Q1 2022 California Water Service Group Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the California Water Service group first quarter 2022 earnings conference call.
At this time, all participants are in listen only mode.
After the speaker's presentation, there will be a question and answer session.
To ask a question. During this time, you will need to press star one on your telephone keypad.
Also please be advised that today's conference is being recorded.
If you require any further assistance. Please press star zero I would now.
I would like to hand the conference over.
Our speaker today, Mr. David Healey, Vice President controller. Thank you. Please go ahead Sir.
Thank you, Jeff and welcome everyone to the 'twenty to 'twenty two.
First quarter earnings results call for California Water service group.
With me today is Marty crops Nicky.
Our president and CEO .
Tom Nagel, our Vice President Chief Financial Officer, and Shannon team, our Vice President of customer service and cheap citizenship officer.
Replay dial in information for this call can be found in our first quarter earnings release, which was issued earlier today. The replay will be available until June 26 2022.
As a reminder, before we begin the company has a slide deck to accompany the earnings call this quarter the.
The slide deck was furnished with an 8-K. This morning and is also available at the company's website at Ww Dot Cal water group Dot com.
Before looking at this quarters results, we'd like to take a few moments to covered forward looking statements.
During the course of the call the company May make certain forward looking statements because these statements deal with future events. They are subject to various risks and uncertainties and actual results could differ materially from the company's current expectations because.
As of this the company strongly advises all current shareholders as well as interested parties to carefully read and understand the company's disclosures on risks and uncertainties found in our Form 10-K .
Form 10-Q press releases and other reports filed from time to time with the Securities and Exchange Commission.
I'm going to pass it over to Tom to begin.
Thank you Dave Good morning, everybody from San Jose, where we're having a.
A nice spring day.
California, and we'll talk about a number of things that are going on this year for us.
Nationally and in California, and some of the things that might affect us over the course of the year.
The quarter itself I'll talk about first and I'm going to jump to slide five.
To just do the comparative.
Financials for the quarter versus last year and it was a good quarter for US we had.
I had the higher revenue of course higher expenses.
Related in some cases to that revenue.
And the net effect of all of that was our net income was up $4 1 million too.
And income of $1 1 million as compared to a loss of $3 million in the first quarter of 2021, and our earnings per share was <unk> <unk> for the quarter as compared to 6% loss in the first quarter of 2021 and as everyone on the call I'm sure knows this is our lightest quarter, we are mostly.
The business of selling water and a lot of that water comes in the summer in California, and Washington, and Hawaii, and so most of our revenue and profits tend to be in the second and third quarter of the year and so.
Relatively quiet first quarter for us our capex.
Improved over last year, very slightly $1 7 million increase there are about two 5%.
Flipping to slide six a couple of the other highlights for us as far as business operations go for the quarter.
We were really excited to be able to apply to our customer bills.
The amount that the state of California have provided to us for customers, who would become delinquent during the Covid pandemic and so we we had received about a little bit over $20 million in.
And relief from the state and we've now applied that to our customer bills. So we've seen a pretty big reduction in the amount of customer delinquencies, we talked about that a little bit in the last the last quarter.
We had a couple of factors that do impact us from time to time and that is our unbilled revenue, we saw a little bit of an increase there over last year $2 3 million and then this mark to market of our Nonqualified plan assets was negative in the quarter as you might expect as the stock market in general was down.
For the quarter.
And then on slide seven just a graphical representation of some of those things.
Key thing I would want to focus on on slide seven is that our revenue increases of <unk> 12, a share.
Our higher than our core operating expense increases of about nine cents a share.
We had a very favorable third year rate increase in the California escalation process.
And so thats, helping us remember it is the third year of the California General rate case, so our opportunities for rate increases or are limited.
And so the other factors that you can see there are some of the other factors that I that I discussed on the prior slide.
Next I would like to jump in on slide eight.
To give a quick California regulatory update.
There is a lot going on in California, with two big cases for the company, there's not a lot to report right now as far as progress so.
Expect that in the second quarter in the third quarter there'll be a lot more tangible information to report, but let me just give you a quick update here. So the California General rate case is continuing we filed our rebuttal testimony earlier in April and we've actually been having informal.
Settlement discussions with the public advocate a last week and this week.
Those are confidential and cordial I think is fair to say so so good good conversations going on there, but nothing to report out of those sessions.
The California General rate case tense it seems to be on schedule.
And so we'll we're in a wait and see mode, obviously the schedules of our.
General rate cases for water and electric utilities in California tend to slip.
But in this case, we seem to be moving along pretty well.
The issues in the GIC as I talked about last quarter are primarily due to the capital investment budgets Theres, a big difference there and what what the staff would liked to see and what we proposed a rate design is an issue and some of our expenses as is typical.
Our issues.
Not a major difference as I again, as I had mentioned last quarter between the parties positions on our sales and on our water production mix. Those are two big factors that are going to hopefully help us allow us to continue to earn their authorized.
Recover returns after the Ram.
Balancing account mechanism goes away next year.
So that combined with hopefully a good outcome on rate design will go a long way towards making a fair regulatory environment for us in California.
The second case Thats ongoing is the cost of capital case.
We did file our rebuttal testimony in March in that case.
And there have been some.
There's some some dialogue.
Potential settlement, there, but generally speaking where we're going to hearing in the <unk>.
Hearings are actually next week. So we will start hearings next week and cost of capital remember that's the case that we file with three other California water utilities.
And we're all asking for a cost of capital for the same time period.
That that hearing in that case is delayed that would've been decided by January one of this year, but the commission delay that process. So we don't know exactly when that's going to become effective.
When exactly we might get a decision in the case.
Unlikely that we'd get a decision at this point before the end of Q3.
But that's the timeframe maybe maybe October November December is what we're thinking right now in terms of the timing of a decision.
The issues for Cal water or the capital structure and the cost of equity and again, we talked about that on the last quarter call.
If the CPUC were to adopt the company's proposed cost of debt and there is no issue from the advocate on that.
And except for the other.
The other things as no change if you will.
The annual impact would reduce revenues by about $11 million once rates become effective so.
Keep in mind that we lowered our cost of debt by doing financing and refinancing it.
Lower values.
This is the proceeding where we're passing on those benefits to our customers in California.
So next I would like to turn it over to Shannon Dean to talk about ESG. Thanks, Tom.
I'm pleased to report that we continued to make significant progress on our ESG efforts in 2021 in Q1 2022.
First we added ESG into our strategic framework, which is the touch stone for all employees that includes our mission values strategic priorities and success drivers.
We found that making ESG a part of our corporate planning process has provided the impetus for engaging all employees in ESG and showing them how they play a critical role in helping us achieve our ESG goals.
It's also enabled us to work with subject matter experts throughout the organization to set meaningful measurable short and long term ESG objectives, which will drive further progress.
Just a few examples of our ESG objectives for 2022 and beyond.
<unk> no less than 5 million and emissions, reducing energy solutions over the next 10 years.
Increase in the use of recycled water in our operations to no less than 5% of total wire supply to customers by 2035.
And developing an enterprise wide renewable power purchasing strategy by 2023 to help us lower scope to greenhouse gas emissions.
You can see more in our ESG report, which is now available on our website.
I will note that our objectives might not seem too flashy, but we want to be very disciplined about ensuring there's a feasible path to success, rather than setting unrealistic or unattainable goal.
So that addresses planning on the execution side earlier. This month, we published SaaS be aligned ESG report that references both G. R. I N T CFT.
In the report we highlight numerous projects that reflect our commitment to executing our ESG strategy, a few of which you see listed here.
I'll call out one of them the climate risk assessment and adaptation framework.
It's an extraordinarily granular look at every one of our water infrastructure facilities throughout California, and importantly, it does three things.
One it enables us to develop adaptation strategy prioritize infrastructure investments and address risks to disadvantaged communities.
Two it identifies varying climate risks in each of our service areas.
And three it provides the foundational framework for prioritizing risks and mitigation measures on an ongoing basis.
Again for more detail on these projects and many others I do encourage you to take a look at our 2021 ESG report, which is available on our group website.
And with that I'll turn it back over to Marty Alright. Good morning, everyone. Thank you.
Before I jump into slide 11, I want to give a little bit of background information theres been a lot of things happening politically in California.
Matter of fact, the drought and how we respond to the drought first and foremost some of you may have noticed on March 29th there was a headline out there that the California state government that federal.
Government reached a voluntary agreement water suppliers of med droughts and Thats, a fairly significant point to highlight for everyone. While it did not include all the <unk>.
Water wholesalers in the state. It does include about 66% of them.
And we're hoping to see the rest of them, we kind of get onboard as we go through the summer months and we no more work is being done to get more of the other wholesalers on.
On target to find a voluntary agreements allow.
Allow something called.
Voluntary agreements, we put in place versus kind of forced allocations.
Between idle.
<unk>.
Between the environment and making sure we have adequate water supply. The other thing it does it puts about $2 $9 billion on the table between state and federal funding and so for those of you that have followed the water debate and the state of California, There's been a lot of tension between AG urban and the <unk>.
<unk> so by getting these two thirds of the people signed up for this voluntary.
Our settlement agreement it starting to put money on the table, which will allow us to move forward with things like restoring the habitat.
Allocating more monies to farmers that they need to allow the Atlantic Gulf Allo and also sets up for.
The project, which is the Bay Delta tunnels, which will allow the state to divert more water. When we have these intense storms that happened with climate change. So that's a fairly significant event that took place at the very end of March again, it's not a complete document they're still working on getting other suppliers on board.
But it is a big step in the right direction side, we were very encouraged to see that the <unk>.
Second thing that happened on April 14th.
And our new simple to state of California signed an executive order and $7 22, and this really does three things one it sets up the state water resources control board to have responsibility for carrying out the executive order and overseeing the drought and two it sets up the possibility that urban water suppliers may be re.
Acquired to adopt more stringent water conservation strategies, including this is the second point the ban on irrigation non functional turf.
So it would be noticed this sets up the possibilities, but the significance of these two events more steps <unk> taken to be better prepared for the drought and to deal with climate change more long term. So the executive order sets up kind of the next stages of the drought, which are important and that's why I'll move on now to slide 11, so where our.
With all of this.
Well, we had an extremely dry January and February and March.
We were having a very dry April as well, but last week, we did receive a couple of feet of snow in the Crs, while that sounds like a lot.
Doesn't move the needle a whole bunch of stuff you look at where we were.
On our Snowpack averages prior to the snowfall last week, we were at about 26, 27% abnormal.
After the snow that fell last week, we went to about 35, 36% of normal so certainly it'll help a little bit but we are certainly in the third year by drought in the state of California, Hence the governors and 722 executive order, which is now pushing us forward into our drought mitigation plans.
So what does that mean 14 of our districts in the state of California are in a stage to drought. We have filed to have the rest of our districts and our stage II drought by the end.
By the end of June just to remind everyone. One of the strategies that the state has adopted is a six stage drought. Our strategy program. So whether you are talking to San Jose water Golden State water Cal Am East Bay mud. We're all on the same definition of what a drought so a stage true to drought SM.
<unk> is up to a 20% drop reduction.
And water supply it has penalties for waste the water, it's a $50 penalty for the first violation its a $100 in the second violation and it starts.
Limiting the use of water for irrigation purposes between one and three days a week and it made the New York Times. This week the La times are talking in Southern California Metropolitan water is now eliminated water irrigation for yards one day a week. So again, it's all contained in the staging process the status.
Put in place.
Does it mean for Cal water clearly all of our districts will be on a stage two plant here in the next six weeks our drought team has been meeting every two weeks since may of 2021. We also if you recall have a.
Drought memorandum account that the commission authorized in June of last year that allows us to track the incremental costs associated with the drought and apply for recovery at a later date. So we have been well on our way for some time preparing to go to stage two stage three and the potential for stage four this year with the drought.
No.
We continue to move ahead with our plans we continue to look at water supply at every district every couple of weeks and our executive team meets with the water supply team looking at water supply throughout the state.
We will continue to March along with our drought response plans as we go into the summer months.
So there'll be more to come on this regularly obviously, it's going to be a topic, that's going to be around for the rest of this year and we'll update you every quarter as things change.
I want to move over to slide 12 to talk a little bit about capex.
Certainly the $68 $5 million in construction spending that's I believe our second all time high during the first quarter of a year.
The team has done a very good job at mitigating some of the supply chain risks that have been common in the news.
For a number of months I, just want to point out that Cal water. Although the team has done an outstanding job in mitigating those risks to date the longer these supply strain.
The supply constraint state stay active and continue to grow the profitability of it affecting us we will continue to grow so as of right now we haven't seen any delays in our capital programs, but certainly.
And plate inflation some of the ability to get.
Pipe parts fittings et cetera, as we go out into 2022 and there are continued delays it'll start to affect our capital program. We don't know how yet again and we have an excellent team thats working on mitigating the supply risks but.
You know, it's going to catch up with US here at some point. So we're going to continue to do all that we can to keep our capital program.
On on track, we will continue to closely monitor, but certainly it's a macroeconomic issue that's a global supply chain set of events and we're not going to be immune from that so we will look to later this year to give more coverage on that as.
As we see how things unfold here in the second quarter, Tom I'm going to hand, it over to you to talk about the ATM equity renewal we've been working on thanks, Marty So.
Just wanted to let everyone know today that we expect to renew our ATM equity program in the near term.
We expect that this program will allow us to raise up to $350 million over a three year period, and if you'll recall the last ATM program that we ran starting in 2019 raised $300 million.
And was completed in Q4 of 2021.
The proceeds obviously will be used for general corporate purposes, all the plans and everything that we talked about from time to time.
We will continue to issue long term debt as a way of balancing the capital structure between debt and equity.
So youll continue to see us with long term debt issuances as well.
Marty I want to talk about business development.
So our business development pipeline continues to be robust, we did announce three new deals.
In the first quarter.
Driftwood Valley, which is in Washington that was a small system stroke water, which is a fairly good sized system 900 connections. It's a system that we've operated on.
On behalf of the owners for about a year to two years that they ultimately have sold their system to us.
That will add 900 connections and then K SFC us, which is a wastewater business on the island of Hawaii, That's our second acquisition on the island of Hawaii.
So if you if you look at where we are year to date, what the two deals that closed Valencia water in new Mexico in animals Valley in new water excuse me Animas Valley water in New Mexico, That's what about 3500 new connections.
That we've added so far year to date. If you include the ones in the middle of that chart.
Which are awaiting regulatory approval and you add up all the total connections. That's about 70 to 7300 connection so far kind of year to date that we have on the books. The business development team continues to be very very busy in all of the states that we operate in Texas, Hawaii, New Mexico, Washington, and California.
It appears that the market is going to stay strong for a while again none of these are really big acquisitions, but were coming across some really nice kind of tuck in acquisitions like the <unk> water system or the second system that we've acquired on the island of Hawaii. So I think it'll it'll continue to be a good year for business development as we move forward in the second and third quarters.
Tom you want to talk about the capital investment so as everyone knows I think by now.
Permanently have added these slides on slide 15, and 16 to just show the.
Recorded and projected Capex and on slide 16, as the as the rate base. The only change here is to update the quarterly Capex. After 2022, you can see the $68 $5 million year to date Capex.
Just to remind everyone that these bar charts. The yellow represents what we requested in the California rate case, plus our projections in the other states that we operate in.
And so that does not reflect any settlement that does not reflect any change as a result of the processing of the case.
And obviously that is all subject to regulatory approval and potential settlement in that in that case flipping.
Flipping to slide 16, the same thing applies we actually have not changed slide 16 at all.
These are the numbers that we had shown you shown here at the end of the year.
But just to remind everyone that these are the projections if the rate case were adopted as filed and.
In California, and all other things as estimated and so those will continue to be revised as we get regulatory approvals and through the passage of time as well.
So Marty I'll, let you wrap up on slide 17, great. Thanks, Tom.
Solid first quarter I think.
Flat, it's done and dusted in the books, obviously, we're in the third year of the ratemaking cycle. So it is always the toughest year in terms of rate relief. So.
Im happy that we had good performance in the first quarter as Tom mentioned, the majority of our revenue and net income fall in the second and third quarter.
But overall happy with the overall performance.
So very happy with the ESG report that Shannon talked about this is our second report obviously, we're taking ESG very seriously.
We are trying to make sure that we pick targets that are very mark and measurable that we can report back on a normal basis that we think are achievable and so I encourage everyone to look at our ESG report and the progress that we've been making as a company.
As I mentioned, we continue to grow through acquisition and we see the business development pipeline still strong as we move into the summer months of 2022.
And the company is really focused on a couple of things right as Tom mentioned on the regulatory front, we have the cost of capital proceeding and we have the California General rate case, which has taken up a lot of time for the regulatory affairs team, we'd like to get those wrapped up this year and working through without with minimal disruptions.
Other thing we got going on is obviously fire season, and the operating teams have already launched they're there. They're fire response teams for the year, we've done all of our training for the year in anticipation of another hot dry season going into the summer months. So certainly we have a lot to work on in the second and third quarter focus is going to be on the regulatory side.
And hopefully we'll have more news on the general rate case and cost of capital at the end.
Our conference call and the second quarter, So just with that I'm going to turn it over to you and we'll open it up for questions. Please.
Certainly at this time I would like to might everyone in order to ask a question Press Star then the number one on your telephone keypad.
And if you would like to withdraw your question press the pause.
Keith.
We'll pause for just a moment to compile the Q&A roster.
Again, if you would like to ask a question you May press star one on your telephone keypad.
Your first question comes from the line of Ben <unk> from Baird. Your line is open.
Hello, how are you guys.
Good morning, Ben.
Thanks for taking my question.
Maybe.
So I hope we'll have you go through we'll.
Tom maybe just just.
<unk> talked about cadence and seasonality again, just to remind us all.
For this year.
And into next year.
It does.
If you have delays in.
Because of supply chain.
Hughes Capex does impact this year at all or how does that flow through or is it more of a next year type of.
Thank you yes.
Yes, that's a good question Ben.
So really what we focus on with Capex is the continuing effort over the long period of time.
Because really what we're talking about is infrastructure replacement reliability water quality and the things that our customers are hoping to get out of the water systems and so.
We tend to have disruptions and have a lower capex spending this year.
I'm not going to affect us.
It's not really going to affect us next year, because the first year of the general rate case, but it will start to affect.
The revenue in that first escalation year. If that continues if were unable to meet the expectation that's set in the California General rate case, so that would start to impact the ability to earn additional money in 'twenty.
<unk> 2004 and 2025.
That's where you would see if we can recover and get back up to speed.
Through some of these disruptions.
Hopefully that answers the question.
It does bother you talks about this $2 $9 billion of federal funding.
<unk>.
How would that impact you.
That moves forward.
Yeah.
It's more of an indirect effect for us obviously, we.
It affects how the water.
As captured in move throughout the state and that water goes to wholesalers and then we have our water we buy from wholesalers half of that water, we produce through our own wells.
So this really centers around the Bay Delta arguments and the Delta Tunnel project, where you just had that you've had that constant.
Our attention and a lot of attention between the environmentalist that farmers.
And urban water users, so that money going on the table.
Goes to help mitigate issues at each of those parties have that kept them from getting into agreement on how to fix these things. So obviously environment Mentalists wanted to have a minimal amount of what amount of water flow for the salmon and salmon spawning farmers want to make sure they have enough.
Water what are their crops or at least have a crop rotation program or that compensated for not planting crops in certain years and urban water users.
What I want to make sure we can get enough water from our suppliers that we can we can make sure we have adequate supply for our customers. So it's really been it's really a lot of state and federal projects that get those three parties aligned to come together to find a long term solution to the ecosystem issues that have been affecting the <unk>.
<unk> over a number of years and it helps us better prepare for climate change.
So there is no no direct quote unquote dollars that that'll affect Cal water, but a little effect, how do we get water until we get waterfront.
Got it. Thank you and then just on the <unk>.
Sure.
April .
What does the impact of doorway going from doing so.
No.
January two.
October September October timeframe.
How does that compare.
Back to you.
And it's really uncertain right now one thing that we don't know is when the when the rates will become effective.
And so.
Key obviously, the overall package that the commission comes up with in terms of return on equity and cap structure determines what kind of a revenue change there might be coming out of this but as far as the timing goes.
Matters is to win when that starts accruing to us either positively or negatively and I will say just in general we asked for no rate increase is the result of the lower cost of debt and we had asked for a higher cost of equity.
And so Theres limited potential for a rate increase out of this.
More likely would be flat rates or rates that would be decreasing.
So the way you guys will have to wait and see on the timing.
Question right now.
Okay. Thank you very much.
Okay. Thanks Pam.
Your next question comes from the line of Jonathan Reeder from Wells Fargo. Your line is open.
Yes.
Hey team Thanks for taking my question.
Jonathan.
I know, there's a lot of the.
My questions already but wanted to just stick with the cost of capital for a couple more.
You mentioned that there has been some settlement dialogue on the cost of capital can you expand on that a bit like.
The potential for settlement increase potentially driven by the recent increase in interest rates and stock market volatility.
Well Jonathan.
Good question as you as you know, we as a company and the California Commission are very encouraging of settlements in settlement discussions I think probably ever since we the company has filed their rebuttal testimony, there's there's certainly been.
In any case, you would expect there to be settlement dialogue.
Think that one thing that you should take is that we are.
Starting hearings I think next Tuesday.
There is no settlement announced yet so.
We're running.
<unk> out of time.
Someone's going to come up with a settlement you would expect it to be coming in the next day or two.
And so nothing's happened nothing's happened, yet that's been announced and so I can't really comment obviously about the internal workings of settlement, but I know that all parties worked in good faith to see if theres a potential for a settlement.
Okay. So in terms of the way we should view it as the hearings take place then the settlement it was kind of off the table I thought you could still potentially pilot settlement.
You can but typically.
Typically we see settlements before hearing or we see a request to delay hearing in order to continue settlement. So that those are the kinds of things I would look for but you're right. I mean, there could always be a settlement afterwards and just to your other comment I think that the.
Thing Thats a little bit.
A little bit tricky here is that a lot of the movement in the capital markets has happened since all the testimony was produced and so the real question is whether the commission itself and the administrative law judge are going to look at the testimony of the experts, which really relies on 2020 data in 2021 data.
Or whether theyre going to look up from the table.
Look up from their desk, a little bit of notice that the capital markets have really shifted in the last four or five months.
And whether to take that into account or not.
We do have or we would have had and have requested again cost of capital adjustment mechanism that would adjust the returns on equity if the.
The Moody's double a utility bond curve goes.
Up or down more than.
More than 100 basis points so.
There's that opportunity.
If that gets included in the next cost of capital as well.
Okay.
<unk> looked at that.
The Moody's and the cost of capital.
If we were using I guess, the test period, which I guess.
What would it end up being perhaps.
But it would be October 'twenty 'twenty through September 2021.
Would it be.
At this point or.
So if thats the test period, what we have internally calculated and and.
This is updating everyday obviously as the rates change every day. It does not appear that the rate is 100 basis points higher than it was at the end of that period, but it hasnt, but its a weighted average so wouldn't necessarily trigger.
Yes.
Rates continued from today through October .
Wouldn't necessarily trigger this year, but would theoretically trigger next year.
And that next evaluation.
For the period of 2024 I guess.
But that's asking a lot to assume that interest rates are going to be in a particular place for for 16 17 months or whatever that number is so so there's a lot of uncertainty about that but certainly the rates have gone up pretty considerably.
The.
The question is again ultimately is the commission is going to be more interested in adopting a little bit higher return on equity as a result of the change in the capital markets and we're certainly hopeful that that is the case.
But obviously the commission does what the commission does here.
Yeah, No I was kind of thinking back to whatever it was.
2012, or whatever where you order. It finally came out but then the mechanism triggered it.
Down if we might have something similar if we have an order late in the year, but maybe you get a trigger up down or something so yes, I think I think just with the math I think in order to trigger up this year for 2023.
You'd have to have an additional increase in rates.
That weighted average over the 12 month period.
It gets above the trigger point.
I just don't see that happening at the current at the current level of interest rates, but certainly as it certainly is up quite a bit and thats certainly a story to be aware of.
Right. Okay. No I appreciate the color there and then I guess.
Given the uncertainty of the effective date of the cost of capital orders, including whether it's retroactive to the beginning of 2022.
I'm guessing Q1 doesn't reflect any revenue adjustment from the lower cost of debt.
That's correct that's correct.
Okay alright. Thanks.
As for the details and good luck as you deal with both the water supply challenges out there as well as capex.
Supply challenges I guess, you could call it.
Great. Thanks, Jonathan and I think we're in for a fund summer.
Your next question comes from the line of Ben Kelly you from Baird. Your line is open.
Hey, I just wanted to follow up.
We received this question about I don't know how closely youre watching this.
H R three or 404 future western water infrastructure and drought resiliency.
What you were speaking of.
Already in.
It doesn't have any legs as it is just a bill that was introduced.
If it was just introduced Ken I'm sure our government affairs team is watching it.
But built in California. It has to go through the Senate has to go through the assembly. It has to go through to appropriations committees.
And they can move around quite a bit.
Ben.
I think I was alerted to this yesterday.
Sorry, Marty.
What my conversation yesterday.
<unk> Bill I can leave that.
The U S introduced in the U S Senate and the one thing to takeaway is that the way the federal legislation works. There are only a very few pieces of legislation that ever get adopted.
Adopt it out of the U S Congress and Senate.
So if we see these for vision there'll be part of some larger bill at some later date.
And really what we're expecting and what the Bill introduced was the notion of money and that's similar to what Youre talking about Marty as far as.
So it's a little bit different story than the money that Marty was talking about with respect to the Delta settlement.
But really when you think about the infrastructure problems in the U S. Any amount of additional money on that wholesale supply side is going to be valuable to us and increasing our reliability to our customers.
Obviously, we're in the business of investing capital in our systems.
But theres a lot of capital to invest in our systems.
And as you know we've been investing about $300 million a year and we expect to be able to continue to do that for the foreseeable future.
That there's that amount of need there.
But really we're talking about the infrastructure, particularly in California that gets water to us that we can buy water water from.
The San Francisco Peninsula, and all of these other places that import water, yes, I know.
Haven't read the details of the Bill Ben but in my discussions with Senator Feinstein and center of the <unk>.
Two big things they were focused on really pertained to wildfire.
And federal Wild fire fighters make 15 Bucks an hour.
So what's been happening and when we have these wildfires is they don't and they've happened more on federal property is they don't have appropriate resources to fight those fires.
And so I got a hunch what's in this bill is raising the wage of the firefighters to a livable wage and the state of California. So when you have people graduating from the wildfire academies, which is typically tied at the junior college level that they stay on the job for a while what happens they get their training and then they ended up going to a city on Muni.
Simple firefighting district, and the Fed's don't have resources. If you remember the fires last year that we had they were predominantly on federal territory.
Thank you very much guys.
Thanks Pat.
Again, if he would like to ask a question you May Press Star then the number one on your telephone keypad.
There are no questions at this time presenters. Please continue.
Okay. Thanks, Jeff So everyone. Thank you for your time today to go through our Q1 results.
Obviously, Q1's always a pretty kind of benign quarter for us coming out of year end and coming off of a fresh 10-K.
We'll look forward to giving everyone a detailed update on our cost of capital general rate case and drought conditions in the state at the second quarter earnings Conference call as scheduled at the end of July So until then be safe. Thank you for joining us and we'll talk to you again soon thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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