Q3 2021 SJW Group Earnings Call
Good afternoon, everyone and welcome to the SJW Group Q3, 2021 financial results conference call.
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.
If anyone should require any assistance during the conference you May press Star zero.
And as a reminder, this conference call is being recorded.
I would now like to turn the conference over to your host Mr. Jim Lynch.
Thank you operator welcome.
Welcome to the third quarter 2021 financial results conference call for SJW group.
I will be presenting today with Eric Thornburg Chairman of the board President and Chief Executive Officer.
For those who would like to follow along slides accompanying our remarks are available on our website at www Dot SJW group Dot com.
Before we begin today's presentation I would like to remind you that this presentation and related materials posted on our website may contain forward looking statements.
These statements are based on estimates and assumptions made by the company in light of its experience historical trends.
Current conditions and expected future developments as well as other factors that the company believes are appropriate under the circumstances.
Many factors could cause the company's actual results and performance to differ materially from those expressed or implied by the forward looking statements.
For a description of some of the factors that could cause actual results to be different from statements. In this presentation. We refer you to the financial results press release and to our most recent forms 10-K, 10-Q, and 8-K filed with the Securities and Exchange Commission copies of which may be obtained on our website.
All forward looking statements are made as of today and SJW group disclaims any duty to update or revise such statements.
You will have an opportunity to ask questions at the end of the presentation.
With that I will turn the call over to Eric.
Thank you Jim welcome.
Welcome everyone and thank you for joining us I'm, Eric Thornburg and it is my honor to serve as chairman President and CEO of SJW group.
As an essential service, we deliver life sustaining water to families and communities, where we live work and serve.
Whether it would be high quality water in a glass a robust supply at the nearby fire hybrid.
Or reliable infrastructure on main street to support economic development.
Water is at the heart of our communities.
Delivering on our vital public mission requires our leaders and employees to maintain a laser focus on the present plan decades into the future and as the past year and a half has shown.
<unk> two unforeseen challenges along the way.
That's J W group and its employees are committed to being a positive force for good in the community protect and improve the environment support water equity.
We have a diverse and inclusive workplace and engage vendors and suppliers that reflect the diversity of the communities we serve.
We are able to build for the future because of our solid foundation.
Our employee teams are working across the country and leaning in to deliver on our commitment to be a leader across the environmental social and governance landscape.
ESG reflects our long standing sense of purpose and our culture of service.
To that end, we are finalizing our first enterprise wide greenhouse gas inventory, which will be the benchmark for reducing our carbon footprint.
We already have solar installations in California, Connecticut, and Maine, and we're working toward more.
One promising project would eventually allow us to meet all of the power needs of our new Soco River drinking water treatment facility in Maine.
The grounds of the Lusaka River facility will also feature more than 250 acres are protected all the open space and a Pollinator garden.
Building on our 2020, a human rights policy every employee in our organization as required to complete training on the policy.
Further as an organization, we support water equity and believe that access to safe affordable and reliable water service is a human right.
We have financial assistance programs to assist customers facing hardships and we're especially proud of our water rate assistance programs in California in Connecticut that provide a 15% reduction on water bills for income eligible residential customers.
More than $1 $1 billion in federal dollars is earmarked to states to pay water and wastewater bills in arrears on behalf of low income residents through the low income household water assistance program.
We are actively engaged to make sure that our customers in all four states can benefit from the program.
Importantly, we believe our commitment to water equity includes investing in our systems. So they can deliver reliable supply of high quality water.
Our subsidiaries are making consistent incremental investments in infrastructure. So that customers at all income levels will have access to the quality and reliable water service they deserve with the costs and rate impacts of those investments incurred gradually so they can be more easily addressed by the.
<unk> and our customers.
Artificially keeping rates low by deferring investment is shortsighted and not sustainable and does not really serve our customers, who all deserve quality water and service for the long term.
Unfortunately, the water shortage of emergency declared in June by Valley water, our California water wholesaler remains in place.
San Jose water continues to aggressively promote water conservation to its customers in order to reach valley water stated goal of reducing water consumption by 15% compared to 2019.
The California public Utilities Commission or CPUC has approved our request to establish a water conservation memorandum account to track the revenue impact of authorized versus actual water consumption. While we are promoting conservation.
A water conservation expense memorandum account was also authorized to track the incremental expenses required to implement our mandatory water conservation program.
Both memorandum accounts allow for the potential future recovery of the revenue and expense impacts.
We continue to have adequate water supply to meet the needs of our California customers.
Last week, some much needed rain moved through the region.
We're hopeful that as an early start to the traditional rainy season in the Bay area.
We are committed to strong partnerships with our communities.
San Jose water has been recognized by American burst of business Awards for the company's response to COVID-19, which included donating and distributing PPE to other water utilities and community organizations.
The Pea CPUC held their 19th annual supplier diversity on bunk titled thriving and surviving Europe. During a pandemic on October 14th a full day virtual event dedicated to supplier diversity.
All CPUC commissioners were present, and let a conversation on supplier diversity, including a recap of California regulated utility supplier diversity results for calendar year 2020.
During the meeting San Jose water was recognized by the CPUC for increasing our results from 12, 9% in 2019, but 31% of addressable spend in 2020.
S. J W was also recognized as one of only 10, California regulated utilities to meet the three supplier diversity sub goals for women, 5% minority, 15% and disabled veteran owned 1.5% spend.
Supplier diversity is a focus of all SJW group companies and another way, we're having an impact for good in our communities coast to coast.
Building and retaining our workforce of water professionals is also critical.
Earlier this month, Connecticut water was recognized at the state level as a top workplace and also at the national level for culture excellence by top workplaces for our professional development program.
Medical water was one of about 250 companies its size to be recognized nationally.
Cyber security is critically important to our industry and the country.
In August I was honored to represent SJW group at the White house's cyber security summit, along with two dozen respected academics and top executives from leading firms of banking commerce energy and water.
It was gratifying to see that the importance of water to our national security is recognized at the highest levels of government, including President bike.
Attendees committed to sharing best practices and in the water space SJW group pledged to be a resource to smaller organizations still developing their own cyber security resources.
I'll now turn the call over to Jim who will review, our third quarter and year to date financial results.
After Jim's remarks, I'll dress other regulatory and business matters Jim.
Thank you Eric.
Our quarterly operating results benefited from authorized rate increases in each of our four operating utilities. These.
These increases were offset by a decrease in customer usage, most notably in our California utility as a result of the drought emergency declarations by the state Governor and valley water <unk>.
The decrease in the availability of surface water supplies in our California service area due to continued dry weather conditions.
In addition, we experienced higher general and administrative expenses as we near the end of the third year of our three year, California rate case cycle with new rates anticipated to go into effect in the second quarter of 2022.
Third quarter revenue was $166 $9 million, a $1 million or 1% increase over reported third quarter 2020 revenue of $165 $9 million net.
Net income for the third quarter.
It was $19 $1 million or <unk> 64 cents per diluted share.
This compares with $26 $1 million or <unk> 91 per diluted share for the third quarter of 2020.
Diluted earnings per share for the quarter was primarily driven by cumulative rate increases of 29 per share.
And decreased production expense due to lower customer usage of <unk> 28 per share.
These increases were offset by a decrease in customer usage of <unk> 48 per share.
An increase in administrative and general expenses of <unk> 16 per share.
And an increase in maintenance costs of seven cents per share.
In addition, the decrease in California surface water production resulted in a decrease of <unk> <unk> per share.
Turning to our comparative analysis for the quarter the $1 million increase in revenue was primarily due to $7 $6 million in cumulative rate increases three.
<unk> $3.3 million in the net recognition of certain regulatory mechanisms in Connecticut and Maine.
And $1.8 million in the recognition of California, balancing and memorandum accounts.
These increases were partially offset by $12 $9 million and decreased customer usage.
Water production expenses increased $2 $4 million compared to the third quarter of 2020.
The expense increase include $7 $8 million and higher average per unit cost for purchasing groundwater and $1 $2 million for the purchase of additional water supply necessary to replace the low volume of California surface water.
These increases were partially offset by $7 $5 million in cost savings due to lower customer usage.
As stated on our previous earnings call, we anticipated producing approximately $2 5 billion gallons of surface water from our California watershed, which is representative of our 10 year average production and consistent with the volume authorized in our 2019, California General rate case.
Through the first nine months of 2021, we experienced minimal rainfall and produced less than 260 million gallons of surface water.
We do not anticipate any significant additional surface water production in 2021.
The incremental cost to supplement this shortfall is approximately $4 $6 million per 1 billion gallons.
Other operating expenses increased $6 $7 million during the third quarter, primarily due to a $3 2 million dollar increase in administrative and general expenses.
$1.8 million and higher maintenance expenses, and depreciation expense of $1 $4 million.
The increase in administrative and general expenses was primarily due to regulatory proceedings in California, Connecticut, and Maine and compensation increases in.
In addition in 2020 administrative and general expenses benefited $1 $4 million from the adoption of a new accounting rule on the credit losses.
And maintenance expenses benefited from the cost recovery of a previously reserved capital project.
No similar benefits occurred in 2021.
Other income in 2020 included a third quarter gain on the sale of real estate of $1 1 million and no similar transaction occurred in the third quarter of 2021.
The effective income tax rate for the third quarter was 13% compared to 15% for the third quarter of 2020.
The effective tax rate decrease was primarily related to flow through tax benefits.
Turning to our year to date results 2021 revenue was $433 9 million a 1% increase over the same period in 2020.
Net income for the first nine months was $42 $5 million or one point of $1 43.
Per diluted share compared to $48 $2 million or a dollar point 68 cents per diluted share for the same period a year ago.
The change in year to date diluted earnings per share was primarily driven by rate increases that contributed 53 per share.
Decreased production cost due to a decrease in customer usage of <unk> 22 per share and favorable changes in balancing and memorandum accounts and other regulatory mechanisms of <unk> 15 per share.
In addition, the tw a purchase price hold back contributed 11 per share.
An increase in flow through tax benefits contributed <unk> 12 per share and new customers contributed eight cents per share.
These increases were offset by a decrease in customer usage of <unk> 53 per share.
An increase in general and administrative expenses of 29 per share and an increase in average per unit water production cost of 24 per share.
In addition, the decrease in California's surface water production impacted earnings by <unk> 15 per share.
And depreciation expense increased 16 <unk> per share while maintenance costs also increased at <unk> 12 per share.
Our 2021 year to date increase in revenue was primarily due to $14 million in cumulative rate increases $2 $4 million and the net recognition of certain regulatory mechanisms in Connecticut and Maine.
And $2 million from new customers.
These increases were partially offset by a decrease in customer usage of $14 $2 million and winter storm credits in our Texas service service area of $800000.
Water production expense in the first nine months of 2021 increased $5 $1 million.
The increase was primarily due to $6 $3 million and higher average per unit cost for purchased water and groundwater and $3 $9 million from the California surface water decrease.
Partially offset by a $5 $8 million savings due to lower customer usage.
Other operating expenses increased $13 9 million year to date, primarily due to $6 million in higher administrative and general expenses $4 $2 million as an increase in depreciation expense and $3 $3 million in higher maintenance expenses.
Increase in general and administrative expense was primarily due to the same items noted in the discussion of our quarterly results.
Other income for the first nine months of 2021 included the Tw, a holdback amount, which I discussed during the second quarter earnings call.
Turning to our capital expenditure program, we added $69 1 million in company funded utility plant in the third quarter of 2021, bringing total company funded additions for the year to $169 $2 million.
We are on track to add approximately $239 million in utility plant in 2021, consistent with our 2021 construction budget.
For the nine months ended September 32021 cash flows from operations increased approximately $29 $7 million over the same period in 2020.
The increase was primarily due to an increase in accounts receivable and accrued unbilled utility revenue collections of $14 $8 million payments.
Payment of amounts previously invoiced and accrued of $7 million.
An increase in net income adjusted for noncash items of $5 $4 million that was due to deferred income taxes, and general working capital items, which increased $3 million.
In addition in the prior year, we made an upfront payment of $5 million in connection with our city of Cupertino service concession agreement that did not recur in the current year.
These increases were partially offset by a decrease in income tax receivable of $5 $5 million.
At the end of the quarter, we had $137 $9 million available on our bank lines of credit for short term financing of utility plant operations and operating activities.
Average borrowing rate on our line of credit advances during the first nine months of the year was approximately 1.34%.
With that I will stop and turn the call back over to Eric.
Thank you Jim.
That'd be group continues to execute on our core growth strategy of investing in high quality water systems to provide safe and reliable service to customers and communities and earning a fair return on those investments we have invested 71% of our planned 2021 capital spending through the end of the third quarter.
Our board has authorized a $223 million capital spending plan for 2022.
Nearly half was allocated to pipeline replacement projects.
California's forward looking capital spending authorization and the wicker and wisc infrastructure recovery mechanisms in Connecticut, and Maine minimize regulatory lag on these infrastructure investments.
As mentioned in last quarter's call on July 28, the Connecticut public utilities regulatory authority or PURA approved an increase of $5 $2 million in annual revenues, which is an increase of about 5.1%.
On August 11th 2021.
Adequate water filed a petition with PURA for reconsideration of the rate case decision related to the treatment of excess accumulated deferred income taxes.
<unk> issued a draft decision on October 25th that would allow the company to increase annual revenues by an additional $1.8 million from the amounts previously authorized in July.
Company appreciates the time that PURA commissioners and staff invested in understanding this complex tax matter and in reaching a fair draft decision.
Final decision on the matter is expected on November 10, with new rates effective as of that date.
If the final decision is unchanged from the draft. The result from the general rate case will be a total increase in authorized revenues of $7 million or six 8% increase in base rates.
The water infrastructure and conservation adjustment was reset to zero as part of the July 28, 2021 general rate case decision.
This week, Connecticut water filed for a wicker increase score approximately $22 million and completed eligible projects.
Any of the projects were those that were not considered by PURA in.
In the general rate case, because of the deadline for capital additions.
If approved as submitted.
CWC expects a wicker surcharge, a two 5% to be added to customer bills in January 2022.
That would generate $2 $6 million in revenue.
Between the anticipated resolution of the general rate case, reconsideration and the width of filing Connecticut water is expected to generate revenue increases of $1 8 million and $2 6 million, respectively by the first quarter of 2022.
Total increase including the $5 2 million. Dollar addition from the general rate case final decision in July is $9 6 million in total.
The combined outcome is near what was anticipated in the company's original rate case filing.
San Jose water company's 2021 general rate case application for new rates in 2022 through 2024 is pending before the CPUC.
The application seeks an increase of nearly $88 million and the revenue requirement over the three year period authorization for $435 million capital budget.
And request to recover $18 5 million from balancing and memorandum accounts Lou.
New rates are anticipated in the second quarter of 2022.
However, the company will file for interim rates to be effective on January 1st 2022.
Yesterday WCS advanced metering infrastructure application is also pending before the CPUC.
That all party settlement agreement was submitted to the CPUC for adoption that would authorize capital investments of approximately $100 million over the next four years for the development of a lie outside of the capital budget requested in the 2021 general rate case.
Final decision on the settlement agreement is anticipated in first quarter of 2022.
The 2022 through 2020 for cost of capital proceeding is also pending before the CPUC.
The application request increases in revenue and return on equity an adjustment to the proposed capital structure and a decrease in the cost of debt.
If approved new rates are expected to be effective in the second quarter of 2022.
Taking into account. These current developments our forecasted earnings remain within our guidance of $1 85 to two O five, but as stated last quarter or towards the lower half of the range.
On September eight 2021 main water company filed a supplemental application with the Maine Public Utilities Commission or PUC for the.
The second step in the right plan for the Biddeford Soco Division.
Maine water requested a $6 $9 million and new base revenues related to the construction of the new Soco River drinking water treatment facility.
This is a $60 million generational investment to replace a vintage facility that has been in service since 18 84.
A decision is expected in the second quarter of 2022 in alignment with the completion of the new treatment facility.
Beginning July one main water implemented an innovative rate smoothing mechanism.
Otherwise by the M P C.
The rate smoothing mechanism mitigates customer rachael by providing a more gradual ramp to new rates driven by the completion of the Soco River facility.
Customers will pay a surcharge until June 2022, with those payments funding a regulatory liability account.
Which will later be used to provide credits to customer bills.
To mitigate the impacts of the full rate increase when the plant is completed and in service in 2022.
A third and final step filing associated with the new treatment facility is expected to be filed in the second half of 2022. After the plant is in service and operating costs are documented.
Before the end of this year main water will file for $2 $4 million of investment recoverable through the water infrastructure surcharge.
Company also expects that by March 1st of 2022 that it will have filed rate increase applications and four of its divisions.
Our rate filings are a condition of settlement in the 2019 tax cut and jobs Act corridor.
We continue to see a pipeline of growth opportunities that SJW, TX, our Texas water and wastewater utility.
On July 23rd S. J W. T X filed for authorization with the public Utilities Commission of Texas to serve Canyon Lakes the states.
Which is next to its existing service area.
On August eight the company filed a change in ownership application with the PUC T to acquire Texas country water.
A decision on that application is expected in the first quarter of 2022.
Decisions on the previously filed applications to acquire the Kindle West and then their east water utilities are anticipated in the fourth quarter of 2021.
Combined these pending applications would add more than 1500 service connections.
That's J W. T X has more than tripled its customer base over the past 15 years.
<unk> has approximately 22000 connections providing service to about 65000 people.
Within the company's existing service area are come all in haste counties, which are two of the four fastest growing counties in the nation.
The addition of Kendall West would add Kendall County.
Another fast growing county.
That's J W. T X has been successful at securing water supplies and building economies of scale that enable organic growth and acquisitions.
Our bullish on SJW, TX and its increasing contribution to consolidated earnings.
On behalf of SJW group I want to thank all of our employees in all of our states for their commitment to protect hub protect public health protect.
Protect each other and deliver life sustaining water service to families and communities with that I would like to turn the call back to the operator for your questions.
And as a reminder, if you have questions at this time. Please press star and then the number one on your text stone telephone and if your question has been answered or you wish to remove yourself from the queue. You May press the pound key.
And first question comes from the line of Angie <unk> from Seaport Angie Your line is now open.
Thank you.
I wanted to ask about the the pending rate case in California, I heard in your prepared remarks comments about you know how important that parents want assistance or which you know I.
And far from that that there is pushed back to the Capex plans that you published we're hearing some.
Some opposition to the the fixed charges that you guys are proposed.
And the filing and also there seems to be some.
Pressure on allowed ROE.
Oh, what about the C and the allowed ROE.
Cost of capital proceeding so well.
Talk to us about.
You know, what's the what are your expectations for the.
But the earnings power.
San Jose water in California.
Yes. Thank you Andrew Thanks for joining our call today and I appreciate your question.
I'll provide my perspective, and then of course, if Jim has anything to add he'll jump right in.
We're in the midst of us actually settlement discussions with the office of public advocate, we think those discussions have been very productive and we're progressing through those I think really well.
I think we are optimistic that well.
We will have.
The majority of issues settled and as you know in California.
The items that you don't settle then or are open and subject to the litigation and the actual hearing process and so we should know fairly shortly just how many issues.
Would proceed onto litigation if any.
And I'm actually optimistic that we are.
It's going to achieve a real fair resolution for our customers and for the company. So so stay tuned and hopefully we'll have some news in the next quarter or so.
Yeah, and Eric the only thing I would add is on the cost of capital proceeding there have been some.
Procedural delays on that so we have not yet.
Started in Ernst down the.
The path of processing that proceeding, but we'll certainly keep folks updated on that as we as we embark on that.
Yeah.
Okay and now you mentioned the.
About the Connecticut case, and the you know 'twenty 'twenty eventual increase of $9 6 million.
What's the level of which this 96 million.
To which they have been I think 6 million will be added soon so whats the revenue level and for Connecticut water in 2020 one.
Jim do you have that off.
At the top of your head.
I believe the authorized is thereabouts around $29 million I'm sorry in revenue no. Let me get that for you why angi and then I can okay I can.
Intervene.
While were out for answering questions.
Okay.
Trying to.
You guys were emerging with Connecticut water. There was this expectation in the long term growth or earnings growth of about 5% and granted that.
Yeah. The weather has has interfered with that this trajectory, but you know given the settlement discussion that in California, and the outcome of the Connecticut rate case D. C. Do you continue to see this 5% earnings trajectory.
I'm talking about basically normalized CAGR.
Yeah that that has continued to remain our guidance overall that.
Over over time, that's what we'll achieve in and if you think about this year the value of having the combined company has really been evident because of the water supply challenges we've had in California. The contributions of our new England companies to earnings this year have really been important so.
You know our goal main goal was to provide the diversity of regulatory exposure and and utilities across the country and and we feel really great about having achieved that that's been you know.
Usually helpful to us here in 2021 and to a great extent last year as well as we navigated through the water supply challenges in California.
There's nothing like a drought to sharpen the focus of all people on the importance of adequate water supply and and you know.
That's true of of our company employees and regulators as well. So so I remain cautiously optimistic that we're going to be at a much better place next year.
Okay, and the last point I understand it's the last year Congress can cycle in California.
Inflation and operating expenses.
But we are seeing actually the opposite trend with some other utilities given that we're in the Covid environment and you know there are at least corporate overhead and malware.
Interest expense is lower than at the corporate level and so.
So are you not seeing similar.
Similar offsets to those inflationary pressures that you see for the rest of the business.
Well there certainly is as you point out to them. Some synchronizing with our current rate cases, you know that's part of the part of the process. We're very proud of our of our expense control over time, you know, Connecticut water haven't been in for rates for over a decade and so.
But when we do go in you know we needed to synchronize.
Expenses with what we would expect to see going forward and same is true in California, where we've had an uptick.
And maintenance costs in California, with the drought, that's kind of a natural situation you experience Andrew when you get the drought in the ground gets.
Hard and dry and starts to move a bit.
We've had more main breaks than typical and that's contributed to some of the higher maintenance expenses, we've seen but but overall, we're really pleased with our overall cost efficiency and what we presented to the commissions. We think we compare very favorably when you look at our total O&M costs across on a per customer basis. So.
That's that's been our experience with it what do you have anything to add to that.
Oh, Yes, I think that's exactly right, Eric we have started to see a little bit of a <unk>.
Price.
Increases in some of our Capex spend, especially in the area of pipe and other areas, where there's a little more short supply out there right now, but as it relates to our O&M expense, Eric is spot on and Angie that revenue number is $110 million.
Okay, and then just last one so as you negotiate the settlement in in California, and I know that we're not yet in the rainy season, even though it seems like it is.
We have started it.
I mean again, it's a guessing game probably at this point, but any sense on.
How your water procurement well, thus far in 2022 little different from what is what will it be reflected in your right from the G. R. A C. I mean do you already feel like you have haven't been.
Sufficiently conservative in your ask in the pending rate case.
You know Andrew I'm going to defer that answer until we complete the settlement process out of respect to it but like I mentioned.
Mentioned earlier, there's nothing like a drought to really focus everybody's attention on it and so.
We're pleased that the public advocates office and are the regulatory staff with CPUC recognize the issue and.
So we're all working together to make sure we do our best to address it. So I hope we'll have some some updates here in the next quarter.
Okay, great. Thank you gentlemen.
Thank you Angie.
Chip.
Next question comes from the line of Jonathan Reeder Wells Fargo. Jonathan Your line is now open.
Hey, good morning, how.
How are you guys doing today.
Hey, Jonathan Thanks for dialing in today Yankee.
Thank you for asking.
Just to build on Andrews.
There might be a little bit and in the DRC processes. There a statutory requirement that the 10 year average or your surface water production be embedded in the case or is that very much a negotiable item.
Yeah, there's no statutory requirement it is.
But the evidence is supremely important of course that experience and so.
But there is the opportunity to as well negotiate that in a settlement agreement process.
Just as part of the overall settlement. So there's puts and takes in any settlement negotiation of course.
Okay and.
I guess maybe.
Maybe ask.
Slightly different or getting a little insight what would the 10 year average look like.
Basically rolling forward three years, including this year.
Low production you know how that compares to about two and a half billion.
You know Jonathan I don't I don't have that just.
Just at my fingertips here, but candidly the what had been previously and rates of two and a half billion was was pretty close to that average as I recall, but subject to check.
The course of the last two years will have pulled that number down, but but over time, the two and a half million dollars has been a pretty pretty good average.
If you look at the trend, it's it's it's well above the trend.
So I just kind of like I think 19.
19, if I recall was it really.
What are you for you guys and then obviously 2020 2021 those were.
Very bad so didn't know how that affected.
Affected the early years that would be rolling off of that 10 year average so.
Okay.
On the.
The Q3 results just to be clear. They didn't include any benefit from the W. CMA or the W. E. M. A memo accounts approved by the CPUC is that right.
Yes.
Yes, that's right Jonathan we are we have not yet met some of the accounting requirements in that regard and so we have not reflected any of the benefits of the two mechanisms.
And recall that the W. CMA was really.
Effective.
As of August one I think it was passed in July mid.
Mid July July 17th, but but the true impact would've been measured from August for us going forward.
Yes, so based on that for the effective date is.
They're like a retroactive once you have once you meet those accounting requirements are you able to you know extensively.
Extensively in Q4, we'll get retroactively to that August 1st effective date them.
Yes, we would be.
Okay.
Okay. So that's.
In part factored into I guess the the.
The reiteration of the guidance range, the lower half of it or whatever.
Yes. It is.
Okay.
Okay.
Excuse me I think I saw that 20 Delta.
It was kind of wondering about that so okay. I think that's all the questions that I have Oh Gee asked a few of the other ones I had so I appreciate that and good luck with the with the California settlement discussions.
Okay. Thank you Jonathan appreciate it thank.
Thank you John.
Again, if you have any questions. Please press star one on your telephone.
And there are no further questions at this time presenters you may continue.
Very good well. Thank you operator, and thank you everyone for joining our call today, we really appreciate your interest in and support of our company.
Really proud of our people I want to once again, thank them for it.
Delivering excellence in the last quarter under really challenging circumstances, both COVID-19 and and droughts and hurricanes and the like and we just couldn't be prouder of our people and we look forward to keeping you posted on our progress in the fourth quarter. Thank you all.
Thank you so much to our presenters and to everyone who participated this concludes today's conference call. You may now disconnect have a great day.
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