Q4 2021 Portland General Electric Co Earnings Call

Ladies and gentlemen, thank you for standing by your conference calls that begin momentarily again. Thank you for standing by your conference call. So I begin momentarily. Thank you.

[music].

Good morning, everyone and welcome to Portland Gen.

General Electric company's fourth quarter 2021 earnings result conference call today is Thursday February 17 2022.

This call is being recorded and as such all lines have been placed on mute to prevent any background noise.

The speakers remarks, there will be a question and answer period, if you'd like to ask a question. During this time simply put the <unk>.

Number one on your Touchtone telephone.

If you would like to draw. Your question. Please press the key power key on your Touchtone telephone.

If you do intend to use to ask a question. Please avoid using the speaker phone.

For opening remarks, I will now turn the call over to Portland General Electric Senior director of Investor Relations Treasury and with management, Don Harding <unk>.

Please go ahead Sir.

Thank you Valerie 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 have prepared a presentation to supplement our discussion, which we'll be referencing throughout the call. The slides are available on our website at investors Portland General Dot com.

Referring 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 and 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 report.

It's on forms 10-K, and 10-Q, which are available on our website.

Leading our discussion our Maria 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 now, it's my pleasure to turn the call over to Maria.

Good morning, and thank you John and thank you all for joining us today.

21 was a year of strong growth and execution.

Against the backdrop of the ongoing pandemic.

Historic ice storm and record heat, we focused on grid hardening and new technologies to improve reliability and resiliency.

Turning to slide four for the full year 2021, we reported net income of $244 million or $2 72 per share. This compares with $155 million or $1 72 per share for the full year 2020.

For the fourth quarter net income was $66 million or <unk> 73 per share. This compares with 52 million or <unk> 57 per share for the fourth quarter of 2020.

Our region is growing.

Particularly the tech and digital sectors driving overall revenue growth.

Net variable power costs were also higher.

Electing regional power market volatility, particularly in the third quarter.

Operating and administrative expenses increased due to higher wildfire and vegetation management expenses and.

And the cost of several storms outside of the large major storm deferral.

Finally employee wages and benefit expenses were higher reflecting an inflation pressures and improved performance over 2020.

Given our regions attractive environment for high Tech and digital companies and ongoing in migration, we expect growth to remain very strong.

Power market challenges will also likely continue.

We've taken several steps to reduce our exposure.

<unk> forward pricing updates to the annual update tariff mechanism.

Second new forecasting methodologies that better reflect wind and other volatility attractive to our rate case.

And third plant operating improvements and finally fourth procurement of additional forward capacity.

Operating efficiency is our focus.

And as we address rising customer expectations as well as inflationary pressures will be increasingly important.

All of this combines to inform our 2022 earnings guidance of $2 75 to $2 90 per share.

Later in the call Jim will go into much more detail on both the 2021 results and our 2022 outlook.

I would like to now talk to a couple of highlights that were significant from an operational legislative and regulatory standpoint.

First opening the new integrated operations center and launching the advanced distribution management system, where key milestones. These investments establish the foundation for intelligent energy network that enables the integration of greater amounts of renewable energy distributed energy resources and increase.

The system flexibility and resiliency.

Second we advanced our digital capabilities across the enterprise to improve performance and deliver exceptional customer experiences.

We simplified our work and reduce costs by equipping field crews with new digital tools.

Upgrading supply chain systems, and increasing call center performance.

Together these advances allow us to get more work done and drive operational efficiency.

Through advanced data analytics, and smart grid technologies, we are increasing the reliability of our system, even under uncertainty and extreme weather conditions.

Third our path to Decarbonization was further catalyzed by the passage of Oregon's clean energy legislation.

Working with a broad coalition of stakeholders.

<unk> carbon reduction goal targets were established that are consistent with our goals and aligned to the international panel on climate change as our Ipcc's six report.

PGE was also the first utility in the country to sign the climate pledge.

Committing to achieving net zero emissions across our company operations by 2040.

And for the 13th consecutive year, our voluntary renewable energy program was ranked number one in the U S by the National renewable Energy Laboratory.

Fourth we initiated an RFP in April for up to 500 megawatts of renewable energy and 375 megawatts of not admitting capacity.

Initial bids were submitted in January with a shortlist expected to be issued in the second quarter and a final decision by the end of the year.

While many of you have lots of questions on the bids.

We are in the very early stages of evaluation and all of this is subject to NDA.

Also in collaboration with customers and stakeholders, we issued our inaugural distributed system plan.

Focus on modernizing our grid to accelerate distributed energy resources and maximize grid benefits for all customers and community members.

Fifth as part of our 2022 general rate case, we recently reached an agreement that subject to <unk> final approval will resolve the annual revenue requirement.

Average rate base capital ratios and a corresponding increase in customer prices.

And finally this year, we relaunched our guiding behaviors first established more than 25 years ago.

And our ongoing and long standing commitment to diversity equity inclusion.

We are increasingly the representation of black indigenous and people of color as well as women in leadership across our company.

We're also continuing our long standing focus on environmental stewardship.

And during the past year PGE employees completed over 15000 hours of community service and employees Retirees PGE Foundation, and our company donated $4 8 million to support our communities.

As we look to the future, we anticipate continued economic growth and load increasing 2% to two 5% in 2022.

With longer term growth of approximately one 5%.

Ongoing focus on digital and other technologies.

Operational improvements and efficiencies, which could help mitigate inflationary cost pressures.

Overall, we are well prepared with improved reliability resiliency and operating performance as we rapidly transform to address urgent climate change challenges and lead a clean energy future across our region.

I'll now turn the call over to Jim. Thank you. Thank.

Thank you Maria and good morning, everyone. Our 2021 results reflect the continued economic growth in our service territories and the opportunities and challenges of our path to decarbonization, we experienced strong load growth from higher residential and industrial demand, while also navigating challenging power markets.

Inflationary cost pressures.

Turning to slide five.

<unk> recovery from the initial economic downturn due to COVID-19, as reflected in our strong year over year load growth of 4% weather adjusted.

2021, we experienced growth across all customer classes residential demand, increasing 1% weather adjusted which reflects ongoing economic growth.

<unk> load increased four 2% weather adjusted as the sector rebounds from the decreased activity in 2020.

Industrial deliveries increased eight 5% weather adjusted.

As our service territory continues to attract growth.

<unk> and digital customers, including data centers customer expansion and new site development activity all point to strong growth in the <unk>.

<unk>.

Favorable weather, we experienced contributed an additional one 1% to the overall growth rate of five 1% in 2021.

Based on recent trends in our service territory, primarily driven by industrial growth and anticipated distributed energy resources growth.

Including transportation electrification adoption, we are raising our long term growth guidance from one to one 5%.

Our quarterly EPS increased from 57 per share in 2020 to 73 per share in the fourth quarter of 2021.

The increase was primarily due was 17 adjustments to a non utility asset retirement obligations.

<unk> in the fourth quarter of 2020.

<unk> fourth quarter results full year, GAAP EPS was $2 72 for.

For 2021 compared to GAAP EPS of $1 72 for 2020 non.

non-GAAP EPS for 2020 was $2 75.

After removing the negative impact of the energy trading losses.

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

Beginning with our GAAP net income of $1 72 per share in 2020 to which we add back the $1.03 per share impact of the energy trading losses, we experienced a 78% increase in total revenues, primarily due to the strong economy driving growth in our service territory with the ban.

Due to more favorable weather offsetting this was 58.

Unfavorable power cost two.

2021 saw significantly higher power prices, particularly in the summer due to warmer weather and increased regional demand for capacity.

<unk> $29 million of incremental power costs under our pecan mechanism, which represents 90% of the variance above the threshold, we anticipate the regulatory process related to this deferral will begin late in quarter two of 2022 and continue through the year.

It was an 18th decreased EPS from costs associated with our transmission and distribution expenses, including <unk> for enhanced wildfire mitigation plan.

Additional vegetation management and <unk>.

Our service restoration costs related to storms in 2021.

There was a 41% decreased EPS from administrative expense, including 12 and adjustments to incentive programs, including <unk> for 2020 decreases and incentives following the trading losses.

<unk> from increases in wage and salary expenses and 16.

Outside services to strengthen risk management improved customer facing technology and improve our supply chain management systems III from higher insurance expenses, partially due to higher wildfire insurance premiums and then <unk> from miscellaneous other expenses.

Going to DNA, a 32% increase due to lower D&A expenses in 2021, including 22% increase due to the impact of a non utility asset.

<unk> obligation revision to 2020 and 18.

Increased due to the impact of plant retirements in 2020 and these.

Increases were partially offset by an 8% decrease due to higher plant balances in 2021.

<unk> decrease from the impact of higher property taxes.

And then finally, there was a 9% increase primarily driven by the recognition of a benefit from our local flow through tax adjustment in Q1 2020.

2021.

Turning to slide seven and last month, we reached an agreement with stakeholders that resolved several significant aspects of our 2022 general rate case. In addition to the previously agreed upon 50 50 capital structure.

5% allowed Roe.

We agreed to a final annual revenue requirement average rate base and a corresponding increase in customer prices. Our final rate base of $5 6 billion, an increase of $814 million or 17%, which represents a constructive outcome for investments made on behalf of <unk>.

Customers, while the $10 million increase in the annual revenue requirement net of power costs represents a modest 5% increase in customer prices.

We also agreed to and our decoupling mechanism.

The operation of the existing decoupling mechanism is misaligned to the policy framework in Oregon, especially as it relates to supporting de carbonization. So the parties agreed to eliminate it.

Parties agreed to accelerated coal strip depreciation to fully depreciated our interest in that plant by 2025.

While certain policy elements remain outstanding and all settlements remains subject to final PUC approval. We are pleased with the potential outcome for our customers and stakeholders. A final order is expected by the end of April .

On the resource front, we made several regulatory filings and which we shared our plans to advance the strategy to meet our targets for reducing greenhouse gas emissions and the power. We served customers, where we have discussed our resource plans earlier in the call and we look forward to working through the RFP process and expect to share an update.

In quarter two.

Turning to slide eight which shows our updated capital forecast through 2026.

We increased our capital expenditure forecast through 2023 through 2026% from $550 million to $650 million per year to more clearly reflect our fundamental plans to invest in the system for reference in 2021, we exceeded our target guidance of 655 with the total capital expenditures.

Of $680 billion over the next five years, we expect to invest roughly $3 billion.

On top of the recently settled five 6 billion entity.

Incident rate case to be clear about this increase I want to point you to the distribution service plan that Maria referred to.

This plan anticipates, a significant growth in load new connects new.

New projects for customers system expansion, Substations and grid modernization, which primarily explained the increase in the capex.

The increase was primarily represent group grid, resiliency and transportation and try and electrification investments plan for future years, but do not include expenditures related to the possible our RFP ownership options with the recent settlement in the PRC sub.

Subject to approval by the PUC. This affirms that we will not need to issue equity to meet our capital requirements in 2022, unless there is a significant renewable addition stemming from the RFP.

On to slide nine the RFP process for energy and capacity resources with bids submitted in January and a shortlist targeted in quarter. Two final selection of winning bids is expected by the end of 'twenty.

'twenty two.

RFP will be a competitive process and we will share more details as we move through the procedural calendar, we continue to maintain a solid balance sheet.

As you can see on slide 10, including strong liquidity and investment grade credit ratings, accompanied by a stable credit outlook.

Total available liquidity at December 31, 2021 $843 million.

And we remain one of the least levered companies in the sector.

We plan to fund investments with cash from operations and the issuance of up to $250 million debt of debt in the second half of 2022.

As we did in 2021, we will apply our green financing framework continue to seek out opportunities to tie our long term debt to our sustainability strategy through capital investments.

Turning to slide 11, we are initiating full year 2022 earnings guidance of $2 72.

To $2 90 per diluted share as a reminder, we established our base year and growth rate in 2019 with EPS of $2 39.

Per diluted share the midpoint of this guidance range represents a five 8% compounded annual growth rate from the $2 39 base.

To walk through a few key drivers.

That will prove that we're confident will grow to this 46% range in 2022.

The drivers of our long term guidance remains strong load growth from in migration and industrial expansion.

Operational efficiencies and potential investment opportunities in our system with renewable resources, we expect continued strength in energy deliveries.

Two to two 5% weather adjusted retail load growth.

Like to address our 2022, O&M guidance midpoint of $600 million.

Which represents a 7% decrease from 2021 levels.

'twenty one O&M included significant work to accelerate our digital and customer strategies and we expect these efforts to create sustainable efficiencies in our operations in 2022 and beyond and 2021, we also accelerated our vegetation management efforts implemented new customer interface system.

Automate many aspects of customer service.

Continued deployment of distribution automation technology, and we've made significant investments to build risk awareness and mitigation into our operations.

Looking forward to 2022, we will increase efficiencies by accelerating adoption of digital technologies and investments made in 2021 <unk>.

We'll leverage increased recent grid investments to strengthen our operations.

I am confident as we continue to identify and implement efficiencies in 2022, we can't continue to grow and we are reaffirming our long term earnings growth guidance of 4% to 6% off of 2019 this year.

With respect to dividends our board recently declared a dividend of <unk> 43 per share our 2021 full year dividend.

It was $1 68 per share this dividend, we completed our 15th consecutive year of dividend growth over the last five years growing at 561% compounded annual growth rate.

We also plan to continue our limited share buyback program.

Offsetting the dilutive effects of shares issued under our compensation programs.

The combination of strong growth trends cleared de carbonization targets and significant opportunities to invest in our customers electrification needs create a compelling case for delivering value by serving clean affordable safe reliable and equitable energy.

To execute our long term financial targets for customers and investors alike. Now before we open the line for questions I'd like to hand, it back to Maria.

Thank you Jim I'd like to note that today, we announced that Liza Caner, our VP General Counsel and Chief compliance officer plans to retire in early July .

And will transition to the role of chief compliance.

Officer effective mid March.

We're grateful for leases insights expertise wise counsel as we navigated the challenges of the last five years recently, Lisa was instrumental in resolving all of the litigation associated with the 2020 energy trading manner.

Please have set high standards for leadership and integrity, and we wish her well in retirement.

The same time I am pleased to announce that on Helicon Espinosa, who has served as deputy General Counsel and corporate Secretary has been appointed as VP General Counsel effective mid March.

Prior to joining PGE and how it held multiple roles at Sempra energy, including Vice President of gas acquisition, Vice President and Chief risk officer of Socal gas.

Chief Counsel for the Sempra International businesses.

She joined <unk> in 2014 from GE when she had multiple legal leadership positions in their oil and gas division Congrats.

Congratulations Lisa and in HOKA basically we wish you well and are grateful for all you've done for PGE and in helicopter. We're excited about the broad expertise and experience that you bring to our executive team and the company.

And now operator, we're ready for questions.

Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press Star then one on your touch tone telephone. Our first question comes from <unk> Kim of Goldman Sachs. Your line is open.

Thank you.

Hey, how are you.

My first question is the.

When you think about the plan whether its capital plan the bed again with rate cases, essentially finish up in the next few months.

What earned ROE should we assume that's currently embedded I guess, a few kind of reverse engineer. The the rate base that was approved for the future test year and whatnot.

The guidance range at least for 'twenty two it seems like something in that 90% range. I know there has been that structural lag that we've always talked about in the past, but from a nominal basis Thats earnings on rate base gets bigger that drag on a percentage basis get smaller so just initial thoughts on how youre thinking about that level going forward.

Great well. Thank you. It's a good question I think your initial thoughts are spot on.

As you know, we settled a regulated Roe or capital structure.

As Jim noted, we're really focused on operational efficiency as well as our transformation.

As we grow our rate base are structural lag does decrease is made up of normal normal course items in the utility sector.

But we as.

As we grow the rate basis that numerator denominator math is encouraging and we'll shrink that over time. We also continue to focus on cost reductions.

On the structural lag area, but across their entire company.

Ill add that.

You can look towards a roughly nine 2% Roe.

At the midpoint for.

2022, consistent with the guidance as we rollout the apps.

The other thing I would add to Maria's comments is that we intend not insignificant management of expenses.

This particular year and while I'm on that topic.

And in my remarks that that would be a 7% decrease from where we came in at <unk>.

2021, however, what.

When I normalize the O&M spending in 2021 I come to more of a 4% decrease there was a series of accelerated expenses of one timers in 2021, so it's four.

4% roughly $25 million reduction in O&M. This year also contributes to an improved Roe outlook.

Okay, Yes that definitely could color second question kind of related to that and obviously, we've talked about your longer term growth rate of about 46% do you think about that.

The base level increases in Capex.

But even excluding.

Potential upside from MBS ownership options at the RFP.

How do you think about wafer cost management of that growth rate going forward.

On top of that if this settlement agreement.

Is adopted as proposed especially with that decoupling mechanism going away, how does that potentially impact organic growth rate at all.

Okay, well, let me let me take the first one the last question you referenced first I think that.

It does impact the growth rate.

First of all a lot of our <unk>.

Capex as you can look in the in the guidance here about two thirds of our capex through.

2026 is really in our transmission distribution system is also a lot of capital in the general business and technology area that supports T&D. So this is very basic.

Work I think you should look also for guidance and the distribution service plan that was filed we've posted a slide in the larger investor deck. This morning that will give you color about the kinds of investments that we see.

In that area as well in terms of decoupling itself as you may be aware, we've been posting some refunds here in recent years because of the.

The nature of the mechanism. It's a symmetrical has a cap on it as well as we grow.

We found it to be.

<unk>.

Not supportive of our goals to reinvest in the business to support a de carbonization and to build out this capex that we have increased.

So I think it's a combination of things that will all promote growth all promote de carbonization good customer service.

Like does that get to your questions.

Okay.

I think that's.

Yes, thats enough color I'll leave it there. Thank you.

Okay.

Thank you. Our next question comes from Julien Smith of Bank of America. Your line is open.

Good morning, Julien good morning.

Hey, Good morning can you guys hear me.

Okay.

Excellent. Thank you guys. Appreciate it so maybe just to follow up on that last question just to close it out.

What's the timing potentially to update where you sit within this four to six so I'm just as you think about if you check the box with a lot of things.

Incremental whether it's ink.

Incremental load growth.

Cost management efforts Capex is this really just about closing out the the regulatory process and getting that final PUC approval here. How do you think about that just first off.

I would say Thats, a good part of it Julien.

The rate case process is very important to us.

There will be some time too.

<unk> continued to invest at higher levels in the business and then also I think what is an important event as our standing in this RFP process. So I think that is.

What is.

Is giving me pause in terms of growing outside that range at the moment, so I want to see very consistent earnings.

I don't want to invest more capital in the business and I want to see the results of the RFP process, that's kind of a short summary.

Excellent.

Alright, perfect and then can you talk a little bit about this shortly as potential here I mean, I know there's not much you can say you are already acknowledged the NDA dynamic.

If you can't specifically here can you speak to your eligibility and the dynamics here, because obviously triple B didn't happen and I think the op you see moves.

Perhaps against you with regards to creating affiliate.

How do you think about your ability to participate.

Given what we know thus far if you will.

I'll leave it open ended.

Doing great.

So we have there's a wide variety of bids that have been submitted.

Every kind of technology, that's out there as well as every kind of PPA or ownership option so lots of variation.

Lots of different options, we are in the process of evaluating them against really objective standards around lease risk these cost ability to decarbonize as fast as possible. Obviously capacity is a big issue across the entire western Portland General is no different.

We'll just need to see where things shake out we have a pretty good history with regards to ownership options.

But we have a better history when it comes to really achieving the least cost least risk options for customers and that's why we will be focused.

Julian I'll add about that affiliates interest filings so.

That was rejected without prejudice by the op in December and.

We're going to continue to look at that and May re propose that again it also.

Could depend on the way that triple B as you call. It continues.

If it continues to separate out some of the tax benefits for normalization that we would hope for that may not be a need for affiliate if our involvement in the RFP as is.

Modest if you want to call it that.

I'm not going to use any dollars, but theres really no trouble.

For us in financing.

The RFP projects that we might be awarded as I mentioned, we're pretty good financial shape.

So we can finance those inside the utility just likely finance anything else, it's not going to be eliminate factor. Let me just conclude by saying that.

Indeed actually do you mind, Jim just two quick clarifying.

Financing I know you said on the call remarks, I think 22 with no equity how are you thinking about equity considerations given the elevated capex again, excluding any potential further awards through.

Through the forecast period.

Yeah, well for 2022.

Clear about no equity.

At this point I wouldn't go any further I do want to see the RFP arrangements, but we're in pretty good shape.

Considering this level of.

Of Capex going forward as you know in the recent settlement were redeemed at a 50 50 ratio.

As long as that continues to operate well be in good shape without equity.

Excellent I'll leave it there thank you guys.

Sure.

Yes.

Thank you. Our next question comes from David Peters of Wolfe Research. Your line is open.

Hey, good morning, guys.

Good morning.

One question for Jim just to kind of piggyback on that last one I noticed you ended <unk>.

<unk> 21, with an equity ratio like 500 basis points below the level and your settlement agreement.

Just taking that into consideration with the elevated capex.

Wondering are you setting up for a need in 'twenty three or you may be just waiting to sync that up with any RFP capital and you might just kind of recognize that to get the balance sheet back closer to a 50 50 level.

Yes, David that's a very good insight I would agree with that on an accounting basis about 45% closer to 47%.

Regulatory ratio works.

As I said, we have the benefit of a settling out at 50 50 and.

I would.

Look at where we come out in the <unk>.

RFP and look to do some some possible equity for that purpose and some additional equity to make sure that our ratios are stout.

I think I think you've got the right logic in the way of thinking about it.

Perfect.

Switching gears to regulatory items, just on the <unk> project. The one that was excluded from the rate case can you maybe just talk about regulatory strategy strategy, there with how you're going to address that lag once that project goes into service, which I assume is at some point later this year.

Sure. So we're in the process of working through with parties on how to address that from a regulatory and timing standpoint.

We have history in the past of having brought items like that into.

Through a separate.

But narrow rate case attached to this rate case.

We would prefer not to file another rate case, I am not a full rate case to bring that into service, but of course thats always an option.

The project overall.

It represents a good portion of what the state of Oregon has been through in the last couple of years tremendous impact of Covid on the project tremendous since it was right in the heart of the wildfires in fact, the transmission lines two and from there almost melted.

A year ago September and then this time last year. It was again in the heart of the ice storms and so we've evacuated the site on multiple occasions.

And we look forward to concluding the project as quickly as possible as safely as possible and bringing it into customer prices at the appropriate time and as we work things out.

Great.

Last one if I can just.

Can you give an update on where you stand with addressing the various deferrals, whether it be wildfire or ice storms and then I guess you have.

As PJM.

<unk> as well and just how much of that is factored into kind of your cash flow guidance that you gave for 2002.

Sure. Let me have Jim really give you a lot of the details on that.

Several of our deferrals are what I'll call normal course, deferrals, so our power cost adjustment mechanism and a long standing process that we've handled first samples for multiple more than a decade.

<unk> got the.

Covid deferral, that's been well well discussed across stakeholders and then what we really have is.

Extraordinary events, whether they are the result of climate change, but certainly the ice storm was up 1% and 40 year event for us in the most disruption we've seen in our service territory in our history.

So while we're looking not only.

At the prudency of all of those costs, but really what is the length of time that we should be recovering them over and.

And so as the legislative matter, we're pursuing securitization, which up until now we've not had the advantages of an Oregon like so many other jurisdictions across the country.

We are in good discussions over all of these aspects I would say with regards to wildfire in general.

We have excellent.

Legislative support.

And that was all put into.

Statute this past year, so we feel pretty good overall about these but it is we are in.

And in times in terms of the magnitude and you wanted to see with some of the deep sure sure I'll, just confirm and I'll give you round numbers, David the power cost adjustment mechanism. This rough justice $30 million in the Covid.

Okay debit.

<unk> is about $36 million.

So what we'll do is take those two items and sort of in the mid year timeframe. This year, we will seek to amortize those both P cabin and Covid deferrals.

Trade away later in the year, probably in the third maybe fourth quarter, we will seek to amortize and settle in on the wildfire of storm deferrals right. So so they are items that we're working on near term at the same time, we'd like to see some securitization put in place.

These altogether total I should add that the ice storm is at $68 million right now at the end of the year anyway.

The wildfires about $46 million altogether, these were $180 million, but there are.

Known mechanisms or power cost and.

Covid pandemic, who will try to knock those down first and then proceed with the two larger ones as we go here.

Perfect. Thank you guys.

Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press Star then one on your touch tone telephone.

Our next question comes from Sophie Karp of Keybanc. Your line is open.

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

<unk> has been discussed already I just wanted to maybe ask you about the hydro conditions.

So your guidance is.

Predicated on normal hydro, but it looks like we are unfortunate Ian another below average here in the west end.

It is actually looking like maybe.

Kind of generational.

Right so.

How do you guys think about that at what point do you normalize to maybe a lower level of hydro in a more permanent basis.

And how do you how would you handle this type of what kind of environment.

Thank you, it's an excellent question and <unk>.

Chart in our 10-K, which shows the Columbia River.

Run off.

<unk> as well as the <unk>.

Our own Clackamas and tissues River basin right now the forecast for 2022 are for the mid Columbia about 105% to 108% and then just under 100% for the river systems upon which we operate.

That is in distinct contrast to last year, where we were in the 80 percents and even for one of our river systems in the 70%. So it's looking a little bit more like 2020 actuals versus 2021 actuals.

The.

Part that will really move the needle on power constant overall availability for the region is the Columbia River.

I would also note that as we look at weather patterns across the West we began a very wet winter lots of snow. Good snow pack that continues up through British Columbia and other areas. That's in distinct contrast to California.

And I think it's I think it's important that we that we recognize that I would say that most recently, it's been pretty mild in the Pacific northwest, which given that this time last year, we were dealing with that.

Really traumatic ice storm with over 760000 different customer outages.

We're pleased to have the nicer weather for the time being.

And I would <unk>.

Thank you also to the NOAA websites for those who want to take a look at the hydro conditions, because they really do have an impact on an overall power availability and cost in the northwest.

Thank you that's helpful and maybe along the same lines.

Is there any commentary you could offer on the latest developments maybe in the western imbalance market. The multiple initiatives that are going on.

Merck and <unk>.

On a regional basis to kind of integrate.

System in the West a little better like whether you see AC and your progress there I guess is there anything that we should be tracking or looking forward.

Sure.

So sorry, that's a great question and a big question.

Let me try and hit all of the different initiatives in work that's taking place.

First of all let me acknowledged as the Western energy imbalance market has been tremendously successful saving lots of money for PGE customers, but customers across the west and allowing us to more seamlessly integrate renewables.

With less wear and tear on our assets and system given the diversity that we're able to.

Accomplish.

<unk> helped quite a bit of so with regards to the west and the energy imbalance market. This spring time, Bonneville power administration will join and that will be pretty significant event and it will sync up operationally.

A number of issues between our balancing authorities and others.

We also.

Working very closely with the <unk> as well as many other parties across the west on the.

Good day ahead market. The acronym is the EDM work, that's taking place and there is quite a bit of work in California going on with regards to <unk>.

Broader governance issues to create more out west wide.

On governance.

Sure.

The queso.

And along with that code.

Healing with wheel through issues as many other issues in the California marketplace.

Simultaneously there is efforts looking at alternatives.

To the Cai, so should we not be able to solve.

Some of the governance issues.

And then also what you see in the northwest, but really now west wide is the.

What was the northwest power pool is now the western power pulse renamed itself and its membership goes all the way down to.

Arizona with SRP, and Arizona public service as well as many other western states and we're working on resource adequacy.

Issues, there, which I think will make a big difference not only for visibility of resource adequacy, but for common understanding of how everything is measured and handled.

I would also say that we're looking at additional transmission planning there was great.

Paper that just came out from the queso, whether they extended their transmission planning discussion and timeline quite significantly. So please know that there is no lack of effort and amount of work taking place across the entire western ambitious.

Thank you I appreciate the color.

Thank you.

Thank you. Our next question comes from Travis Miller Morningstar. Your line is open.

Hello, everyone. Thank you.

Okay.

Good morning, I was thinking.

Thinking high level about inflation and the various impacts that you guys would face.

Higher inflationary environment for the rest of the year what are some of the options that you have either on a regulatory side or an operating side to manage some higher cost.

We're the last.

Through the summer into the fall.

So thank you very much first of all in terms of our planning assumptions and thinking and we are expecting higher inflation not only throughout the summer and fall, but probably on a multiyear basis.

One of the things that we have done is address the wage inflation and we began doing that in 2021, ensuring that the great people that we have working here.

Our adequately compensated and doing the best work that we possibly can deal.

<unk> been focused on digitalization of many of our processes and workflows throughout our company.

How our customers interact with us.

And we've made really substantial improvements and changes many of which are foundational, but many of which are already seeing changes from our frontline coworkers.

And their tools that they're using all the way to how customers are paying their bills.

We are seeing tremendous efficiencies from that and we hope to continue to.

<unk> not only see the same but to accelerate that transformation, but as we know inflation is not a utility trend.

And we deploy a tremendous amount of goods and services.

On behalf of customers.

And whether thats through capital and O&M and so we're watching things very very carefully and do you have anything you want to add a couple of things Travis. Thanks. Thanks for the question. It is directly related to inflation, but I'll call. It indirectly when we had the traumatic ice storm last year that you referred to.

We took stock in literally.

Increased our.

Spares and inventory is very essential.

I think the events of last year caused us to purchase equipment a lot sooner than we would have in the ordinary course of things have we not had that kind of store and so we're well supplied right now.

<unk> services in many cases in field services signed up on a long term basis.

To use contracting.

As a hedge.

To do that the other thing I would add Trevor is that we're very well financed right now the financing that we did last year.

Turned out to be all transactions are judged hindsight extraordinarily attractive and so we have very little to do this year at higher rates thats not exactly inflation, either but I think the inflation complex of course impacts rates. So I think we're reasonably well positioned overall.

Sure. Okay, that's great and so just two on the 2022 as we assume that operating cost number we can assume that it has inflation in there, but you've got enough cost offsets that you can keep it.

Roughly flat to slightly down.

Yes, I would say about 4% down to normalized O&M in 2000.

<unk> 21, and with the efficiency programs that Maria mentioned are baked into that guidance that's correct.

Okay, and then real quick supply chain issues anything.

Putting together RFP bids are.

So you are seeing.

Anything on that side or even just general equipment any supply chain issues, you're seeing these days.

So first of all for our co workers working through the issues on capital projects in O&M projects.

And in our supply chain area. They are working very hard on this issue, but overall from an investor standpoint from a bottom line standpoint, we were able to manage through.

And I'm really proud of the hard work that we've been doing for months on this and we as Jim mentioned, we began to focus on this coming after the storms of last year and really doubling down on the second quarter and we will continue to keep an eye towards that I would say for procurement.

Whether it be on the renewable side on solar.

John .

Our wind side, we are seeing the implications of some supply chain issues and we're working through that with the suppliers of those projects.

Projects.

Maybe last without beating this horse too much <unk>.

We've had a chat about this issue with the board our board of directors.

They are very supportive of us.

Creasing, our authorities to buy long lead equipment as soon as we get at attractive prices and so we're using all the authorities and increased authorities to manage the problem as we go it's a very important issue for us.

We're very focused on it right now, especially as we increase capex.

Alright.

That's great I really appreciate the thoughts.

Thank you.

Our next question comes from Anthony Elian hike your line is open.

I think they got my name butchered.

Sandy will be are you guys doing.

Nice to see them.

Talk to you.

So that is okay. It sounds good.

Got it.

Sure.

So I just wanted to.

Clarify kind of the statements or statements or questions around kind of the growth rate.

So I'm just.

Little confused because I guess you are seeing is a 4% to 6% growth rate two to two 5% top line growth, which I assume is going to extend through 2022.

You have 650 million plus capex so far.

Control of your costs.

Regulatory lag going away is the.

As the rate base goes up.

So what am I mean, I understand you got to wait through the rate case.

What am I missing here I mean, how does that only add up.

6%.

Excuse me can add if I do the math quite a bit.

Sure.

So Andy Thank you for the question and I appreciate the issues that you are looking at.

One of the things we're also looking at us.

More volatility in our operating environment as you remember we've come off a period of tremendous ice.

Wildfires.

Record temperatures that we've never seen in the Pacific Northwest energy markets that had been highly volatile.

And.

A challenging overall work environment and when you talked about supply chain inflation issues and while we are confident.

We are going to make sure that we're able to put points on the board before we make other changes. So I think there is a.

There is a recognition of the overall operating environment that we and many other utilities are facing.

Anything you want to add to that yes, I would say Andy.

Look at it two ways the incremental growth earnings year to earnings year, which is a plus 4% from.

2021 is actual results at the midpoint of the new guidance range and then.

I also look at it as growth of the base year of 2019, which is $2 39.

And Thats the five 5% CAGR I mentioned, assuming we get to the guidance mid point in 2022, and then I look at obviously.

I'll call kind of.

And earnings power estimate given our rate base and look at the rate base itself, which is presently at five $6 billion just to trade some math with you.

It will increase when Faraday isn't there closer to a $5 seven numbers so pro forma.

Even though the settlements of $5 six charter days hanging out as it were so that so add another $100 million then I look at the <unk> in.

Our cap structure and the allowed ROE.

And I could arrive exactly at the midpoint of this year's guidance in fact, a little lower I think the 283% at the midpoint of this year's guidance.

I understand I understand.

This year right. So I'm like yes, looking looking long longer term you gave a.

Multiple year Capex forecast.

And then the topline growth alone.

Especially if.

Decoupling or is eliminated or most of it.

I mean, it's.

This plus minus multiply divide you come up with a much higher <unk>.

Growth rate so.

This is something that we're kind of state.

Kind of waiting on the rate case for and then obviously you had the RFP, but that would be upside.

To what I'm talking about and it also would be chunky.

I'm just completely confused was this just kind of.

Kind of weighting getting the rate case decided on.

And then we get a refresh from you guys.

So Andy as I noted in the in the bigger picture comments with regards to.

The events that we face as we look out into the future.

As to how we look at.

Improving not only our de carbonization profile, but our liability resiliency.

There are many.

Factors that we're looking at longer term.

We also add in in addition to.

Just a simplified math that you're doing so.

I think to get.

Get more visibility on the future, we probably should wait for more quarters.

And our follow up guidance for 2023, and then 2024 and thereafter.

But right now I really like our efforts where they are.

No.

Get that and I understand about the but that doesn't really make any sense.

Wildfires whatever some other <unk>.

Weighting events.

So that's kind of like the normal course of business and really has been affected your.

Longer term outlook and you get recovery of most of it. So it really doesn't I don't know I think you guys had kind of have to.

Maybe get through this rate case, but are you going to have to think long and hard I think and maybe communicated a little bit better because I think.

46% is kind of.

I guess, probably one of the lowest growth rates in the sector. So.

And I understand you're pointing to five and a half, but it's still based on kind of what your profile is and the opportunity in your service territory.

I don't really think kind of living up to the.

Opportunity, there, but I guess, it's something you'll deal with it.

I get it.

The next couple of quarters.

Sounds good and appreciate your insights.

And confidence.

Thank you.

Showing no further questions at this time I'd like to turn the call back over to Maria Pope for any closing remarks.

Great. Thank you all for joining us today, we appreciate your interest.

And advice with regards to Portland General.

And we hope to connect to you and with you in the near future. Thank you very much.

Thank you ladies and gentlemen, this does conclude today's conference. Thank you all for participating you may now disconnect have a great day.

Okay.

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Yes.

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Yes.

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Yes.

Good morning, everyone and welcome to Portland.

General Electric company's fourth quarter 'twenty 'twenty. One earnings result conference call today is Thursday February 17th 2020 to.

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 would be a question and answer period, if you'd like to ask a question. During this time simply put the number one on your Touchtone telephone.

If you would like to draw. Your question. Please press the key power key on your Touchtone telephone if you do intend to use to ask a question. Please avoid using the speaker phone.

For opening remarks, I will now turn the call over to Portland General Electric Senior director of Investor Relations Treasury and with management got on automate had a meal.

Please go ahead Sir.

Thank you Valerie 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 have prepared a presentation to supplement our discussion, which we'll be referencing throughout the call. The slides are available on our website at investors Duck Portland General Dotcom.

Referring 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 and 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 report.

So on forms 10-K, and 10-Q, which are available on our website.

Leading our discussion our Maria 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 John and thank you all for joining us today two.

<unk> 2021 was a year of strong growth and execution.

The backdrop of the ongoing pandemic the historic ice storm and record heat, we focused on grid hardening and new technologies to improve reliability and resiliency.

Turning to slide four for the full year 2021, we reported net income of $244 million or $2 72 per share. This compares with $155 million or $1 72 per share for the full year 2020.

For the fourth quarter net income was $66 million or <unk> 73 per share. This compares with $52 million or <unk> 57 per share for the fourth quarter of 2020.

Our region is growing, particularly the tech and digital sectors driving overall revenue growth.

Net variable power costs were also higher reflecting regional power market volatility, particularly in the third quarter.

Operating and administrative expenses increased due to higher wildfire and vegetation management expenses.

And the cost of several storms outside of the large major storm deferral.

Finally employee wages and benefit expenses were higher reflecting an inflation pressures and improved performance over 2020.

Given our regions attractive environment for high Tech and digital companies and ongoing in migration, we expect growth to remain very strong.

Power market challenges will also likely continue.

We've taken several steps to reduce our exposure to first forward pricing updates to the annual update tariff mechanism.

Second new forecasting methodologies that better reflect wind and other volatility retroactive to our rate case and.

And third plant operating improvements and finally fourth procurement of additional forward capacity.

Operating efficiency is a focus.

And as we address rising customer expectations as well as inflationary pressures will be increasingly important.

All of this combines to inform our 2022 earnings guidance of $2 75 to $2 90 per share.

Later in the call Jim will go into much more detail on both 2021 results and our 2022 outlook.

I would like to now talk to a couple of highlights there were significant from an operational legislative and regulatory standpoint.

First opening the new integrated operations center and launching the advanced distribution management system, where key milestones. These investments establish the foundation for intelligent LNG network that enables the integration of greater amounts of renewable energy distributed energy resources.

An increase in system flexibility and resiliency.

Second we advanced our digital capabilities across the enterprise to improve performance and deliver exceptional customer experiences.

We simplified our work and reduce cost by equipping field, Chris with new digital tools upgrading supply chain systems, and increasing call center performance to.

Together these advances allow us to get more work done and drive operational efficiency.

Through advanced data analytics, and smart grid technologies, we are increasing the reliability of our system, even under uncertainty and extreme weather conditions.

Third our path to de Carbonization was further catalyzed by the passage of Oregon's clean energy legislation.

Working with a broad coalition of stakeholders aggressive carbon reduction goal targets were established that are consistent with our goals and aligned to the international panel on climate change is a ipcc's six report.

PGE was also the first utility in the country to find the climate pledge committing to achieving net zero emissions across our company operations by 2040.

And for the 13th consecutive year, our voluntary renewable energy program was ranked number one in the U S by the National renewable Energy Laboratory.

Fourth we initiated an RFP in April for up to 500 megawatts of renewable energy and 375 megawatts of not admitting capacity initial.

Initial bids were submitted in January with a shortlist expected to be issued in the second quarter and a final decision by the end of the year.

While many of you have lots of questions on the bids.

We are in the very early stages of evaluation and all of this is subject to NDA.

Also in collaboration with customers and stakeholders, we issued our inaugural distributed system plan.

Focus on modernizing our grid to accelerate distributed energy resources at a maximized grid benefits for all customers and community members.

Fifth as part of our 2022 general rate case, we recently reached an agreement that subject to <unk> final approval will resolve the annual revenue requirement.

Average rate base capital ratios and corresponding increase in customer prices.

And finally this year, we relaunched our guiding behaviors first established more than 25 years ago.

And our ongoing and long standing commitment to diversity equity inclusion.

We are increasing the representation of black indigenous and people of color as well as women in leadership across our company.

We're also continuing our long standing focus on environmental stewardship.

And during the past year PGE employees completed over 15000 hours of community service and employees retirees to PGE Foundation, and our company donated $4 8 million to support our communities.

As we look to the future, we anticipate continued economic growth and load increasing 2% to two 5% in 2022.

With longer term growth of approximately one 5%.

Ongoing focus on digital and other technologies.

Operational improvements and efficiencies, which could help mitigate inflationary cost pressures.

Overall, we are well prepared with improved reliability resiliency and operating performance as we rapidly transform to address urgent climate change challenges and lead a clean energy future across our region.

Now I'll turn the call over to Jim. Thank you. Thank you Maria and good morning, everyone. Our 2021 results reflect the continued economic growth in our service territories and the opportunities and challenges of our path to decarbonization.

We experienced strong load growth from higher residential and industrial demand, while also navigating challenging power markets and inflationary cost pressures.

Turning to slide five the continued recovery from the initial economic downturn due to COVID-19 as reflected in our strong year over year load growth of 4% weather adjusted.

In 2021, we experienced growth across all customer classes with residential demand, increasing 1% weather adjusted which reflect ongoing economic growth.

<unk> increased four 2% weather adjusted as the sector rebounds from the decreased activity in 2020.

Industrial deliveries increased eight 5% weather adjusted as our service territory continues to attract growth.

Tech and digital customers, including data centers customer expansion and new site development activity all point to strong growth in this sector.

Favorable weather, we experienced contributed an additional one 1% to the overall growth rate of five 1% in 2021.

Based on recent trends in our service territory, primarily driven by industrial growth and anticipated distributed energy resources growth.

Including transportation electrification adoption, we are raising our long term growth guidance from one to one 5%.

Our quarterly EPS increased from 57 per share in 2020 to 73 per share in the fourth quarter of 2021.

The increase was primarily due to a 17 set adjustments to a non utility asset retirement obligations.

<unk> in the fourth quarter of 2020.

<unk> fourth quarter results full year, GAAP EPS was $2 72 for.

For 2021 compared to GAAP EPS of $1 72 for 2020 non.

non-GAAP EPS for 2020 was $2 75.

After removing the negative impact of the energy trading losses.

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

Beginning with our GAAP net income of $1 72 per share in 2020 to which we add back the $1 <unk> per share impact of the energy trading losses, we experienced a 78% increase in total revenues, primarily due to the strong economy driving growth in our service territory with the <unk>.

Since due to more favorable weather offsetting this was 58.

Unfavorable power cost.

2021 saw significantly higher power prices, particularly in the summer due to warmer weather and increased regional demand for capacity.

<unk> $29 million of incremental power costs under our PJM mechanism, which represents 90% of the variance above the threshold, we anticipate the regulatory process related to this deferral will begin late in quarter two of 2022 and continue through the year.

There was an 18 decreased EPS from costs associated with our transmission and distribution expenses, including <unk> for enhanced wildfire mitigation plan.

Additional vegetation management and age of.

Our service restoration costs related to storms in 2021.

There was a 41% decreased EPS from administrative expense, including 12 and adjustments to incentive programs, including <unk> for 2020 decreases and incentives following the trading losses.

<unk> from increases in wage and salary expenses and 16.

Outside services to strengthen risk management improve customer facing technology and improve our supply chain management systems <unk>.

From higher insurance expenses, partially due to higher wildfire insurance premiums and then <unk> from miscellaneous other expenses.

Going to DNA, a 32 <unk> increased due to lower D&A expenses in 2021, including 22 increased due to the impact of the non utility asset rich.

<unk> obligation revision to 2020 and 18 inch.

Increased due to the impact of plant retirements in 2020, and these increases were partially offset by an 8% decrease due to higher plant balances in 2021.

A 5% decrease from the impact of higher property taxes.

And then finally, there was a 9% increase primarily driven by the recognition of a benefit from our local flow through tax adjustment in Q1 of 2021.

'twenty one.

Turning to slide seven last month, we reached an agreement with stakeholders that resolved several significant aspects of our 2022 general rate case. In addition to the previously agreed upon 50 50 capital structure and nine 5% allowed Roe.

We agreed to a final annual revenue requirement average rate base and a corresponding increase in customer prices.

Our final rate base of $5 6 billion, an increase of $814 million or 17%, which represents a constructive outcome for investments made on behalf of customers, while the $10 million increase in the annual revenue requirement net of power costs represents a modest <unk> 5%.

The increase in customer prices.

We also agreed to and our decoupling mechanism the operation of the existing decoupling mechanism mechanism is misaligned to the policy framework in Oregon, especially as it relates to supporting de carbonization.

So the parties agreed to eliminated.

Parties agreed to accelerated colstrip depreciation to fully depreciated, our interest in that plant by 2025.

Certain policy elements remain outstanding and all settlements remains subject to final PUC approval.

I'm pleased with the potential outcome for our customers and stakeholders. A final order is expected by the end of April .

On the resource front, we made several regulatory filings and which we shared our plans to advance the strategy to meet our targets for reducing greenhouse gas emissions and the power we served customers.

You discussed our resource plans earlier in the call and we look forward to working through the RFP process and expect to share an update in quarter two.

Turning to slide eight which shows our updated capital forecast through 2026.

We increased our capital expenditure forecast for 2023 through 2026% from $550 million to $650 million per year to more clearly reflect our fundamental plans to invest in the system for reference in 2021, we exceeded our target guidance of 655 with the total capital expenditures.

Of $680 billion.

Over the next five years, we expect to invest roughly $3 billion.

On top of the recently settled five 6 billion is the incident rate case to be clear about this increase I want to point you to the distribution service plan that Maria referred to.

This plan anticipate significant growth in load new connects.

New projects for customers system expansion, Substations and grid modernization, which primarily explained the increase in the capex.

The increase was primarily represent group resiliency in transportation and try and electrification investments plan for future years, but do not include expenditures related to the possible RF RFP ownership options with the recent settlement and the PRC sub.

Subject to approval by the PUC. This affirms that we will not need to issue equity to meet our capital requirements in 2022, unless there is a significant renewable addition stemming from the RFP.

On to slide nine the RFP process for energy and capacity resources with bids submitted in January and a shortlist targeted in quarter. Two final selection of winning bids is expected by the end of 2022.

RFP will be a competitive process and we will share more details as we move through the procedural calendar.

We continue to maintain a solid balance sheet.

As you can see on slide 10, including strong liquidity and investment grade credit ratings, accompanied by a stable credit outlook.

Total available liquidity at December 31, 2021, $843 million and we remain one of the least levered companies in the sector.

We plan to fund investments with cash from operations and issuance of up to $250 million debt of debt.

Half of 2022.

As we did in 2021, we will apply our green financing framework continue to seek out opportunities to tie our long term debt to our sustainability strategy through capital investments.

Turning to slide 11, we are initiating full year 2022 earnings guidance of $2 72.

To $2 90 per diluted share as a reminder, we established our base year and growth rate in 2019 with EPS of $2 39.

Per diluted share the midpoint of this guidance range represents a five 8% compounded annual growth rate from the $2 39 base.

To walk through a few key drivers.

That will prove that we're confident will grow to this 4% to 6% range in 2022.

The drivers of our long term guidance remains strong load growth from in migration and industrial expansion.

Operational efficiencies and potential investment opportunities in our system with renewable resources. We expect continued strength in energy deliveries with 2% to two 5% weather adjusted retail load growth would.

I would like to address our 2022 O&M guidance midpoint of $600 million.

Which represents a 7% decrease from 2021 levels too.

2021, O&M included significant work to accelerate our digital and customer strategies and we expect these efforts to create sustainable efficiencies in our operations in 2022 and beyond and 2021, we also accelerated our vegetation management efforts implemented new customer interface system.

Automate many aspects of customer service, we continue deployment of distribution automation technology, and we made significant investments to build risk awareness and mitigation into our operations.

Looking forward to 2022, we will increase efficiencies by accelerating adoption of digital technologies and investments made in 2021.

Leverage increased recent grid investments to strengthen our operations.

I am confident as we continue to identify and implement efficiencies in 2022, we can't continue to grow and we are reaffirming our long term earnings growth guidance of 4% to 6% of 2019 this year.

With respect to dividends our board recently declared a dividend of <unk> 43 per share our 2021 full year dividend.

$1 68 per share this dividend, we completed our 15th consecutive year of dividend growth. The last five years growing at 561% compounded annual growth rate.

We also plan to continue our limited share buyback program to offset any dilutive effects of shares issued under our compensation programs.

The combination of strong growth trends cleared de carbonization targets and significant opportunities to invest in our customers electrification needs create a compelling case for delivering value by serving clean affordable safe reliable and equitable energy.

To execute our long term financial targets for customers and investors alike. Now before we open the line for questions I'd like to hand, it back to Maria Thank.

Thank you Jim I'd like to note that today, we announced that Liza Caner, our VP General Counsel and Chief compliance officer plans to retire in early July and.

<unk> will transition to the role of chief compliance.

Officer effective mid March we're grateful for leases insights expertise wise counsel as we navigated the challenges of the last five years recently leased though was instrumental in resolving all of the litigation associated with the 2020 energy trading manner.

Lisa sets high standards for leadership and integrity, and we wish her well in retirement.

The same time I am pleased to announce that on Helicon Espinosa, who has served as deputy General Counsel and corporate Secretary has been appointed as VP General Counsel effective mid March.

Prior to joining PGE and how it held multiple roles at Sempra energy, including Vice President of gas acquisition, Vice President and Chief risk officer of Socal gas.

Steve Council for the Sempra International businesses.

She joined <unk> in 2014 from GE, where she had multiple legal leadership positions in their oil and gas division Congrats.

Congratulations Lisa and in Hawker basically we wish you well and are grateful for all you've done for PGE and in silica. We're excited about the broad expertise and experience that you bring to our executive team and the company.

And now operator, we're ready for questions.

Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press Star then one on your touch tone telephone. Our first question comes from into Kim of Goldman Sachs. Your line is open.

Thank you.

First question Hey, My first question is the.

When you think about the plan whether its capital plan that again with the rate case potentially finished up in the next few months.

What earned ROE should we assume that's currently embedded I guess, a few kind of reverse engineer. The the rate base that was approved for the future test year.

Whatnot.

The guidance range that would be for 'twenty two it seems like something in that 90% range. I know there has been that structural lag that we've always talked about in the past, but from a nominal basis Thats earnings on rate base gets bigger and better drag on a percentage basis get smaller so just initial thoughts on how youre thinking about that level going forward.

Great well. Thank you. It's a good question I think your initial thoughts are spot on.

As you know we've settled a regulated Roe or capital structure.

As Jim noted, we're really focused on operational efficiency as well as our transformation.

As we grow our rate base are structural lag does decrease is made up of normal normal course items in the utility sector.

But we as.

As we grow the rate basis that numerator denominator math is encouraging and we will shrink that over time. We also continue to focus on cost reductions.

The structural lag area, but across their entire company.

I'll add that.

You can look towards a roughly nine 2% Roe.

At the midpoint for.

2022, consistent with the guidance as we rollout.

The other thing I would add to Maria's comments is that we intend not insignificant management of expenses.

This particular year and while I'm on that topic.

And in my remarks that that would be a 7% decrease from where we came in at <unk>.

2021, however, what.

When I normalize the O&M spending in 2021 I come to more of a 4% decrease there was a series of accelerated expenses of one timers in 2021, so it's four.

4% roughly $25 million reduction in O&M. This year also contributes to an improved Roe outlook.

Okay, yes that definitely could color and second question kind of related to that and obviously, we've talked about your longer term growth rate of about 46%. Okay. Thanks.

Base level increases in Capex.

But even excluding the potential upside from MBS ownership options at the RFP.

How do you think about wafer cost management of that growth rate going forward.

On top of that if it does.

If the pharma agreement.

Is adopted as proposed especially with that decoupling mechanism going away, how does that potentially impact or benefit your growth rate at all.

Okay, well, let me let me take the first one the last question you referenced first I think that.

It does impact the growth rate.

First of all a lot of our <unk>.

Capex as you can look in the in the guidance here about two thirds of our capex through.

2026 is really in our transmission distribution system is also a lot of capital in the general business a technology area that supports T&D. So this is very basic.

Work I think you should look also for guidance and the distribution service plan that was filed we've posted a slide in the larger investor deck. This morning that will give you color about the kinds of investments that we see.

In that area as well in terms of decoupling itself as you may be aware, we've been posting some refunds here in recent years because of the.

The nature of the mechanism. It's a symmetrical has a cap on it as well as we grow.

We found it to be.

<unk>.

Not supportive of our goals to reinvest in the business to support the de carbonization and to build out this capex that we have increased.

I think it's a combination of things.

That will all promote growth all promote de carbonization, good customer service and the like does that get to your questions.

Okay.

I think that yes.

That's enough color I'll leave it there thank you.

Okay.

Thank you. Our next question comes from Joanne Smith of Bank of America. Your line is open.

Good morning, Julien Good morning, Eric.

Hey, Good morning can you guys hear me.

Hello.

Excellent. Thank you guys. Appreciate it so maybe just to follow up on that last question just to close it out.

What's the timing potentially to update where you sit within this four to six so I'm just as you think about if you check the box with a lot of things.

Incremental whether it's acreage.

Incremental load growth.

Cost management efforts Capex is this really just about closing out the regulatory process and getting that final PUC.

C approval here, how do you think about that just first off.

I would say that's a good part of it Julien.

The rate case process is very important to us.

There will be some time too.

<unk> continued to invest at higher levels in the business and then also I think what is an important event as our standing in this RFP process. So I think that is.

What is.

Is giving me pause in terms of growing outside that range at the moment. So I wanted to see very consistent earnings.

I want to invest more capital in the business and I want to see the results of the RFP process, that's kind of a short summary.

Excellent.

Alright, perfect and then can you talk a little bit about this this shortlist potential here I mean, I know there's not much you can say you are ready knowledge the NDA dynamic, but if you can specifically here can you speak to your eligibility and the dynamics here, because obviously triple B didn't happen and I think the <unk> moved.

No.

Perhaps against you with regards to creating affiliate.

How do you think about your ability to participate.

Here, given what we know thus far if you will.

I'll leave it open ended.

Julian Great.

So we have there's a wide variety of bids that have been submitted.

Every kind of technology, that's out there as well as every kind of PPA or ownership option so lots of variation.

Lots of different options, we are in the process of evaluating them against really objective standards around lease risk these cost ability to decarbonize as fast as possible. Obviously capacity is a big issue across the entire western Portland General is no different.

So, we'll just need to see where things shake out we have a pretty good history with regards to ownership options.

But we have a better history when it comes to really achieving the lease cost least risk options for customers and that's why we will be focused.

Julian I'll add about that affiliate interest filings so.

That was rejected without prejudice by the op in December and.

We're going to continue to look at that and it may have re propose that again it also.

Could depend on the way that triple B as you call. It continues.

If it continues to separate out some of the tax benefits for normalization that we would hope for that may not be a need for affiliate if our involvement in the RFP as is.

Modest if you want to call it that.

But using the dollars, but theres really no trouble.

For us in financing.

The RFP projects that we might be awarded as I mentioned, we're pretty good financial shape.

So we can finance those inside the utility just likely finance anything else, it's not going to be eliminate factor. Let me just conclude by saying that.

Indeed, it's actually do you mind, Jim just two quick clarifying.

Financing I know you said on the call remarks, I think 'twenty two there was no equity how are you thinking about equity considerations given the elevated capex again, excluding any potential further awards through.

Through the forecast period.

Yeah, well for 2022.

Clear about no equity.

At this point I wouldn't go any further than what I do want to see the RFP arrangements, but we're in pretty good shape.

Considering this level of Av.

Of Capex going forward and as you know in the recent settlement were redeemed at a 50 50 ratio. So as long as that continues to operate well be in good shape without equity.

Excellent I'll leave it there thank you guys.

Sure.

Tim.

Thank you. Our next question comes from David Peters of Wolfe Research. Your line is open.

Hey, good morning, guys.

Good morning.

One question for Jim just to kind of piggyback on that last one I notice you ended <unk>.

<unk> 21, with an equity ratio like 500 basis points below the level and your settlement agreement.

Just taking that into consideration with the elevated capex.

I'm just wondering are you setting up for a need in 'twenty three or you may be just waiting to sync that up with any RFP capital and you might just kind of recognize that to get the balance sheet back closer to a 50 50 level.

Yes, David that's a very good insight I would agree with that on an accounting basis about 45% closer to 47% the way the <unk>.

Regulatory ratio works.

And as I said.

We have the benefit of a settling out of 50 50 and.

Wood.

Look at where we come out in the in the <unk>.

RFP and look to do some some possible.

<unk> for that purpose and some additional equity to make sure that our ratios are stout, but I think I think <unk> got the right logic in the way of thinking about it.

Perfect.

Switching gears to regulatory items.

The third project. The one that was excluded from the rate case can you maybe just talk about regulatory strategy strategy, there with how you're going to address that lag once that project goes into service, which I assume is at some point later this year.

Sure. So we're in the process of working through with parties on how to address that from a regulatory and timing standpoint.

We have history in the past of having brought items like that into.

So through a separate.

But narrow rate case attached to this rate case.

We would prefer not to file another rate case is not a full rate case to bring that into service, but of course thats always an option.

The project overall.

<unk> represents a good portion of what the state of Oregon has been through in the last couple of years tremendous impact of Covid on the project.

Tremendous since it was right in the heart of the wildfires in fact, the transmission lines, two and from there almost melted.

Eric I was September and then this time last year.

Again in the heart of the ice storms and so we've evacuated decide on multiple occasions.

And we look forward to concluding the project as quickly as possible as safely as possible and bringing it into customer prices is the appropriate time and as we work things out.

Great.

Last one if I can just.

Can you give an update on where you stand with addressing the various deferrals, whether it be wildfire or ice storms and then I guess you have.

As PJM.

<unk> as well and just how much of that is factored into kind of your cash flow guidance that you gave for 'twenty two.

Sure. Let me have Jim really give you a lot of the details on that.

Several of our deferrals are what I'll call normal course, deferrals, so our power cost adjustment mechanism and a long standing process that we've handled first samples for multiple more than a decade.

<unk> got the Covid.

Covid deferral, that's been well well discussed across stakeholders.

Stakeholders and then what we really have is sort of extraordinary events, whether they are the result of climate change, but certainly as the ice storm was up 1% and 40 year event for us.

Most destruction and be seen in our service territory in our history.

Well, we are looking not only.

At the prudency of all of those costs, but really what is the length of time that we should be recovering them over.

And so as the legislative matter, we're pursuing securitization, which up until now we've not had the advantages as an Oregon like so many other jurisdictions across the country, but we're in good discussions over all of these aspects I would say with regards to wildfire in general.

We have excellent.

Legislative support.

And that was all put into.

Statute this past year, so we feel pretty good overall about these but it is we are in.

And new times in terms of the magnitude and you wanted to see what some of the detail sure sure I'll, just confirm and I will give you round numbers, David the power cost adjustment mechanism.

Just as $30 million in the Covid Pat.

Debit deferral is about $36 million.

So what we'll do is take those two items and sort of in the mid year timeframe. This year, we will seek to amortize those both <unk> and cope with deferrals.

Trade away later in the year, probably in the third maybe fourth quarter, we will seek to amortize and settle in on the wildfire of storm deferrals right. So so they are.

Adams that we're working on near term at the same time, we'd like to see some securitization being put in place.

These all together total I should add that the ice storm is at $68 million right now at the end of the year anyway.

The wildfires about $46 million altogether, these were $180 million, but there are.

Known mechanisms or power cost and.

Covid pandemic, who will try to knock those down first and then proceed with the two larger ones as Brito here.

Perfect. Thank you guys.

Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press Star then one on your Touchtone telephone.

Our next question comes from Sophie Karp of Keybanc. Your line is open.

Hi, Good morning, Good morning, Good morning, and thank you for taking my question.

<unk> has been discussed already I just wanted to maybe ask you about the hydro conditions.

So your guidance is obviously predicated on normal hydro, but it looks like we are unfortunate to see another below average here in the west end.

It is actually looking like it may be.

Kind of generational.

And throughout right so.

How do you guys think about that at what point do you normalize to maybe a lower level of hydro in a more permanent basis.

And how do you how would you handle this type of what kind of environment.

Thank you it's an excellent question then.

There is a chart in our 10-K, which shows the Columbia River.

Run off.

<unk> as well as the <unk>.

Our own Clackamas and tissues River basin right now the forecast for 2022 are for the mid Columbia about 105% to 108% and then just under 100% for the river systems upon which we operate.

That is in distinct contrast to last year, where we were in the 80 percents and even for one of our river systems in the 70%. So it's looking a little bit more like 2020 actuals versus 2021 actuals.

The.

Part that will really move the needle on power constant overall availability for the region is the Columbia River.

I would also note that as we look at weather patterns across the West we began a very wet winter lots of snow. Good Snowpack that continues up through British Columbia and other areas. That's in distinct contrast to California.

And I think it's I think it's important that we that we recognize that I would say that most recently, it's been pretty mild in the Pacific northwest, which given that this time last year, we were dealing with.

Really traumatic ice storm with over 760000 different customer outages.

And we're pleased to have the nicer weather for the time being.

And I would <unk>.

Once you offer to the NOAA websites for those who want to take a look at the hydro conditions, because they really do have an impact on an overall power availability and cost in the northwest.

Thank you that's helpful and maybe along the same lines.

Is there any commentary you could offer on the latest developments may be in the western imbalance market on multiple initiatives that are going on.

Merck and.

On a regional basis to kind of integrate the entire.

And then the rest a little better like whether you see AC and your progress there I guess is there anything that we should be tracking or looking forward.

Sure.

So sorry, that's a great question and a big question.

Try and hit all of the different initiatives in work, that's taking place and.

And first of all let me acknowledge that the western energy imbalance market has been tremendously successful saving lots of money for PGE customers, but customers across the west and allowing us to more seamlessly integrate renewables.

With less wear and tear on our assets and system given the diversity that we're able to.

Accomplished.

Sales helped quite a bit of so with regards to the west and the energy imbalance market. This spring time, Bonneville power administration will join and that will be pretty significant events and.

And it will sync up operationally.

A number of issues between our balancing authorities and others.

We are also.

Working very closely with the <unk> as well as many other parties across the west on the.

Good day ahead market. The acronym is they EDAM work, that's taking place and theres quite a bit of work in California going on with regards to <unk>.

Broader governance issues to create more out west wide.

Governance.

Sure.

The queso.

And along with that code.

Dealing with wheel through issues as many other issues in the California marketplace.

Simultaneously there is efforts looking at alternatives.

To the <unk>, so should we not be able to solve.

Some of the governance issues.

And then also what you see in the northwest, but really now west wide is the.

What was the northwest power pool is now the western powerful renamed itself and its membership goes all the way down to.

Arizona with SRP, and Arizona public service as well as many other western states and we're working on resource adequacy.

Issues, there, which I think will make a big difference not only for visibility of resource adequacy, but for common understanding of how everything is measured and handled.

I would also say that we're looking at additional transmission planning there was great.

Paper that just came out from the queso, whether they extended their transmission planning discussion and timeline quite significantly. So please know that there is no lack of effort and amount of work taking place across the entire western ambitious.

Thank you I appreciate the color.

Thank you.

Thank you. Our next question comes from Charles <unk> of Morningstar. Your line is open.

Hello, everyone. Thank you.

Okay.

Good morning, I was thinking.

Thinking high level about inflation and the various impacts that you guys would face.

Higher inflationary environment for the rest of the year.

Some of the options that you have either on a regulatory side or an operating side to manage some higher cost.

Were to last through.

Through the summer into the fall.

So thank you very much first of all in terms of our planning assumptions and thinking we are expecting higher inflation not only throughout the summer and fall, but probably on a multiyear basis.

One of the things that we have done is address the wage inflation and we began doing that in 2021, ensuring that the great people that we have working here are adequately compensated and doing the best work that we possibly can deal we have been focused on digitalization of many of our processes.

<unk> and workflows throughout our company.

How our customers interact with us and.

And we've made really substantial improvements and changes many of which are foundational, but many of which are already seeing changes from our frontline coworkers.

And their tools that they're using all the way to how customers are paying their bills.

We are seeing tremendous efficiencies from that and we hope to continue to.

<unk> not only see the same but to accelerate that transformation, but as we know inflation is not a utility trend.

And we deploy a tremendous amount of goods and services.

On behalf of customers.

And whether thats through capital and O&M and so we're watching things very very carefully and do you have anything you want to add a couple of things Travis. Thanks. Thanks for the question. It is directly related to inflation, but I'll call. It indirectly when we had the traumatic ice storm last year that were you referred to.

We took stock in literally.

Increased our.

Spares and inventories various central.

I think the events of last year caused us to purchase equipment a lot sooner than.

Then we would have in the ordinary course of things have we not had that kind of store and so we're well supplied right now.

<unk> services in many cases in field services signed up on a long term basis, we try to use contracting.

Hedge.

Do that the other thing I would add Trevor is that we're very well financed right now the financing that we did last year.

It turned out to be all transactions are judged on site.

Jordan early attractive and so we have very little to do this year at higher rates thats not exactly inflation, either but I think the inflation complex of course impacts rates. So I think we're reasonably well positioned overall.

Sure. Okay, that's great and so just two on the 2022 as we assume that operating cost number we can assume that it has inflation in there, but you've got enough cost offsets that you can keep it.

Roughly flat to slightly down.

Yes, I would say about 4% down to normalized O&M in 'twenty.

'twenty, one and with the efficiency programs that Maria mentioned baked into that guidance that's correct.

Okay, and then real quick supply chain issues anything.

Putting together RFP bids are.

So you are seeing.

Anything on that side or even just general equipment any supply chain issues, you're seeing these days.

So first of all for our coworkers working through the issues on capital projects in O&M projects.

And in our supply chain area. They are working very hard on this issue, but overall from an investor standpoint from a bottom line standpoint, we were able to manage through.

And I'm really proud of the hard work that we've been doing for months on this and we as Jim mentioned, we began to focus on this coming after the storms of last year and really doubling down on the second quarter and we will continue to keep an eye towards that I would say for our procurement.

Whether it be on the renewable side on solar or on.

Our wind side, we are seeing the implications of some supply chain issues and we're working through that with the suppliers of those projects.

Projects.

Maybe last without beating this horse too much Trevor is that.

We've had a chat about this issue with the board our board of directors.

They are very supportive of us.

Creasing, our authorities to buy a long lead equipment as soon as we get at attractive prices and so we're using all the authorities and increased authorities to manage the problem is we know it's a very important issue for us and where we are.

Very focused on it right now, especially as we increase capex.

Okay Alright.

Great I really appreciate the thoughts.

Thank you.

Our next question comes from Andy Elia hike your line is open.

I think they've got my Big picture.

It's Andrew.

Please go ahead.

Nice to see you talk to your data.

Okay sounds good.

Sure.

So I just wanted to.

To clarify kind of statements.

<unk> questions around kind of the growth rate.

So I'm just.

A little confused because I guess you are seeing is a 4% to 6% growth rate.

Two to two 5%.

Top line growth, which I assume is going to extend through 2022.

650 million close to the Capex so far.

Control of your costs.

Regulatory lag going away as the.

As the rate base goes up.

So what am I mean, I understand you've got to wait through the rate case.

What am I missing here I mean, how does that only add up to 42, 6%.

Excuse me can add if I do the math quite a bit.

Okay.

So Andy Thank you for the question and I appreciate the issues that you are looking at.

One of the things. We're also looking at is.

A more volatility in our operating environment as you remember we've come off of it.

A period of tremendous ice.

Wildfires.

Record temperatures that we've never seen in the Pacific Northwest energy markets that have been highly volatile and a.

A challenging overall work environment, and we can totally talked about supply chain inflation issues and while we are confident we are going to make sure that we're able to put points on the board before we make other changes. So I think there is a.

There is a recognition of the overall operating environment that we and many other utilities are facing.

Anything you want to add to that yes, I would say and I look at it two ways the incremental growth earnings year to earnings year, which is a plus 4% from.

2020 one's actual results to the midpoint of the new guidance range and then.

I also look at it as growth of the base year of 2019, which is $2 39.

And Thats the five 5% CAGR I mentioned, assuming we get to the guidance mid point in 2022, and then I look at obviously, what I'll call kind of.

And earnings power estimate given our rate base and look at the rate base itself, which is presently at five 6 billion just to trade some math with you.

It will increase when faraday isn't they're closer to a $5 seven number so pro forma.

Even though the settlements of $5 six fair days hanging out as it were so that so add another 100 million that I look at the sea whip in.

Our cap structure and the allowed ROE.

And I could arrive exactly at the midpoint of this year's guidance in fact, a little lower I think the 283 is the midpoint of this year's guidance.

I understand Jim I understand that.

This year right. So I'm like yes, looking looking long longer term you gave a.

Multiple year Capex forecast.

And then the topline growth alone.

Especially if decoupling.

Decoupling or is eliminated or most of it.

I mean.

It's as plus minus multiply divide you come up with a much higher.

Growth rate so.

This is something that we're kind of state.

Kind of waiting on the rate case for.

Obviously, you had the RFP, but that would be upside.

To what I'm talking about and it also would be chunky.

I'm just completely confused is this just kind of.

We are getting the rate case decided on.

And then we get a refresh for me guys.

So Andy as I noted in the in the bigger picture comments with regards to.

The events that we face as we look out into the future.

As to how we look at.

Improving not only our de carbonization profile, but our liability resiliency.

There are many.

Factors that we're looking at longer term.

We also add in in addition to.

Just a simplified math that you're doing so.

I think to get.

Get more visibility on the future, we probably should wait for more quarters.

And our follow up guidance for 2023, and then 2024 and thereafter.

But right now we really like our efforts where they are.

No no.

Get that and I understand about the but that doesn't really make any sense.

Wildfires, whatever some other extenuating events.

So that's kind of like the normal course of business and it really hasnt affected your.

Longer term outlook and you get recovery of most of it. So it really doesn't I don't know I think you guys are kind of have to.

Maybe get through this rate case, but are you going to have to think long and hard I think maybe communicated a little bit better because I think.

46% is kind of.

I guess, probably one of the lowest growth rates in the sector. So.

And I understand you're pointing to five and a half, but it's still based on kind of what your profile is and the opportunity in your service territory.

I don't really think kind of moving.

Living up to the.

<unk>.

I guess something you'll deal with it.

Got it.

Next couple of quarters. Thank you.

Sounds good and appreciate your insights.

And confidence.

Thank you.

There are no further questions at this time I'd like to turn the call back over to Maria Pope for any closing remarks.

Great. Thank you all for joining us today, we appreciate your interest.

And advice with regards to Portland General.

And we hope to connect to you and with you in the near future. Thank you very much.

Thank you ladies and gentlemen, this does conclude today's conference. Thank you all for participating you may now disconnect have a great day.