures also comes a lot of wind that not only helps with energy generation, but can create additional outages and so that sometimes is a negative hit to our T&D costs. So we can see whether go both ways.

And we are it's one of the reasons that we are hardening our system. So that we can reduce outages, especially as people continue to work at home and kids are sometimes going to school is still at home.

Sure that our reliability is higher than ever.

Understood and then just real quickly on the <unk>.

EV infrastructure.

Is that a sizable investment opportunity in addition to owning building remaining more.

Supply for your portfolio.

Sure. So first of all from a legislative enabling standpoint.

We've got great decisions on the books and supportive utility infrastructure to accelerate the pace of electric vehicle adoption.

Whether it is infrastructure that's needed within our systems.

Transformers Substations.

<unk>.

Whether it is make ready so that additional cabling and infrastructure to get to.

The charging stations or whether it's the charging stations themselves.

Very clear that the state of Oregon Commission expects, the Portland general to be at a leader and an enabler and clean transportation.

So we see it as a tremendous.

Tremendous opportunity. It will obviously is smaller sized nat now, but will increase substantially with each year.

The forecast for electric vehicles are very high.

Oregon has some of the highest penetration highest amounts of electric vehicles already to start with but.

The other is is that the more electric vehicles. There are other more sort of off peak periods of charging we can do which enhances reliability lowest cost for customers overall and so we see it as really a synergistic set of goodness for the entire system as we move forward not only is it a cleaner environment.

<unk> better reliability, but also we were able to lower costs as electricity fuel is less expensive than fossil fuels, Brian it'll show up in load growth I would say, 10% pending in the second.

Half of the decade here, but starting to ascend in the next couple of years.

In addition to the Capex implications. So I think there's goodness on both sides there'll be additional capex to support as Maria said, but also I would.

Would estimate more more and more load growth coming out of that as we get into the second half of the decade.

We see each electric vehicle essentially.

Our equivalent to a new residential customers.

Okay, great. Thank you very much.

Thank you our final question for today comes from the line of Paul Patterson from <unk> Associates. Your question. Please.

Hey, how are you guys doing.

Good Paul how you Ben.

It's been awhile since I've talked to you Jim.

<unk>.

So listen.

So most of my questions have been answered.

I really appreciate it.

Your comments Maria about.

Youre focused on coast customer calls et cetera.

And.

I was just a little surprised and maybe you can sort of explain the disconnect in the staff testimony, which seems to highlight.

Right upfront that they're concerned that there is some sort of trade off between this and in an environmental focus.

At least that they seem to be somewhat concerned about that.

And I'm just wondering if you could sort of.

Explain.

You think they might be coming from or if this is a communications issue were.

What do you think because I know you guys are.

It's the opposite or at least that's my impression.

So first of all I don't think I'm going to take a stab at where that's coming from I would reiterate all the comments that Jim has made that we work collaboratively together.

The regulators where the regulated.

As a company are really proud of the investments we have made.

Believe we got it right in terms of seeing the future and the increased volatility the pressure around reliability and we have been investing.

To be able to weather the storms that come at us, whether it's high heat or ice or whatnot and to be able to deliver.

Affordable reliable energy to our customers that is increasingly carbon free and.

And if you look at the overall price increases that we have proposed.

They are quite modest and it's really hats off to everyone, who works at Portland General day in and day out.

At driving efficiency across our system better use of technology and digital solutions are putting the customer first in everything that we do and.

And I'm really proud that we were able to keep our customer prices as low as we have proposed in the general rate case and that we were able to hold off on our rate case during the worst days of the pandemic.

So I think theres a lot of goodness between.

Our filing and we look forward to working collaboratively with parties.

As we move forward.

Sure.

The context.

The rate case itself in the back and forth and what have you on that.

When you guys are making when you guys are forward thinking and you are looking at all of those are there ways, perhaps of using technology and renewables to actually lower cost for customers or I mean do you see any of these things is perhaps being.

From a sort of a cost reduction perspective, perhaps.

In terms of delivering this I mean in other words it seemed to me from reading it that they felt that there was some sort of trade off at least in terms of focus and thats, what I was sort of.

That's what I sort of just wondering strategically speaking.

Just in general how should we think of that when you. When you are looking at all of those.

Or is it just so look if we're going to be if we're going to be going green, we're going to have to pay a lot more for it if you follow what I'm, saying so.

No I don't believe we're going to have to pay a lot more for it but I do think we're going to need to be smarter or going to need to use technology.

In different ways, we're going to need to be integrated with partners not only in our distribution system, many of whom are our customers, but also across the west.

And you can see that continually to the work that we have done to keep our costs low renewable energy today.

New renewable energy in most instances costs less than a new new thermal operations, but it's going to create additional challenges around technology I'm really pleased that we've gotten after our distributed resource systems or we have an <unk> system thats.

Just about to go live.

And we will continue focusing in on the technologies that will allow us to reduce costs for customers in the renewable energy that we are taking on this is a huge transition and we're all learning together and we're going to be transparent and collaborative.

Okay. Thanks, so much I appreciate it.

Thank you.

Have a great way to take care.

Thanks, Paul take care.

Thank you very much.

This does conclude the question and answer session of today's program I'd like to hand, the program back to Maria Pope for any further remarks.

Great. Thank you all for joining us today and for those of us that we will.

See you at the EI financial.

Conference in just a couple of weeks or 10 days. We appreciate your interest in Portland General and we hope to connect with you in the future. Thank you.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

Okay.

[music].

Good morning, everyone and welcome to the Portland General Electric company's third quarter 2021 earnings results Conference call.

If you'd like to withdraw your question. Please press the pound key on your telephone keypad.

If you do you intend to ask a question. Please avoid the use of speaker phones for opening remarks, I'd like to turn the conference call over to Portland General Electric's Senior director of Investor Relations Treasury and risk management hard on or a meal. Please go ahead Sir.

Thank you Jonathan Good morning, everyone I am pleased that youre able to join us today.

Before we begin this morning I'd like to remind you that we've prepared a presentation to supplement our discussion, which we'll be referencing throughout the call.

Slides are available on our website at investors stop Portland General Dotcom.

Turning to slide two some of our remarks. This morning will constitute forward looking statements.

We caution you that such statements involve inherent risks and uncertainties.

Actual results may differ materially from our expectations.

For a description of some of the factors that could cause actual results to differ materially. Please refer to our earnings press release and our most recent periodic reports on forms 10-K, and 10-Q, which are available on our website.

Leading our discussion today are Maria Pope President and CEO, and Jim Ajello Senior Vice President of Finance CFO and treasurer. Following their prepared remarks, we will open the lines for your questions now, it's my pleasure to turn the call over to Maria.

Good morning, and thank you Karen and thank you all for joining us.

Hot summer weather and power market volatility had a significant impact on our region and our results this quarter.

Turning to slide four we reported net income of $50 million or <unk> 56 cents per share for the third quarter of 2021. This compares with a loss of $17 million or <unk> 19.

Per share for the third quarter of 2020.

Year to date financial performance is on track and despite the third quarter volatility in the energy markets and higher O&M. We are reaffirming our 2021 earnings guidance of $2 70.

To $2 85 per share.

Our long term outlook remains unchanged and we are reaffirming our 4% to 6% long term earnings growth guidance.

Overall, our business is strong driven by load growth from the technology and digital sectors as well as elevated residential use due in part to the hot summer weather and continued COVID-19 constraints.

Year to date revenue is up 12% versus 2020 and for the quarter up 17% versus last year.

Jim will cover third quarter results in more detail provide regulatory capital updates and discuss the outlook for the rest of the year.

The ongoing impacts.

Climate change underscore the importance of investments and actions, we are taking to rapidly transition to a clean energy future and meet our 2030 de carbonization goals, while also ensuring that we have sufficient capacity.

We estimate that our 2030 targets will require approximately 1500 to 2000 megawatts of additional carbon free resources and approximately 800 megawatts of not admitting capacity resources.

In addition to removing costs from our portfolio.

We're seeking approximately 1000 megawatts of renewable and non emitting capacity resources as part of our RFP, which will be issued in December.

As part of this procurement, we plan to add 375 to 500 megawatts of renewables to our portfolio.

We will also bring on approximately 375 is not admitting dispatch load capacity.

We will work with the PUC and party to evaluate opportunities to procure additional resources. So the types of projects submitted in the IRB process excuse me the RFP process makes sense for customers and are attractively priced.

We could see procuring about a third of our clean energy resources needed to meet the 2030 emissions target reductions with this RFP.

We not only need more renewables.

We need to upgrade the grid to integrate these resources, making it easier for customers to participate in demand response and distributed energy programs.

I'm going to keep service reliable and affordable.

And our recent distributed resource kidney distributed system plan, we lay out plans for the grid of the future that supports robust two way energy flows and better manages energy years, especially during peak periods.

We estimate that as much as 25% our flexibility needed to meet our decarbonize future would come from customers and distributed energy resources, such as solar panels batteries electric vehicles.

During the 2021 summer heat them.

We worked with customers to save 62 megawatts of power equivalent to powering 25000 homes.

We are working to significantly grow this program to 500 megawatts.

End of 'twenty 'twenty three.

We are very pleased to have been selected by the department of LNG as part of their connect communities program and are working with local to Eni groups on the placement of resources, such as batteries, two way EV charging and solar panels to ensure that our customers and underserved communities.

This clean energy transition.

P J in our utility partners across the west are working to bolster reliability planning advance integrated market and examine the benefits of a western regional transmission organization.

Throughout these processes, we will continue to advocate for rigorous resource adequacy standards.

Sustainability.

It is foundational to our business.

In September we published our ESG report building upon our number one ranked voluntarily voluntary renewable program.

Sustainability is part of the fabric of everything we do.

Including financing, we recently adopted a green financing framework under which we successfully placed a $150 million in green bonds.

Yesterday, we filed a rate case with the federal Energy Regulatory Commission to review, our third party transmission revenue.

The revenue that we received from these new prices will offset retail customer prices to a revenue credit.

We continue to make progress on our 2022 general rate case and reached settlements with stakeholders in October that resolve the cost of equity.

And Gibbs at nine 5% as well as a 50 50 cap structure.

We look forward to working with stakeholders on the remaining items.

Finally I'm.

I am pleased to welcome Dawn Farrell to our board of Directors, Don retired as President and CEO of Transalta in March.

Our deep experience in the energy sector as well as her leadership and transforming a thermo based generation company to a leading clean renewable energy company will be important as we advance our own transformation.

Was evident throughout the summer.

Others.

As an actual usage remains significantly elevated as a remote work continues we anticipate these trends to continue.

And this has contributed to our strong year over year load growth.

Turning to slide five we reported GAAP income of <unk> 56 per share in the third quarter of <unk> 21, compared to a GAAP loss of <unk> 19 per share in the third quarter of 2020 non-GAAP income for the third quarter of 2020 is 90.

After removing the negative impact of the energy trading losses.

I'll cover our financial performance quarter over quarter on slide six.

Beginning with a loss of <unk> 19.

Per share for the third quarter of 2020, we will add back the $1.09 one time impact of the energy trading losses.

We experienced a 37% increase in total revenues, primarily due to the strong economy driving growth in our service territory with the balance due to warmer weather. This represents a 17% year over year increase in total revenues.

Offsetting this was a 39.

Of unfavorable power cost, we experienced substantially higher market prices due to warmer weather and increased regional demand for capacity as well as lower renewable generation.

As a result, we are forecast to be above the $30 million threshold to begin customer cost sharing pursuant to our power cost adjustment mechanism through.

Our power cost this summer were not materially impacted by rising natural gas prices.

Our portfolio is well positioned and a bit long to balanced gas price fluctuation and we have significant gas storage at the $4 1 billion cubic foot north mist facility that we can draw upon.

As needed there was an 11% decrease to EPS from costs associated with our fixed operating expenses, including <unk> for enhanced wildfire mitigation <unk> of additional vegetation management, including work that was delayed as we focused on storm restoration during the second quarter <unk>.

A service restoration costs and <unk> of miscellaneous other expenses.

There was an <unk> 18 decrease to EPS from administrative expense.

The year over year increase is attributed to items that were unique to 2020, including seven and adjustments to incentive programs. Following the energy trading losses in the prior period and <unk> from the deferral of bad debt. Following the approval of the COVID-19 deferral.

The remaining administrative expense can be attributed to <unk> for outside services to support improvements to our customer experience.

<unk> increase in employee benefit expenses and one.

From miscellaneous other expenses.

While O&M was higher this quarter when compared to Q3 2020 on a year over year basis, our cost have increased only 2% annually. Since 2019. The fact that we have reduced planned outages by 29% year over year set up a large wildfire prevention program and greatly.

Increased vegetation management is a testament to the efficiency rebuilt into the O&M program.

<unk> benefit from lower depreciation and amortization due to plant.

Retirements.

<unk> of higher tax expense due to the timing difference.

Asset retirements in 2020, and <unk> from other unfavorable miscellaneous items.

We see this as a constructive outcome and look forward to discussing remaining unsettled issues with parties in the case.

You saw earlier this month, we made several regulatory filings, which we shared and which we shared our plans to advance the strategy to meet our targets for reducing greenhouse emissions and the power we served customers.

<unk> discussed our RFP plans earlier in this call we still plan to bid in benchmark resources into the RFP process to support our bids we filed for an affiliated interest entity that will help support our de carbonization injuries.

Our recent settlement in the GIC, assuming approval by the LPC. This affirms that we will not need to issue equity in 2022 to meet our capital requirements unless there is a significant renewable addition, stemming from the aforementioned RFP, we continue to maintain a solid balance sheet.

<unk>, including strong liquidity and investment grade ratings, accompanied by a stable credit outlook total available liquidity at 930 is just over $1 billion at PGE sustainability is woven into the fabric of who we are as a company and we stand behind that through our actions as an organization.

Including in our financing plans this quarter, we renewed and increased by $150 million of our revolving credit facility to include sustainability linked to performance metrics. We also refinanced the wheat ridge renewable energy facility with low cost debt under a green bond in alignment with our green financing framework.

The demand for this was evident that it was as it was nearly six times oversubscribed. Our investors are keen to purchase debt linked to sustainable investments going forward, we will seek out opportunities to tie our long term debt.

Toward our sustainability strategy two capital investments not only are these actions good for our business, but theyre also good for society.

Turning to slide nine our year, our year to date 2021 performance remains on track.

We reaffirm our guidance range of $2 70 to $2 85.

And we remain on track to achieve long term earnings growth guidance of 4% to 6% from the 2019 base year.

Certainly ladies and gentlemen, once again, if you have a question. Please press Star then one on your Touchtone telephone. If your question has been answered and you'd like to move yourself from the queue. Please press the pound key our first question comes from the line of Intel Kim from Goldman Sachs. Your question. Please.

Yeah.

Thank you.

My first question.

Okay.

More financial in nature, just Jim for the year do you think about the year to date results.

You're reiterating D.

Yeah.

I guess the guidance range that you are right last year.

It seems to imply a pretty healthy fourth quarter earnings relative to if you look at 2019 fourth quarter or.

Fourth quarter results can you just help us.

Generally.

Piece together some of the moving parts that gets us there.

Yes. Thanks.

As I understood. Your question Youre trying to in effect walk.

From where we are today to the.

Result of the 2021 guidance.

In fact, what we might do in the fourth quarter. So let me, let me try to Kurt Kurt do I get that right, Yes, that's correct.

Okay perfect. Okay. So let's.

Look back to the fourth quarter of 2020 there.

Earnings were <unk> 57.

For sure you May recall, but also we recorded a.

Asset retirement.

Obligation for our Sullivan Hydro facility the facility, that's well over 100 years old in fact.

And that was <unk> 17, a share we also adjusted.

Incentives for that fourth quarter as non-GAAP earnings were.

Sure.

Picking up speed in the fourth quarter. So in reality, what happened was the way I look at the fourth quarter and I walk to the fourth quarter of this year, we had about 22.

Between the ROE and the incentive adjustment.

Added to the <unk> 57 to normalize the fourth quarter of 2020, which gets you to about 79.

And that in fact.

Gets you to about the mid point, if that were to reoccur again in 2021 of the present range does that help.

Okay. So the <unk> pretty.

Okay component of it.

Yes, the <unk> was 17 cents a share incentive adjustments $5 20 to add debt to 57, you would normalize the fourth quarter of 20% to 79, a share and we're at 198 or 198 as you would know for the year to date.

Presently alright.

Yeah.

Alright, okay.

That definitely helps and thank you for that.

Second question.

Maria just broader picture I think.

No question guys, what's the state of Oregon.

Peter.

Proposing and advocating and acting on.

The clean energy transformation in Portland.

Part of that.

We think about the the pending reconciliation package that is out there and the potential for extensions.

<unk>.

Changes to how those mechanisms work, how does that how do you think about that impacting or creating them.

Mental opportunities maybe even over the next five years in terms of different clean energy investments that could come about.

Okay first of all it's a great question and we are very pleased to see the announcements yesterday, our significant investments that will help us and others transition to a clean energy economy. The structure of the tax credits in the bill are particularly important to us.

As you know we've worked with Senator Wyden on Tech neutral tax credits those are reflected in what was discussed yesterday by the president.

And also important to us as tax normalization.

That's included in there.

Still working.

Very focused on normalization for transmission and in particular for storage.

And so that those remain our goals of ours should that not take place the affiliate filing that Jim talked about will give us.

The level playing field to continue to move forward with important components.

From a.

Utility standpoint for our customers.

Around battery storage and others. So that we can get the very lowest cost for customers as we make this important transition.

Understood. That's it for me thank you.

Thank you.

Thank you. Our next question comes from the line of Julien Dumoulin Smith from Bank of America. Your question. Please.

Thank you Albert and good morning, Good morning team. Thank you and congrats to Don as well I don't know if she is there, but well done on bringing on more talent here.

But.

Ed.

Yeah.

If I could just jump into the rate case, just real quickly here two quick clarification. So.

First off just following the earlier settlement.

Obviously on cap structure in a row.

How you frame the potential to settle other.

Other outstanding items, and just the process there and then and then related to that if you could clarify given the capital structure on the <unk>.

50 authorized.

Does that change any equity dynamics.

As far as Youre concerned here.

Julian it's Jim good morning, I'll kick off so.

To take your last question first yes. It does it gives me confidence that we could.

Going into 2022 without the issuance of any equity we're in very good shape from a balance sheet standpoint, our cost of financing in April to fund even that increased capital program that I spoke of a moment ago, we changed that from $5 50 next year or two to $6 55.

And I'll just go further and Maria may want to add and in a moment, but.

We received comments earlier this week, we are evaluating those.

I would say that this is a normal part of the process.

Just wanted to remind everyone that.

We we deferred filing a bit here earlier this year.

Consideration of the community impacts on Covid. So I think we were we.

We respect that everybody's interest in terms of timing, we feel we've put forward a pretty modest proposal frankly.

About three 9% 2% of that was in the AUT itself.

Largely a capital case, we added $993 million of capital between the last time rates were filed.

Has kept as I mentioned this in the remarks, a moment ago, our O&M pretty tight over that period of time.

So.

And as you would know.

He has a history of settling so we are about to get into a process where were we will exchange information and hopefully get to that outcome, but it's too soon to predict anything at all Maria anything to add.

I want to emphasize that as we've made decisions around our rate case, we have been particularly cognizant of the economy and particularly on those most impacted by the pandemic.

As a result delayed filing our rate case.

I would also say that we were able to do that because of all of the tremendous work that our colleagues here at Portland General have done in Jim's prepared remarks, he talked about.

The efficiencies.

That we have gotten from better use of technology digital driving efficiencies across our entire company is a matter of fact, our planned outages are down significantly over 20%.

We have seen better utilization of our assets better work management flow.

And there's no question that we are getting more work done than we have in the past and I'm really encouraged that we were able to keep through all of the ups and downs of the last 18 months to two years O&M, increasing at only 2% annually and this focus on cost but more.

<unk> on efficiency in driving outcomes for customers has allowed us.

Have the flexibility to delay to delay our rate cases, we brought on really important reliability capital.

Capital also in the compliance area as Jim mentioned, we have really focused on vegetation management wildfire protection and then as you know people are moving to Oregon, and we have quite the expansion in our digital and high tech areas until we have built a number of new <unk>.

Stations, even expanded some other of our infrastructure and.

It's really because of the good work of people at Portland General.

Been able to keep our prices as low as we are particularly in light and from all of that is going on in our economy today.

Got it excellent.

And just if I can pivot to hear to the affiliate dynamic just real quickly you brought this up they seem somewhat novel can you can you speak a little bit more as to.

Just how that might expand the opportunity or wide pivot to this opportunity now given that you haven't used it in the past I understand that tax normalization, obviously is.

Has been an impediment out there and then maybe your level of confidence there and now that Youre pivoting to this.

This strategic focus here on winning.

Sure. So first of all we remain hopeful.

And the industry is focused on resolving the tax normalization issues in those discussions as you have seen Senator wyden quoted in political and whatnot are very much in play.

This is not this affiliate filing is not new we've been talking about it for a long time and debating it.

So it's very similar to many other affiliate filings that you see across the country.

Allow us to utilize.

Tax advantages to reduce renewable costs from customers for customers.

To allow for more competition and really so that our customers can have the very lowest cost energy that's reliable as we transition to ever increasing amounts of new renewables, we have we as well as many others have very aggressive 2030, and 2040 golf and we think this is an important tool.

And that toolbox.

Julien I think I hear you asking the question of why now and why US and in addition to the structural disadvantages.

<unk> to the way independent power producers can accelerate those tax credits and we have to normalize them over the life of the asset.

30 years, let's say.

We need a couple of thousand megawatts between now and the end of the decade, and we want to be in that mix.

Don't expect to win everything, but we expect to be very competitive and we need the tools to do that and that's really the framework and why now we're doing that.

Okay fair enough excellent.

I will leave it there guys. Thank you.

Sure. Thank you Julien.

Thank you our next question.

Our next question comes from the line of David Peters from Wolfe Research. Your question. Please.

Hey, good morning, guys.

Yeah.

The question first question I just have is just on the net variable power costs and obviously the magnitude of that seems fairly unprecedented.

And then the deferral of 27 million.

Curious how you expect this to play out exactly just because I think this is the first time, you expect to kind of reach that.

And then just kind of particularly with the backdrop that you have several several other.

Sizable deferrals pending and our outstanding along with the rate case.

There are any creative ways to kind of mitigate potential bill impacts for customers here going forward.

Dave I would agree with your observations.

Mike My time here is fairly short, but I look back and I think you are right about that.

The nature of the levels here.

What was the weather and the.

The markets that we experienced over the summertime.

So I look at the mechanism itself as.

And our deferral under that mechanism is highly formulaic.

There are deferrals and there are deferrals. This one I believe is can be objectively calculated.

At the level that we have recorded it and so I believe that this particular.

Deferral is very straightforward very verifiable and the way. It would work is typically typically I would say that subject to discussion with the op C. As we would amortize that over a couple of year period, starting as I mentioned in the remarks.

After.

We adjudicate this.

Pending <unk> that we have at.

At the moment, so that's that.

One.

You.

You referred to the other deferrals, which are substantial.

As you could calculate their nearly 150 million altogether, but they're very different in nature.

There is the Covid deferral.

Which again is subject to I think a pretty straightforward calculation around around debt bad debt and then they're more complex.

<unk>.

Around the wildfires.

2020.

And the last one being the biggest evolve which is the February storm cost So I think.

I'll describe these in terms of both.

Size and sending.

Complexity and I fully expect since we don't have a securitization.

Our capability in the state at least not yet.

We will have to sit down and.

<unk>.

Agree on an amortization schedule and as I describe those.

<unk> they will go from shorter to probably a longer period of time. So the latter deferrals that I've mentioned, probably over a number of years, maybe many years.

So that's how I look at it David and that's how I would.

Think about it going forward.

Let me add a couple of things to that.

We have gone through an extraordinary period of time, and we obviously had the pandemic.

Had a while very destructive wildfires.

We had.

Once in 40 year ice storm, where more than half of our customers who are out of power and we had over 700000.

Distinct customer outages.

We also had the Hiseq dome event, and it's really has been up.

And unusual point in time, most utilities would use a securitization structure and that I think it's something that we will explore with parties. It is very important as well because we're able to take advantage of very low cost debt rates.

So that will that will certainly be something that we will build for sale I think it's really important as we look going forward around power costs.

The Pea Cam is really just one link in.

In the chain of power cost recovery I think of this as kind of a.

Four or five step process. The first one is our our forecasting methodologies.

And earlier this year late last year, we made changes to some of our modeling assumptions.

With discussions with parties and OTC and those changes allow for more volatility to be reflected in our modeling.

That's particularly important with the variability of hydro and wind.

The second would be our AUT.

Our power cost filing that we do each year, we are able to chew up market prices for power as we go into the prompt year.

And making sure that our plants.

The utmost reliability on the most challenging days of the year, whether those be ice storms and freezing temperatures are high-keyed events.

And then finally, the pecan comes in and provides a regulatory backstop for our extraordinary volatility we've.

We've experienced this summer. So I think these are really unusual times as we look forward.

Into 2022.

And you can see we've had been in discussions with parties around the AUT, we're about to we'll be locking down those numbers as we move forward.

About half of the $60 million increase that we're roughly forecasting.

Is directly related to higher load and so that's a good advance.

And then we're seeing about the other half related.

<unk>.

And.

It's really.

Markets in the energy space.

Alright, thank you for that detail.

Second question I had just just back to the rate case.

We saw staff's testimony earlier this week and obviously, a big Delta versus you guys ask which I don't think is inconsistent with the history, but.

Could you maybe just comment on what you saw in there understanding that you do you think there is still a good chance of settlement.

And then just chances on getting some of those.

Proposed changes approved around the storm accrual and decoupling.

Yeah, David I'll start and Marino may want to add to it you are right I mean I appreciate your comment not inconsistent with history, we don't overreact to these things either.

These are the kinds of things that.

Happen in cases like this.

Aye.

I will tell you that I think we should pursue the DRC.

All of its detail.

We desire to get to a settlement.

But the deferrals are on separate tracks and separate dockets, and therefore should be separated from the case and that's our view and Thats the way its setup.

Two to go forward here and as you know the.

With prospects here are always something that we tried to do.

And we.

We will deal with the deferrals in due course, but but there'll be on a separate track.

Yes, I don't think I have anything to add in oil work collaboratively with parties.

We will be transparent.

And I think help everyone understand.

The magnitude of the past year to 18 months.

And the good work that we have done to address.

The issues.

That mother nature has brought us to create a more reliable and resilient utility as we go forward.

Alright, Thank you guys.

Thank you. Thank you.

Thank you. Our next question comes from the line of Sharp Theresa from Guggenheim Partners. Your question. Please.

Hey, good morning, guys.

Sure.

Maybe just starting at a higher level.

Obviously laid out some pretty substantial energy and capacity needs through 2030, and I understand it won't necessarily all be utility owned as Maria obviously, you highlighted in the prepared remarks, but how should we sort of think about maybe this opportunity in the context of your guided 4% to 6% growth on that.

Past.

You've talked about the current RFP push you higher in that range. So with the size of the overall need be enough to get you to consider maybe guiding even higher.

Sure it's Jim good morning, so.

I will tell you are set up for the guidance range here is not.

Including.

Any any generation facilities that we may be fortunate enough to compete and win for an <unk>.

This next round in fact.

We'd anticipate a couple of ERP is in this decade, maybe two or three and success of.

Calls for more resources.

We've recently upped our expectations and we've been encouraged to up our expectations given the.

The March that we're on here so just to make it clear none of that ownership would be in the 4% to 6%.

And it also.

Let's not forget here, we're backing out.

As soon as practicable our interest in the Colstrip plant, we have accelerated depreciation.

That's been.

Agreed to still needs to be.

Approved finally by the Oregon PUC in the context of this rate case, but we have a settlement there too.

Celebrate depreciation of 2025, so so we're making a really strong pivot.

Two a significant purchase and perhaps ownership program.

But in terms of ownership that's not in the guidance nor is the capital that we've laid out.

The debt.

To operate the system.

Including any of the capital that we would need to build those those assets.

So just.

Maybe just brings a follow up so is the current process is that supportive of how your guide is in <unk>.

Spanning the runway or could it actually be accretive.

If I'm not if I understand Youre correct your question correctly.

<unk>.

Additionally.

As Jim mentioned any additional.

Our.

Ownership opportunities through IR piece of those fees at least cost least risk.

Projects would be accretive to our 46% growth yes for sure.

As you can expect Charlotte, we will capitalize those appropriately but at the end of the day will be accretive sure.

Okay. Okay. Thank you very much for that and then just on the RFP process right in the event.

You were successful when would you be looking to do the associated equity would you automatically be eligible for an associate rider for recovery or would you have to go back and put up at Trc.

So we do have a renewable adjustment mechanism.

Allows us to track in renewable energy.

Its very favorable elements in that.

Can ism that we've used on numerous occasions and most recently with the ridge energy facility.

But I'll add ensure that we wouldn't know about the award periods until probably the spring and early summer.

Construction would take place.

For much in the way of financing certainly equity financing.

Okay perfect. That's all the questions. Thank you very much I appreciate it sure yes.

Thank you. Our next question comes from the line of Peter Gordon from Mizuho. Your question. Please.

The new normal going forward. Thank you.

Sure well in the west and maybe even the rest of the country as you look at sports trees.

All over the place I think it's really important that we recognize.

The high heat events that we had.

And so that created.

To forecast those events, but not too far out into the future. We also had.

Quite a bit less hydro power in the region and all combined with hydropower is actually wind generation as well and that created quite a bit of volatility in market prices throughout the west and those that we were exposed to I would say that we particularly saw run up.

Before the day ahead markets would have some of the highest prices and then they would frequently would fall off.

<unk> and.

In real time.

As we think about working across the last we've seen at additional liquidity as we're more integrated.

And I would say power and energy trade. It in leaders are really looking at how we expand the integration and pooling of resources across the entire last whether that two day ahead market and the expansion of the EAM with T cell whether that is through reliability discussions at the northwest power.

Pool or whether that's through other forums, where people are really looking at how we manage going forward.

We're fortunate to have as I walked through the ability to update our power costs.

And every year through the annual update mechanism until we were able to reflect the learnings year to year into our future power costs and the reality of these market conditions as you know we've across the last two reduced a number of significant thermal plants.

Thats, having thats, having an impact on.

As we get into <unk> periods of time, there are less resources and standby that could come back onto the market and as a result, I think we will continue to see volatility and we are learning and managing through it.

Okay. Thank you.

Thank you. Our next question comes from the line of Travis Miller from Morningstar. Your question. Please.

Good morning, Thank you.

You answered a lot of my questions until I appreciate that I wanted to go back to the Capex increase.

Can you talk a little bit more about that what types of projects led you to increase the 2022 number and what was the factor or factors during the quarter. The last three months that led you to raise that number $100 million or so.

So let me build a little bit Travis on the answer I just gave to the prior question around reliability and market one of the things. That's also really important as a tool in our toolbox and I mentioned it in my prepared remarks was that.

Being able to use essentially 25% of the capacity and sort of shock absorber of markets in the distribution system and so as we move forward, we have accelerated our plans around our distributed resource.

Plans, whether thats <unk> it could be solar battery storage electric vehicles and their ability to charging and create buffer, but also demand response programs.

We have had one of the most robust.

Energy conservation programs in the contract that we lead in those areas and so all of this together combined with the infrastructure that needs to support.

A really smart flexible grid as we integrate more renewables and try and reduce the impact of volatility is important it's not just important to pricing. It is important to overall reliability.

Let Jim talk to you a little bit more about the specific buckets of capital.

That we have.

Please know that we are moving quickly to reflect the new realities.

All of our markets and the need for greater sustainability in a carbon free future.

Hey, Travis I'll add that.

Largely we don't we don't think of Capex as such.

Something that is.

Temporarily in.

In the short term, we think of it as a long term matter. So just looking at.

The 22, the reference to the higher.

Capex at 655 versus $5 50, so largely that's 60% 65% in fact grid related just to prove the point that Maria was making about $25 million of that.

Really is from our integrated Operation Center, which we're finishing up we're adding some facilities out there thats about a 200 plus million dollars of investments a little bit of that carries over into.

The new year 2022, we've got some.

Work on the generation side as you would imagine as everyone would have maintenance capex there and then we're.

We're investing a great deal in technology, that's the other chunk or part of that Digitization more customer service activities improved.

Work.

Flow and how we manage.

Ziv amounts of data that we're collecting some of our systems are older needs to be replaced.

Operating systems administrative systems, and what have you. So and then as you look to the out years 2023 of 2025 again those exclude us.

Does anything in 'twenty two for generation that we may build.

It's largely grade related work.

You could really see the.

Technology investments continuing the $85 million, but then it's close to $400 million.

And all of the topics that Maria just mentioned so it's really about grid resiliency other than any generation, which is not included here.

Okay, Great. That's helpful. One higher level question, obviously, you've talked about a lot of capacity needs relative to energy.

How do you think about capacity.

80% carbon reduction world or even 100% clean.

Energy World. These days typically we think about capacity as a fossil fuel source type of resource.

So.

We started out blessed to be in the Pacific Northwest, where overall hydro generation makes up about 50% 55%.

The generation in the region. So I think it's important to acknowledge that we have a natural competitive advantage from that standpoint and much of that in addition, as low cost. We also do have capacity factor from both wind and solar and the diversity of being able to use us combined and adding adding battery storage.

Our wheat ridge facility is a great example of not only that since it combines all three of those technologies in its scale, but it also better utilizes very scarce resources of transmission.

That's important.

I would also say I've mentioned about being able to use the distribution system as a shock absorber and really a source of capacity across our area and that that will grow very rapidly and as it is a really important component for us I would also say that we have a number of partnerships, we've announced a partnership with.

Douglas PD one of the Ah hydro operators on the mid sea, we provide energy services. They provide capacity to us and you can see a renewal of a contract we have with the control that <unk> tried to the warm springs, along those same lines on the disputes river as well as many others.

What I would call.

All of the above set of solutions, including all of the integrated aspects of west wide markets and the need to.

Move much faster and accelerate the pace of change across the entire west. So it's an exciting time.

These are challenging problems I don't want to under <unk>.

Estimated or are sound as if we have all the answers we're going to be learning and growing.

Through this with every year and it really is going to be.

The challenge of the next decade around reliable sources of capacity that supports ever increasing uses of electricity.

We're excited to be leading in the clean energy future, Yes, Travis I'll, just wind up here by saying that in the 20.

'twenty, one RFP that were talking about launching here in the near term about 375 megawatts of non admitted capacity is being called for and I'm going to be very interested to see.

POW battery technology and the cost curves.

So up in terms of that auction I can't prejudge it right now.

But that's a pretty big purchase for a system of this size.

So, we'll see where that goes and it may not only be batteries.

The sense, we have from the market is that they will show up and of course pricing will be very very important.

Yes, indeed, thank you very much that's very helpful. I appreciate it thank you.

Thank you. Our next question comes from the line of Andrew Levy from Hite Edge. Your question. Please.

Hey, guys.

Oh handy.

Couple of questions.

First on.

On kind of what's going on in Congress Congress direct pay.

Thanks, Eric.

Familiar with that and looked at that.

Yes.

Yes, yes.

Okay before I ask my question.

So how does that kind of play in.

Assuming you win a portion of.

This capacity thats needed.

I guess, that's both good for you guys for the ratepayers.

It brings in more cash immediately maybe affect rate base, a little bit as well.

But if.

What youre, saying.

The situation, where you may need to issue some equity eventually to pay for.

<unk>.

Yes.

The additions.

Would that kind of offset that equity need and maybe change.

Outlook as far as growth and then.

Additionally, I would think it would also make even more competitive.

As a bidder for these assets to buy.

Something like that.

Accusations.

So Andy first of all thank you for the question and you're absolutely right.

Income areas.

All of these things are incredibly important tools.

As we deliver cost effective renewable and reliable energy to our customers.

We call them adhere is up leveling the playing field, but it's really important that customers do not see price shocks.

We're able to use all of these tools competitively and effectively.

For our service territory the state of Oregon.

All the customers that we serve there's no question that direct payload offset needs for equity and gives us more optionality as we move forward as with many other aspects in the reconciliation plan.

As well as.

All of the tax issues still being worked out.

<unk> of the direct pay PTC, Andy because while I think it's probably pretty pretty obvious, but it's a significant game for our customers a significant gain for the company. The thing that I would add to Maria's explanation is that.

Are all benefits and I hope, we get that just to be honest.

Okay and then.

Kind of continuing on.

Then you have this like regulatory structural regulatory lag, that's a fairly fixed cost on that.

Taking that doesn't really grow a lot as far as the actual.

Cost of lag.

So as your rate base growth.

By definition that lag, especially if you end up adding significant capacity and capex that lag.

Theoretically.

Sure shrink.

Okay.

Yes, absolutely right.

Yet another reason why we're benefiting from the growth in our territory that sort of growth.

Should.

Benefit us in a number of ways, including including that lag right.

As you know I mean, the OTC, Oh, PUC calculates our our equity returns differently than we would from an accounting standpoint.

We punch over 9% on an accounting standpoint, so we do relatively well I think.

With investors.

In terms of the allowed ROE of course, they take out the short term.

Debt here, so we actually have a bit higher ratio on equity.

As calculated by <unk> standards, then we would on an accounting basis, but our returns are better.

On an accounting basis, there, but you are right.

It's the concept of spreading.

Those expenses over a larger base.

Fundamentally right. It also reduces the volatility as you would have a larger more stable base to.

To start with.

Got it and one last question.

Kind of circling back to the beginning.

So just on the pecan.

So.

This.

Your strategy as far as kind of eliminating.

On that risk.

The shareholder and for the Ratepayer bye.

By adding this capacity.

Time, and whether it's one of the euro and the ability to contract for that obviously will help on the volatility, especially if we get extreme weather, but I'm just curious just for 2023 by 2022.

Jumping ahead.

Every year matters to you as they get older.

I think my time here.

I guess for all of us.

The 2022 again without divulging.

Anything that you may not want to divulge those volumes how are you.

<unk>.

Going into the market.

What's kind of the strategy as far as trying to eliminate.

If we got extreme weather again, we don't know what the weather's going to be with the tried and eliminate some of that volatility into next year.

The shareholder.

Yes.

Yes, so first of all we take a.

Call sort of an all in above set of strategies.

It starts with how we run our generation facilities.

And ensuring that they are 100% reliable during the most challenging days of the year.

The next is how we integrate those generation facilities across our power operations area and ensuring that we have the right amount of capacity.

Procured and the right reserve margins for the increased volatility that we're seeing as we move forward.

And clearly all of those things and we've taken actions on.

We also have.

Adjusted and worked with parties and the commission.

Our modeling techniques to make sure that our modeling is reflecting the current market reality of having less quite frankly thermal resources that can just be turned on and off.

So those things are really important as we look farther out.

Better integration of.

<unk> circuit breaker and a source of generation and we found that this was particularly helpful. During the high heat dome event, where we were able to move around.

Some of our distributed.

Resources in the system as well as.

Question that our customers want ever increasing amounts of.

Clean energy, but theyre not going to trade off cost and reliability and we learned a lot. This summer from the extreme conditions that we.

We found ourselves in.

Our system.

Worked very well generation as well as the T&D system very limited impacts on the customer. So I think we were battle tested in that regard, but at the same time those more extreme.

<unk> conditions I think someone said earlier on the call are those the new normal or.

And we don't know but.

And I won't say much more than this we have already prepared very well for next summer in terms of our positioning.

<unk>.

I think we're going to be extremely well prepared as we go into the season next year.

Okay, that's terrific and yes, I think the main thing.

The lifestyle, which is the most important thing.

Yes, I was very proud I was very proud of the group.

Both on the generation side in the T&D side under extreme very extreme conditions.

And each point in time, whether it be fires or ice storms or heat terms or whatnot we are.

We're rapidly iterating and learning faster than we ever have before.

AI.

Okay.

Yeah.

Okay.

Everyone.

I know I know I've taken enough time, and it's like 12 O finding people probably want a glass much but I'll see you guys David Thanks, Andy.

See you in person and we don't have to worry about the mute button.

Okay.

Yes.

Thank you. Our next question comes from the line of Brian Russo from Sidoti Your question. Please.

Yeah, Hi, just curious when you sit to AUC in the near term.

Our cost.

Do you assume normal hydro conditions or.

We utilize NIH.

Forecast.

When setting that and when is the actual date in which the.

Set.

So we use a long standing hydro forecast.

And then for the <unk>.

Wind forecast, which is just as importantly use five year rolling averages.

And we've had pretty tough wind conditions as well so thats reflected in the history of this used all of that data also goes into how the market is pricing both I'll.

Electricity and gas and that those prices are true up and that we will in the next couple of days and weeks, we will be setting the AUT and then that will be what we'll use for 2022.

Combined with the new modeling that we've worked together on.

With the parties.

Right because it because I know that the forecasts are for.

Wet and cold weather in the Pacific Northwest and I was wondering if.

That's captured in the tariffs.

Or do you know that that creates.

Yeah.

The benefit.

Potentially retain under the P Chem.

And I can tell you.

We are expecting a full year of <unk>.

Wet and cold weather, we are off to a good start in that instance, and that will be very helpful for hydro conditions.

As well as.

Restocking not only reservoirs, but also in some instances a lot of tables. So all of that is good and will be a benefit. This next year I would also note that with.

Those were.

And we are and it's one of the reasons that we are hardening our system. So that we can reduce outages, especially as people continue to work at home and kids are sometimes going to school is still at home and making sure that our reliability is higher than ever.

Understood and then just real quickly on the <unk>.

<unk> infrastructure.

Is that at our.

The sizable investment opportunity in addition to owning building remaining more supply for your portfolio.

Sure. So first of all from a legislative enabling standpoint.

We've got great decisions on the books and supportive utility infrastructure to accelerate the pace of electric vehicle adoption, whether it is infrastructure that's needed within our systems.

<unk> Substations.

Line, whether it is make ready so that additional cabling and infrastructure to get to the.

The charging stations or whether it's the charging stations themselves.

Very clear that the state of Oregon Commission expect the Portland general to be at a leader and an enabler and clean transportation.

And so we see it as a.

Tremendous opportunity. It will obviously is smaller sized nat now, but will increase substantially with each year.

The forecast for electric vehicles are very high.

Oregon has some of the highest penetration highest amounts of electric vehicles already to start with but the.

<unk> better reliability, but also we were able to lower costs as electricity fuel is less expensive than fossil fuels right and it will show up and load growth I would say, 10% pending in the second.

Half of the of the decade here, but starting to ascend in the next couple of years.

In addition to the Capex implications. So I think there's goodness on both sides there'll be additional capex to support as Maria said, but also I would.

Good estimate more more and more load growth coming out of that as we get into the second half of the decade.

See each electric vehicle essentially.

Equivalent to a new residential customers.

Okay, great. Thank you very much.

Thank you our final question for today comes from the line of Paul Patterson from Glen <unk> Associates. Your question. Please.

Hey, how are you guys doing.

Good Paul how are you been.

Right.

Welcome to talk to you Jim.

So listen so most of my questions have been answered.

Really appreciate it.

Your comments Maria about.

Your focus on cost cuts recalls et cetera and.

I was just a little surprised and maybe you can sort of.

If you can the disconnect in the staff testimony.

Which seems to highlight.

Right upfront that they're concerned that there is some sort of trade off between this and in an environmental focus.

That seems to be somewhat concerned about that.

And I'm just wondering if you could sort of.

Claim.

They might be coming from or if this is a communications issue were.

What do you think because I know you guys are.

Or just the opposite or at least that's my impression.

So first of all I don't think I'm going to take a stab at where stats coming from I would reiterate all the comments that Jim has made that we work collaboratively together they are the regulators where the regulated.

We as a company are really proud of the investments we have made.

I believe we got it right in terms of seeing the future and the increased volatility the pressure around reliability and we have been investing.

To be able to weather the storms that come at us, whether it's high heat or ice or whatnot and to be able to deliver.

Affordable reliable energy to our customers that is increasingly carbon free.

You look at the overall price increases that we have proposed.

They are quite modest and it's really hats off to everyone, who works at Portland General day in and day out.

At driving efficiency across our system better use of technology and digital solutions, putting the customer first in everything that we do.

So I think theres a lot of goodness between.

Our filing and we look forward to working collaboratively with parties.

As we move forward.

Sure.

The context of the rate case itself in the back and forth and what have you on that is there.

When you guys are making you guys are forward thinking and you are looking at all of those are there ways, perhaps of using technology and renewables to actually lower cost for customers or I mean do you see any of these things is perhaps being.

From a sort of a cost reduction perspective, perhaps.

In terms of delivering this through I mean in other words it seemed to me from reading it that they felt that there was some sort of trade off at least in terms of focus and that's where I was sort of.

That's what I sort of just wondering strategically speaking.

Just in general how should we think of that when you. When you are looking at all of those or.

Or is it just so look if we're going to be if we're going to be going green, we're going to have to pay a lot more for it do you follow what I'm, saying so no.

No I don't believe we're going to have to pay a lot more for it but I do think we're going to need to be smarter or going to need to use technology in.

In different ways, we're going to need to be integrated with partners not only in our distribution system, many of whom are our customers, but also across the west.

And you can see that continually to the work that we have done to keep our costs low renewable energy today.

New renewable energy in most instances cost less than a new thermal operations, but it's going to create additional challenges around technology and I'm really pleased that we've gotten after our distributed resource systems or we Havent Atms system Thats.

Just about to go live.

And we will continue focusing in on the technologies that will allow us to reduce costs for customers in the renewable energy that we are taking on this is a huge transition.

We're all learning together and we're going to be transparent and collaborative.

Okay. Thanks, so much I appreciate it.

Thank you.

Have a great well take care.

Thanks, Paul take care.

Thank you very much.

This does conclude the question and answer session of today's program I'd like to hand, the program back to Maria Pope for any further remarks.

Great. Thank you all for joining us today and for those of us that we will.

See you at the EI financial.

Conference in just a couple of weeks or 10 days. We appreciate your interest in Portland General and we hope to connect with you in the future. Thank you.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

Q3 2021 Portland General Electric Co Earnings Call

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